Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has maintained its insurer financial strength (IFS) rating of Postal Life Insurance Company Limited at ‘A+’ with a stable outlook, while placing the company under rating watch due to pressing challenges in business performance and governance.
According to The Pakistan Credit Rating Agency Limited announcement issued on 07 October 2024, the life insurance market in Pakistan remains predominantly public, with the public sector holding approximately 66.6% of the market as of December 2023. The industry has seen a shift in focus from first-year persistency to second-year, with a notable growth in Gross Premium Written (GPW) by approximately 7.7% year-over-year. The overall industry net premium also showed a rise of about 7.4%, despite the increase in net claims by roughly 31%.
Postal Life Insurance Company, a separate legal entity established by the Government of Pakistan through the Ministry of Communications in March 2020, has been grappling with significant challenges. In 2023, the company witnessed a dramatic 46% decline in GPW along with a spike in claims, which severely impacted its underwriting performance. The persistency ratios for both first-year policies and renewals remained low, contributing to an elevated combined ratio. However, the company’s bottom line continued to be supported by the government due to income related to legacy business operations.
The company operates through the Post Office Business Fund (POBF) and the Pakistan Business Fund (PBF), covering legacy and new business obligations respectively. Despite these challenges, Postal Life’s liquidity position remained stable. The agency noted that the completion of audited financial statements on time is critical for maintaining financial transparency and is integral to sustaining the company’s rating.
Postal Life’s rating watch reflects ongoing pressures in business performance and the need for enhanced governance frameworks. The agency underscores the importance of the company’s ability to independently sustain statutory funds, enhance market position, and improve core profitability as crucial to its future rating assessments. Furthermore, the streamlining of audit procedures and prudent risk management are highlighted as vital for maintaining stability and confidence in Postal Life’s operational capabilities.