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The Pakistan Credit Rating Agency Limited

Date
25-Jan-2018
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Iqra Bashir
iqra.bashir@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Methodology | Insurer Financial Strength (IFS) Rating | General (Jun 17) [View]

Related Research

  • Sector Study | Insurance | General (Oct 17) [View]
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PACRA places IFS Rating of The Pakistan General Insurance Company Limited on Rating Watch | Outlook Negative
 Rating Type Insurer Financial Strength(IFS)
Current
(25-Jan-2018)
Previous
(29-Dec-2017)
 Action Maintain Maintain
 IFS Rating A- A-
 Outlook Negative Stable
 Rating Watch ✔ ✔

PGI is braving with stressed times. The company, under the directive of SECP, halted underwriting operations. The regulatory and legal bodies have investigated PGI’s claims towards Pakistan Re-Insurance Company (PRCL). They determined a sizeable amount to be paid back to PRCL which the company has recently paid back. SECP also asked the company to fulfill other parameters to enable resumption of underwriting operations. The management represented that they have complied with all the parameters and now requested to resume operations - final nod is awaited.
In the meantime, the company has been pursuing recovery of receivables, while streamlining legal requirements. The company’s financial profile has suffered significantly on account of payment to PRCL and writing-off of receivables. However, the company has built a considerable investment book - which lends comfort. At the same time, PGI plans to raise a sizeable amount through right shares - quantum/timing of this injection would finally determine the financial risk profile of the company, going forward.

PACRA would continue to monitor the developments and update its opinion accordingly.
About the Entity
The Pakistan General Insurance Company Limited (PGI), established in 1947, is listed on Pakistan stock exchange. Majority shareholding is with Mr. Zahoor Ahmad and his family. The effective controlling stake is held by the family and directors (~70%). PGI, with its Head Office in Lahore, operates a network of 36 branches spread across the country.
The financial statements of PGI for 2016 were audited by Rahman Sarfaraz Rahim Iqbal Rafiq, Chartered Accountants. They expressed an unqualified opinion on the financial statements for CY 2016. Muniff Ziauddin & Co. chartered accountants, have done limited review for financial statements of June 17 and included an emphasis of matter in the report.

PGI’s Board of Directors is reconstituted lately and comprises seven members. The board comprises three individuals from the sponsoring family and four from outside. Mr. Mazhar has lately taken over as chief executive of the company.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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