VIS reaffirms 'A (IFS)' rating for PQGTL

March 13, 2024 (MLN): The VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Pak Qatar General Takaful Limited (PQGTL) at ‘A (IFS)’ with a stable outlook forecast, latest press release issued by VIS showed.

The rating signifies a high capacity to meet policyholder and contractual obligations. Risk factors may vary over time due to business/economic conditions. Outlook on the assigned rating is ‘Stable’.

To recall, the previous rating action was announced on January 2nd, 2023.

The rating takes into consideration the company’s sponsorship profile which includes prominent Qatar-based financial institutions, such as Qatar International Islamic Bank and Qatar Islamic Insurance Company.

Together with Pak Qatar Family Takaful Limited (PQFTL), the Pak-Qatar Group offers takaful services in both life and non-life domains.

The Company’s branch network spans over 8 cities but it also indirectly benefits from PQFTL’s outreach as well.

Additionally, the rating is underpinned by PQGTL’s market positioning as a small-medium-sized player in the private non-life insurance industry.

The business risk profile of the overall insurance industry is currently elevated owing to a projected slowdown in domestic economic activity due to high interest rates, rupee devaluation, heightened inflation levels, destruction caused by floods coupled with expected rate hardening by international reinsurers.

The financial risk assessment of the company takes into account the augmentation in the topline, driven largely by upward revisions in sum insured and premium rates in line with inflationary pressure; however, market share witnessed a downtrend over the rating review period as topline expansion lagged industry growth.

However, loss ratios depicted an increase on the back of an increase in average claim size which offset the rationalization of the underwriting expense ratio.

Consequently, the combined ratio was elevated resulting in underwriting losses being registered.

On the flip side, an uptick in investment income on the back of the high policy rate environment helped prop up the bottom-line.

The overall risk profile is supported by sound reinsurance arrangements with reputed international reinsurers.

The rating reflects a comfortable liquidity position as depicted by an improvement in liquid assets relative to net technical reserves and insurance debt relative to gross premium.

Moreover, while operating and financial leverage indicators exhibited elevation during the review period, they remain commensurate with the assigned benchmarks.

Additionally, the aging of claims is healthy with no claim overdue for more than a year at end-CY22.

Going forward, the rating remains sensitive to the company’s ability to uplift its underwriting performance, particularly through expansion of business generation and arresting loss ratios, amidst the challenging macroeconomic environment.

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