5th Pillar Family Takaful Limited

CREDIT RATING REPORT | Aug-25

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Rating History
Dissemination Date IFS Rating Outlook Action Rating Watch
18-Aug-25 A+ (ifs) Stable Maintain -
20-Dec-24 A+ (ifs) Stable Maintain -
22-Dec-23 A+ (ifs) Stable Maintain -
09-Mar-23 A+ (ifs) Stable Initial -
About the Entity

5th Pillar Family Takaful Limited ("5th Pillar" or "the Company") was incorporated in Mar-20 as a public unlisted company. The Company operates in the Family Takaful / Life Insurance business. The Company is a joint venture between businesses from Kuwait and Pakistan. A major stake of ~41.75% is held by Kuwait International Investment Holding Company, supported by ~26.25% held by 5th Pillar Holdings Limited and ~32% by Muhammadi Family & Associates. The Sponsors possess diversified experience in local and international investment and asset management services. The Company's Board is chaired by Mr. Saleh Saleh Naser Al-Selmi. While Mr. Nasar us Samad Qureshi serves as the Company's CEO. He is assisted by a team of experienced professionals.

Rating Rationale

Pakistan's life insurance segment is primarily dominated by the public sector, holding ~61% market share as of CY24, while the private sector accounts for ~39%. The industry’s GPW stood at ~PKR 434bln during CY24 (CY23: ~PKR 404bln), reflecting a YoY growth of ~7%. The industry's bottom line was supported by robust investment income of ~PKR 467bln during CY24 (CY23: ~PKR 292bln), representing a YoY increase of ~60%, which contributed to improved Profit After Tax (PAT) of ~PKR 23bln in CY24 (CY23: ~PKR 20bln). Going forward, the overall outlook for the industry remains stable.
The rating of 5th Pillar Family Takaful Limited ("5th Pillar" or "the Company") is supported by the Sponsor’s stable financial standing, underpinned by a diversified portfolio of businesses in both local and international markets. Operating in the family takaful segment, the Company has an emerging profile and a distinctive business model that integrates commercial viability with religious principles. The Company generates revenue from individual family takaful plans (~63%), along with group family takaful plans (~37%). Its product portfolio also includes targeted savings plans, such as those for Hajj and Umrah, children’s education, and marriage, primarily catering to the lower-middle and middle-income segments of society. During CY24, the Company witnessed a substantial uptick in its topline reported at ~PKR 560mln (CY23: ~PKR 180mln), a YoY increase of ~211%, due to the impact of individual takaful plans that were launched in the latter half of CY23. This increase in topline trickled down and resulted in improved underwriting results. The Company is investing in digitalization by developing a mobile application 'Niyat' for the underwriting of business and policyholder management. This would enhance customer experience, enabling the Company to improve retention. During CY24, the investment income of ~PKR 300mln is primarily supported by returns on debt security, which continues to contribute positively to the bottom line. However, inflated administrative expenses led to a loss at the net level. From a financial risk perspective, the Company maintains a stable liquidity profile backed by an effective claims management framework. However, the shareholders' equity eroded due to accumulated losses. The paid-up capital of the Company remains in line with the updated minimum capital requirement issued by SECP. Continued Sponsor support and the presence of a strong reinsurance partner provide additional comfort to the ratings.

Key Rating Drivers

The ratings are dependent on the continued support and guidance from the key Sponsors. The successful unfolding of the model is of absolute necessity. The equity of the Company needs to be kept liquid and in safe investment avenues.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

METHODOLOGY

RATING ANALYST

  • Faiqa Qamar
  • faiqa.qamar@pacra.com
  • +92-42-35869504
  • www.pacra.com

5th Pillar Family Takaful Limited

rating analysis

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Profile
Legal Structure

5th Pillar Family Takaful Limited ("5th Pillar" or "the Company") was incorporated as a public unlisted company on 05-Mar-20.


Background

Kuwait International Investment Holding Company, 5th Pillar Holdings Limited, and Muhammadi Family & Associates (Muhammadi Family) initiated this project to facilitate Hajj and Umrah to middle and low-middle-income Muslims. The Company received its Takaful operator license from the Securities and Exchange Commission of Pakistan (SECP) on 04-Oct-21.


Operations

The Company mainly operates in the Takaful business. The Company is engaged to provide Shariah-compliant products, i.e.; Hajj and Umrah Saving plans.


Ownership
Ownership Structure

The Kuwait International Investment Holding Company holds the major stake (~41.75%) of the Company. While (~26.25%) is held by 5th Pillar Holdings Limited. The remaining stake is held by Mr. Muhammad Ali (~25%) and Ms. Saima Sohail Tabba (~7%).


Stability

Ownership of the Company seems to remain stable as the sponsors hold a prominent position in various sectors of the local and international business sectors.


Business Acumen

The sponsors have strong acumen and a diversified business portfolio, providing significant support to the Company.


Financial Strength

The Company gathers financial strength from the Sponsors, if needed.


Governance
Board Structure

The overall control of the Company lies with the eight-member Board, comprising seven Non-Executive Directors and one Executive Director. Out of these, five Directors are representatives of Kuwaiti Companies, while two Directors represent the Muhammadi Family.


