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The Pakistan Credit Rating Agency Limited
Press Release

Date
13-May-23

Analyst
Muhammad Noor Ul Haq
noorulhaq@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA maintains IFS Rating of TRAFCO Insurance Company Limited

Rating Type IFS
Current
(13-May-23 )
Previous
(13-May-22 )
Action Maintain Initial
IFS Rating BBB+ (ifs) BBB+ (ifs)
Outlook Stable Stable
Rating Watch - -

TRAFCO Insurance Company Limited is the emergent player in general insurance space. The rating reflects group support by way of planned synergetic benefits between different ventures of TRAFCO Group. The Company's underwriting portfolio is currently in development stage, which will be growing as envisaged by the management. The Company deals in “Fire and Property Damage”, “Marine, Aviation and Transport”, “Motor” and “Miscellaneous” segments. The rating factors in TRAFCO’s weak solvency, which remains below the regulatory requirement. The Company’s ultimate forte resides with the motor segment ~65.37% followed by fire & property (~18.67%) and miscellaneous (~15.94%). Further, TRAFCO continues to report weak profitability with high underwriting losses, thereby resulting in net losses of PKR 8mln during CY22. The underwriting losses can partially be accredited to a negligible net insurance premium. Presently, TRAFCO does not maintain an investment book. The quantum of liquid profile stood at PKR 2mln as at end-Dec22. TRAFCO's liquidity profile needs significant improvement.
The Company's success in achieving GPW targets and the expectation of financial support from the sponsor is essential. This should translate in improved underwriting performance and augmented liquidity. The rating would gain benefit provided the Company meets all statutory requirements and captures a sizeable share in the market while achieving breakeven in its core operations. At the same time, the liquid earning investments profile of the Company must rise.

About the Entity
TRAFCO Insurance Company Limited was incorporated in Pakistan as an unlisted public limited company on October 25, 1979.The Company operates within the conventional general insurance space through three branches in Pakistan and has no Window Takaful operations. The registered office and principal place of the Company is located at TRAFCO House, Lahore. The company’s seven-member board is chaired by Mr. Tahir Malik. The composition of the board consists of four non-executives, an independent and two executive members. The CEO, Mr. Muhammad Nawaz Shahid, is assisted by a team of professionals, possesses around three decades of related experience.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.