JCR-VIS reaffirms Financial Strength Rating of Takaful Pakistan Limited

Karachi, December 23, 2015 (PPI-OT): JCR-VIS Credit Rating Company Limited has reaffirmed the Financial Strength Rating of Takaful Pakistan Limited (TPL) at ‘BBB+’ (Triple B Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 19, 2014.

The assigned rating incorporates strong benefits performance in motor business which is TPL’s core line of business. Rating also reflects adequate re-takaful arrangements for key segments, low level of insurance debt and conservative investment profile. Rating is constrained by persistent trend in underwriting losses albeit having declined over time and a modest risk adjusted capitalization level. TPL has an adequate reinsurance program in place while financial profile of reinsurers on the panel is considered sound. Moreover, the company has been unable to arrange any re-takaful cover for its terrorism and health business.

Equity base of the company has been improving on the back of continuing profits in Shareholder’s Fund. However, capitalization indicators remained constrained and continued to limit the company’s overall underwriting capacity. Sponsors are considering equity injection in the on-going year which is expected to improve the risk profile of the institution. Apart from improving liquidity position, the additional capital will enable TPL to comfortably maintain its solvency margin above regulatory requirements. As and when this happens, the assigned rating will be re-visited accordingly.

Contribution base of TPL depicted an increasing trend with higher business booked in motor. Although, overall benefits performance has depicted stability; further increase in business volumes is required to absorb the company’s expense base and bring about improvement in results from underwriting operations. Going forward, management envisages diverting share of motor and health business towards fire and marine. Effective implementation of the said strategy while maintaining business growth remains to be seen.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk