PACRA Maintains IFS Ratings of Crescent Star Insurance Limited – Rating Watch Re-affirmed

Lahore, February 03, 2020 (PPI-OT): Crescent Star Insurance predominantly has a holding company structure through building its noninsurance strategic book. IFS rating of the company reflects the company’s liabilities towards the policyholders. The company has deployed sizeable funds in Dost Steels Limited (DSL), funded through internal sources and equity injection; herein, management of associated risks will be important. Dost Steel Limited has halted its production as its management ponders its future strategy. Moreover, it has entered the FMCG sector – CSFoods and CSLuxury. While CS Technologies is aimed at providing group support. 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 losses, though the expense ratio is still alarmingly high. The company’s liquidity profile matches the risk parameters for the current size of business operations, however, going forward, should the insurance business increase, improvement in liquidity profile is essential. The business volumes of the company remain relatively low with regards to its peers, however, improvement is expected.

The rating watch captures the company’s consolidation process in Dost Steel Limited and backward merger of CSFoods into PICIC Insurance while fulfilling regulatory and legal requirements. The insurance business volumes are low, accordingly, management prefers facultative arrangements. Crescent Star Insurance holds a major stake in Dost Steel Limited, herein, smooth running of operations and consequent turnover build-up is critical. The cash return from subsidiaries is important. Meanwhile, risk absorption capacity needs to be kept intact.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com