Karachi, January 31, 2018 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the Insurer Financial Strength (IFS) rating of Alpha Insurance Company Limited (AICL) at ‘A’ (Single A). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 15, 2015.
Current rating of AICL derives strength from financial profile and demonstrated support of its sponsor, State Life Insurance Corporation of Pakistan (SLIC). SLIC is the largest life insurance company in the country and is owned by the Government of Pakistan. Assigned rating continues to be constrained by persistent trend in underwriting losses, high levels of insurance debt and outstanding claims.
Gross premium written by the company has witnessed a noticeable decline on a timeline basis, primarily attributable to frequent changes in the top management over the years. The company has also made concerted efforts towards improving its overall control environment which diverted the company’s focus from business development, during 2017. Going forward, AICL anticipates higher business volumes with a prudent underwriting practice. In order to achieve its projected level of premiums, the company has revamped its sales force and distribution network. In addition to the financial support demonstrated by SLIC, the sponsor has also provided AICL support through its marketing and business development avenues. Developments in this regard are yet to materialize.
During the outgoing year, the company incurred significant underwriting losses emanating from claims reported in its fire and engineering segment. Moreover, despite support from investments, operating loss increased in the ongoing year. As per management, corrective measures taken for improving its internal controls will help arrest this deteriorating performance. Nevertheless, with low business volumes, underwriting expense ratio and subsequently combined ratio are reported at more than 100%.
Liquidity profile of the company also weakened with insurance debt in relation to gross premium being sizeable at 75.9%. Ageing profile of insurance debt also depicts room for improvement given that a large chunk belongs to receivables outstanding since 2009; recoveries in this regard are ongoing. Nonetheless, capitalization levels of the company are considered adequate as evident from low leverage indicators. During 2017, SLIC injected fresh capital into AICL in order to meet the minimum paid up capital of Rs. 500m, as per regulations.
For more information, contact:
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi