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The Pakistan Credit Rating Agency Limited

Date
14-Nov-2016
Analysts
Amara Gondal
amara.gondal@pacra.com

Muneeb Rashid
muneeb.rashid@pacra.com

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

  • General Insurance and Takaful Operator (Jun 16) [View]
  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]

Related Research

  • Sector Study | Insurance | General (Nov 15) [View]
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PACRA Upgrades IFS Rating of East West Insurance Company Limited
 Rating Type Insurer Financial Strength(IFS)
Current
(14-Nov-2016)
Previous
(11-Nov-2016)
 Action  Upgrade
 IFS Rating  A+
 Outlook  Stable
 Rating Watch - -

The ratings take into account overall improvement in the risk profile of the company. Persistent growth enabled sizeable rise in market share in recent years (9M16: ~3%, CY12: 1.8%). Prudent underwriting practices alongwith a focus on diversified products and customers helped the company to demonstrate continued healthy underwriting performance. Revamped investment management framework has been beneficial, thereby adding a sizeable cushion to the bottomline. Rolling out the advanced IT infrastructure and real time insurance solution, expected to complete by end-Dec16, would augment the control environment. The company envisages strengthening its footprints, while pitching medium and small sized risks, with enduring focus on the crop and livestock insurance. The financial risk profile benefits from the company's strong liquidity position; cash generation efficiency of the company is higher. The longevity of the company is supported by a consensus document among the sponsoring family members regarding the succession of key roles, though material implementation progress is yet to be achieved.

The rating is dependent on company's ability to improve its market position with sustained profitability. The liquidity position and, hence, financial risk profile should remain afloat alongwith growth. Timely implementation of upgraded IT infrastructure and MIS is critical for the rating.
About the Entity
EWI commenced commercial operations as a general insurance company in 1983 and is listed on the Pakistan Stock Exchange. Yunus family effectively holds the majority shareholding (~63%) in the company. The family also controls majority stake (~72%) in East West Life Assurance Company Limited. However, the company has been sold to AWT, pending regulatory approval.

EWI's eight member board of directors is equally split between the sponsors - four members (including the CEO - Mr. Naved Yunus) belonging to Yunus family and independent directors - four members. In addition to CEO, two other family board members are part of the management team. Mr. Naved, well-qualified from the US and UK, has been associated with the company for the last three decades as CEO. He is assisted by a professional team.
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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