Karachi, December 29, 2022 (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 Plus). IFS rating of AA+ denotes very strong capacity to meet policy holders and contract obligations. Risk factors are very low, and the impact of any adverse business and economic factors is expected to be very small. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on December 28, 2021.
The assigned rating incorporate UIL’s established market position, strong franchise value and sponsor profile (UBL and its ultimate sponsor group). The Company categorizes as the fifth largest insurance company in the country holding a market share (incl. of Window Takaful Operations) of 4.2% as of 2021. As per management, subdued growth in business underwritten during the review period was mainly a function of a risk-averse underwriting strategy. Projected improvement in market share will be important from a ratings perspective.
Ratings incorporate sound Reinsurance Panel of UIL with all reinsurers being rated ‘A-’ or higher (except Arab Re which has a small proportion in Fire and Engineering, General Accident and Marine segment) rating on the international scale. New additions employed in the Reinsurance panel during 2022 include Kenya Re (B rated on international scale), Tunis Re (AA rated on international scale) and AXA Life and Health Reinsurance Solutions (Pvt.) Limited (AXA) (A+ rated on international scale).
The ratings take in to account underwriting quality of UIL with overall net claims ratio of the company improving on a timeline basis. During 9M2022, net claims ratio from the motor, fire and property damage and marine segments increased largely owing to some large industry wide claims. Timeline increase in overall underwriting profit was largely a function of lower quantum of losses incurred in the health segment through reduction of loss making clients and rise in motor segment profits led by higher prices of automobiles.
Overall profitability profile of the company improved in the review period supported by reducing combined and net operating ratio. Although net operating ratio improved in the review period, the same possesses room for further enhancement to meet the peer average. Ability of the company to sustain these profitability metrics amidst current slowdown in macroeconomic environment and impact of flood claims will remain a key rating factor. On the asset quality front, the Company managed to reduce net insurance debt in relation to gross premium on a timeline basis supported by stringent collection mechanisms in place.
Liquidity indicators of the company remain adequate, given sizable coverage of (net) technical reserves; however, compare lower than peers. Although overall leverage ratios improved in the review period (barring weakening in financial leverage at end-Sep’22 owing to higher technical reserves), the same continue to report on the higher side as compared to peers. Projected improvement in the same to levels that commensurate with the assigned ratings will be important.
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/