August 1, 2019: VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength (IFS) rating of EFU General Insurance Limited (EFU) at ‘AA+’ (Double A Plus).
Outlook on the assigned rating is ‘Stable’. The rating indicates very high capacity to meet policyholder and contract obligations. Risk is considered modest, but may vary slightly over time due to business/economic conditions.
The previous rating action was announced on June 29, 2018.
EFU General Insurance Limited (EFU) continues to maintain its leading position in the private insurance sector in Pakistan with a market share of 24% (2017: 27%) as at end-December 2018.
The assigned rating takes into account sound capitalization and liquidity indicators of the company. Adequate profitability and favourable leverage indicators vis-à-vis peers are also reflected in the assigned rating.
Top line of EFU has depicted improvement with gross premium (including contribution from Takaful operations) reported at Rs. 20.8b (2017: Rs. 20.4b) at end-2018.
Business mix remained similar to the preceding year with fire and property segment constituting the largest segment on gross basis.
Due to higher retention on net basis, motor segment represents the largest segment in terms of net premium.
Going forward, management believes that top line of the company is expected to be driven by increase in the sum insured.
Sound equity base and adequate reinsurance arrangements provide comfort to the risk profile of the company.
The company has reinsurance arrangements in place with diverse panel of reinsurers. Size of maximum per risk claim remained unchanged during the outgoing year and is considered manageable in relation to the company’s loss absorption capacity on net basis. Maintaining prudent underwriting quality and sound reinsurance arrangements is considered important from ratings perspective.
Overall profitability, while remaining at an adequate level, was reported lower in 2018 on account of reduced income from underwriting operations. Bottom line was supported by higher income from investment portfolio.