Lahore, January 31, 2022 (PPI-OT):Crescent Star Insurance (CSIL or the Company) predominantly has a holding Company structure through building its non-insurance strategic book. IFS (Insurer Financial Strength) rating of CSIL portrays the Company’s relative ability to meet liabilities towards the policyholders. The rating reflects Crescent Star Insurance’s strategy directed towards direct line insurance in motor and miscellaneous segments. Focus remains on underwriting risk free business, though volumes remain relatively low, hindering the underwriting profitability of the Company.
A considerable investment has been undertaken by CSIL in Dost Steels Limited (DSL) which has remained non-cash producing over an extensive period. In order to convert DSL into an income generating unit, a revival plan is being chalked out for quite some time aimed at providing much required leadership, as well as requisite funding for working capital and operational needs. Further, a contingent merger of a subsidiary is further expected to unlock synergistic benefits for the Company, materialization of which remains crucial. The Company’s current liquidity profile matches the risk parameters for the size of business operations, however, going forward, should the insurance business increase, improvement in liquidity profile is essential.
During CY21, bank financing and automotive sector growth facilitated the industry progression. As COVID re-emerged through its “Omicron” variant, its potential implications remain yet to unfold in the coming year. Reduction in management expenditure and product innovation shall remain crucial for the industry participants in order to solidify market position.
The rating watch captures the Company’s consolidation process in Dost Steel Limited and merger of CS Foods into PICIC Insurance, while fulfilling regulatory and legal requirements. Keeping the business model, the management prefers facultative arrangements. The cash return from subsidiaries is important. Meanwhile, risk absorption capacity needs to be kept intact.
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Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com