Karachi, December 29, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed the Insurer Financial Strength (IFS) rating of UBL Insurers Limited (UIL) at ‘AA’ (Double A). Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on November 17, 2020.

The assigned rating incorporate UIL’s established market position, strong franchise value and sponsor profile (UBL and its ultimate sponsor group). In our recent review, we have noted slowdown in business growth, as a result of which some market share attrition has been noted. As per management, slow growth is mainly a result of a selective underwriting strategy. Nevertheless, the attrition in market share is a concern and VIS will continue to closely monitor changes in the same on an ongoing basis.

Ratings incorporate Reinsurance Panel of UIL, which is considered sound with all reinsurers being rated ‘A-’ or higher (except Arab Re which has a small proportion of 2.5% in Fire and Engineering, General Accident and Marine segment) rating on the international scale.

The ratings take in to account underwriting quality of UIL. We have noted an adverse movement in gross claims ratio, which has affected UIL’s (net) profitability metrics, with underwriting operations posting a breakeven in 2020. Cognizant of the impact on UIL’s profitability, underwriting quality guidelines have been revised, which include lower exposure to textile sector, attrition of major client in the Motor segment, which had higher loss ratio, in addition to some changes in the health segment policies. These measures taken by the management should allow the Company to post improvement in combined ratio in 2022.

Ratings incorporate financial risk profile of UIL. As of Sep’21, UIL’s operating leverage stands on the higher side, while financial leverage has also trended up on a timeline. Cognizant of this, the management will lower the payout ratio going forward to build capitalization buffer. Liquidity indicators remain adequate, given sizable coverage of (net) technical reserves.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/