Final PR
The Pakistan Credit Rating Agency Limited

Jhangeer Hanif

Faraan Taimoor

Applicable Criteria

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

Related Research

  • Sector Study | General Insurance (Nov 16) [View]
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PACRA Assigns IFS Rating to Pakistan Reinsurance Company Limited
 Rating Type IFS
 Action Initial
 Long Term AA
 Short Term -
 Outlook Stable
 Rating Watch -

This rating reflects healthy financial profile of Pak Re, as reflected in strong liquidity level that is also providing good coverage against outstanding claims. The company’s business profile is supported by around one-fourth share in country’s total reinsurance business. Pak Re has adequate underwriting performance. Its loss ratios are largely aligned to industry average. Lately, the company is getting agile in its underwriting practices. This is primarily done on the back of better utilization and analysis of PakRe’s extensive information base. This should benefit loss patterns. The company’s business acquisition cost, though low, has room for improvement. Pak Re has a sizeable investment book, though over the recent period the increment has been minimal. This is pre-dominantly deployed in low-risk government papers and bank placements. Based on book value, around one-fourth investment book is in equities and related mutual funds. Although it exposes to risk, sizeable unrecognized gain provides cushion. Government ownership and first right of refusal for up to 35% of reinsurance business in the country are key rating factors.

PakRe now has adequately engaged and functional Board of Directors and apex management team. This should help in putting a comprehensive medium-term strategic plan. This is important. Improving operational efficiency and better utilization of technology tools should be prioritized. Moreover, turnaround time of claims settlement and premium recovery can be improved. Favorable outcome of certain issues with Sindh Revenue Board would release liquidity; timely resolution is important. Meanwhile, upholding good governance standards remain critical.
About the Entity
Pakistan Reinsurance Company Limited (PakRe), established in 1952 and listed on Pakistan Stock Exchange, operates as the sole Pakistan based reinsurer. It is owned by the Federal Government (75%); through Ministry of Commerce (45%) along with the Employee Empowerment Trust (6%), and State Life Corporation (24%). PakRe possesses the first right of refusal for upto 35% of reinsurance volume offered by all insurance companies existing in Pakistan.

The board of PakRe comprises nine members, of which five are nominated by Federal Government while one is nominated by State Life Insurance Company. The CEO, Muhammad Siddique Memon, appointed recently in Dec’16, is a BS-22 grade officer of Pakistan Administrative Group and carries over three decades of civil services experience. Noticeably, he remained Chief Secretary Sindh, Chairman PNSC, and founding director of Sindh Bank. The company’s top management consists of qualified and experienced professionals and are actively working on institutionalizing policies and procedures at Pak Re.
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.