Final PR
The Pakistan Credit Rating Agency Limited

Amara Gondal

Muneeb Rashid

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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 Rating Type IFS
 Action Maintain
 Long Term A-
 Short Term -
 Outlook Developing
 Rating Watch RatingWatch -

The rating reflects CSInsurance's strategy to focus on direct line personal insurance in motor and health segments, targeting small ticket clients. The company has shredded its corporate health portfolio - amid high losses. This enabled the company to improve underwriting performance, though expense ratio is still significantly high. The company's liquidity profile matches the risk parameters for current size of business operations, however, going forward with rising business, improvement in liquidity profile is essential. The company is gearing towards growth with realigned organizational structure alongwith strengthened sales team, extended branch network, refined systems and control with upgraded IT infrastructure. Meanwhile, expansion through non-organic means is on cards with significant merger and acquisition in pipeline. At the same time, CSInsurance is moving towards a holding company structure through building its non-insurance strategic book. The company has completed (in Dec-16) deployment of sizeable funds (65% of equity) in Dost Steels Limited (DSL), funded through internal sources and fresh equity injection; herein, management of associated risks will be important. Moreover, it has entered FMCG sector - CSFoods and CSLuxury. While, CSTechnologies is aimed at providing group support.

The rating remains on watch with developing status due to; (i) acquisition of controlling stake in DSL, herein, successful operations (expected CoD 2Q17) is critical, (ii) merger with PICIC Insurance is at advance stage of filing in high court; this may bring synergic benefits to the company, and (iii) acquisition of controlling stake (62.5%) in Pak Kuwait Takaful Company is pending regulatory approval; which would entail entrance in takaful market. Monitoring of subsequent solvency is crucial.

The rating requires desirable outcome from above stated transactions. Meanwhile, risk absorption capacity needs to be kept intact.

About the Entity
Crescent Star Insurance Limited (CSInsurance), a listed company, was established in 1957. In Feb-2013, new management took over the company, following acquisition. The market share is small (9M16: 0.3%). CSInsurance is majority controlled by group of individuals including two private companies holding 55%. The company's Head Office is located in Karachi, and currently operates a network of 9 branches across the country.

The overall control of the company vests in BoD including the MD. The Chairman & Managing Director Mr. Naim Anwar, is the key man behind the company; he has been in the general insurance industry for over two decades. He is assisted by a team of experienced professionals.
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