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The Pakistan Credit Rating Agency Limited

Date
30-Mar-2017
Analysts
Amara Gondal
amara.gondal@pacra.com

Iqra Bashir
iqra.bashir@pacra.com

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

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

Related Research

  • Sector Study | Insurance | Life (Apr 16) [View]
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PACRA Maintains IFS Rating of Dawood Family Takaful Limited
 Rating Type Insurer Financial Strength(IFS)
Current
(30-Mar-2017)
Previous
(31-Mar-2016)
 Action Maintain Maintain
 IFS Rating A- A-
 Outlook Stable Stable
 Rating Watch - -

The rating denotes strong capacity of the company to meet policyholder and contractual obligations. The rating reflects DFTL's ability to continue capturing takaful volumes, though this is enough only to sustain market share (~1% in 2016). This is helping the company in gradually bridging the gap towards operational break-even. However, it requires continued business expansion and maintained efficiency. Herein, the company is eyeing bancassurance as an important source of contribution. The Takaful Fund (PTF) combined with Shareholders' Fund (SHF) amount to an aggregate surplus at end-Dec16. A sound IT infrastructure provides support to the operational efficacy of DFTL. The company has adequate risk absorption capacity. However, investment book of shareholders' fund still has a proportion of non-performing sukuk investments; some of them are being repaid at agreed restructured terms.

The rating is dependent upon continued improvement in surplus in takaful fund, sustained liquidity position, and nurturing of recently achieved core profitability. At the same time, upholding strong governance practices is critical. The sponsors financial profile was relatively stretched, which is now improving.
About the Entity
Dawood Family Takaful Limited (DFTL) is an unlisted Shariah-compliant Life Insurer which came into existence in May 2007 and commenced operations beginning 2009. It operates through a branch network of 41 branches, with the Head Office in Karachi. DFTL is majorly owned by First Dawood Group (FDG) holding 43% stake, followed by the Bank of Khyber (15%), and GulfCap (8%).

DFTL has a seven-member BoD, which includes CEO, three representatives of FDG, including one executive director (Mr. Rafique Dawood), one of BoK, and two independent directors. Mr. Nasir Mahmood, who had been associated with the company for five years as Head of Individual Marketing and Agency Administration, was appointed CEO in Mar'14. Mr. Mahmood has vast insurance industry experience related to marketing and business development. A team of professionals assists the CEO.
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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