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The Pakistan Credit Rating Agency Limited

Date
06-Dec-2017
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Muneeb Rashid
muneeb.rashid@pacra.com

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

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

Related Research

  • Sector Study | General Insurance (Nov 16)
  • Sector Study | Insurance | General (Oct 17)
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PACRA MAINTAINS IFS RATING OF CRESCENT STAR INSURANCE LIMITED; REMAINS ON RATING WATCH
 Rating Type Insurer Financial Strength(IFS)
Current
(06-Dec-2017-)
Previous
(23-Jun-2017)
 Action Maintain Maintain
 IFS Rating A- A-
 Outlook Developing Developing
 Rating Watch ✔ ✔

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 alarmingly 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. CSInsurance is fast moving towards a holding company structure through building its non-insurance strategic book. The company has completed deployment of sizeable funds 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. To further expand its footprint in the retail business, CSInsurance plans to intake fresh equity through way of right issue.

The rating remains on watch with developing status due to acquisition of major stake in DSL, herein, successful operations (revised expected CoD end-Nov17) is critical and other significant developments including merger of CSFoods with and into PICIC. The rating requires desirable outcome from above factors. 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. The market share is small (CY16: 0.4%). 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 11 branches across the country.

The overall control of the company vests in eight member 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 an experienced 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.