Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has maintained the Insurance Financial Strength (IFS) rating of State Life Insurance Corporation of Pakistan, reflecting the organization's dominant position in Pakistan's life insurance market, which is predominantly controlled by the public sector.
According to The Pakistan Credit Rating Agency Limited, State Life, which is owned by the Government of Pakistan, holds about 67% of the market share. The company's strength comes from its effective agency model and significant customer retention evidenced by persistency rates. In the calendar year 2023, State Life's Gross Premium Written (GPW) saw a year-over-year increase of approximately 10%, largely driven by group premiums. Despite the growth, the company faced underwriting losses due to a spike in death claims and an increase in policy surrenders, exacerbated by tough economic conditions.
The life insurance sector in Pakistan demonstrated overall growth, with a Gross Premium Written increase of about 7.7% in 2023. The industry's focus has shifted towards enhancing second-year persistency rates from first-year, aiming to prioritize sustainable growth. Approximately 47% of the total GPW last year came from renewals, with group life policies without cash value contributing around 37%. The sector also witnessed a net premium growth of around 7%, although net claims rose by about 31%, influenced by higher policy maturities and surrenders.
State Life's financial stability is further supported by its extensive investment portfolio, valued at PKR 2,021 billion in 2023, up from PKR 1,747 billion in 2022. The corporation's loss ratio climbed to approximately 92%, impacting the combined ratio, which stood at around 110%. Nevertheless, the comfort for stakeholders comes from State Life's robust risk absorption capability, underscored by adequate liquidity and the high quality of its investments. The Government of Pakistan's guarantee for policyholder liabilities also adds a layer of security.
While the experienced management team provides a basis for confidence in State Life's ratings, there is a pressing need for the corporation to upgrade its digital strategies to align with the evolving market demands. The implementation of a new ERP system is anticipated to enhance business operations significantly, allowing real-time service provision to all stakeholders and supporting the company's strategic goals, including diversification and growth.