Members’ Profile

The Chairman of the Board, Mr. Saleh Saleh Naser Al-Selmi, has been associated with the Board since 2020. He holds an overall experience of more than two decades across the insurance, banking, and investment sectors. Mr. Mirza Baseer Baig, a Non-Executive Director, is the founder and Executive Director at 5th Pillar Holdings (DIFC, UAE), with 25+ years of experience in M&As, startups, and financial advisory across Pakistan and the GCC. He has been associated with the Company since 2020. All other Board members possess diversified professional backgrounds and rich business acumen. They have served in leading positions locally and internationally throughout their professional career.


Board Effectiveness

The Board meets every quarter; however, it convenes extraordinary general meetings if required. The Board is assisted by three committees: i) Investment Committee, ii) Ethics, Human Resource & Remuneration, and iii) Audit Committee, chaired by a Non-Executive Director. The Audit Committee meets quarterly, while the other committees meet twice a year. Minutes of the meetings are adequately documented.


Financial Transparency

External Auditors, M/S. KPMG Taseer Hadi & Co. has issued an unqualified audit report pertaining to the financial statements for CY24. The Company has outsourced internal audit functions to M/S. BDO & Co. Chartered Accountants that reports independently to its respective BoD Committee. Both firms are QCR rated and on SBP's panel in category "A."


Management
Organizational Structure

The Company operates through the following departments: i) Information Technology, ii) Finance, iii) Human Resources, iv) Administration v) Marketing, vi) Compliance, vii) Customer Services, viii) Underwriting, ix) Actuarial services, x) Sales, xi) Operations, xii) Training & Development, and xiii) Corporate Solutions. All the departmental Heads report to the CEO, who then reports to the BoD.


Management Team

Mr. Nasar us Samad Qureshi holds an overall experience of more than four decades in the insurance sector of Pakistan and UAE. He has held the position of the CEO since the Company began operations. Mr. Awais Hanif, ACA, became the CFO in 2022 and holds an overall professional experience of more than a decade. The management team comprises experienced professionals.


Effectiveness

The Company has three management committees, namely: (i) Underwriting & Re-takaful Committee, (ii) Claim Settlement Committee, and (iii) Risk Management & Compliance Committee. All the committees comprise three members and are headed by the CEO of the Company. These committees meet on a quarterly basis, and minutes are adequately maintained.


Claim Management System

The Company has a claims matrix that require approval from the CFO and the CEO based on the level of claim received.


Investment Management Function

The Company has outsourced its investment management function to Al-Meezan Investment Management Limited, standing as the first and largest Shariah-Compliant Asset Manager in Pakistan. Al-Meezan Investment Management Limited is rated by PACRA (AM1).


Risk Management Framework

The Company's risk management policies are established to identify and analyze the risks the Company has booked, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The system and policies are reviewed regularly to reflect changes in market conditions and the Company's activities.


Business Risk
Industry Dynamics

The life insurance sector is primarily dominated by the public sector, holding ~61% market share as of CY24, while the private sector accounts for ~39%. The industry’s GPW stood at ~PKR 434bln during CY24 (CY23: ~PKR 404bln), reflecting a YoY growth of ~7%. On the claims side, net claims stood at ~PKR 374bln in CY24 (CY23: ~PKR 366bln), mainly trickling in from policy maturity, and lately, a considerable uptick is observed in policy surrenders. The industry's bottom line was supported by robust investment income of ~PKR 467bln during CY24 (CY23: ~PKR 292bln), representing a YoY increase of ~60%, which contributed to improved Profit After Tax (PAT) of ~PKR 23bln in CY24 (CY23: ~PKR 20bln). The total investment portfolio of the insurance industry stood at ~PKR 2,518bln as of CY24 (CY23: ~PKR 2,027bln). Going forward, the overall outlook for the industry remains stable.


Relative Position

The Company operates as a small player and holds a market share of less than ~1% in terms of GPW.


Persistency

The Company reported first-year persistency of ~13% during 3MCY25, whereas first year persistency of ~42% was reported during CY24. The persistency is currently low as the Company initiated individual takaful business in the latter half of CY23.


Revenue

The Company generates revenue primarily from the sale of flagship products, i.e., Hajj and Umrah saving plans. During CY24, the Company reported GPW of ~PKR 560mln (CY23: ~PKR 180mln), primarily generated from individual family takaful reported at ~PKR 351mln (CY23: ~PKR 35mln). During 3MCY25, the Company reported GPW of ~PKR435mln (3MCY24: ~PKR 91mln), mainly emanating from individual family takaful plans. The uptick in GPW is due to the introduction of individual family takaful plans during CY23. Going forward, the Company's revenue is expected to grow.


Profitability

During CY24, the Company reported underwriting profit at ~PKR 225mln (CY23: ~PKR 39mln) due to an uptick in GPW. At the net level, the Company reported a loss of ~PKR 140mln (CY23: ~PKR 71mln-loss), due to an increase in management expenses by ~28.4%. During 3MCY25, the Company reported an underwriting profit of ~PKR 269mln (3MCY24: ~PKR 25mln). However, the Company reported a loss of ~PKR 58mln (3MCY24: ~PKR 46mln-loss) due to a decrease in investment income. Going forward, controlled management expenses along with sustainable investment income remain essential in achieving profitability.


Investment Performance

The investment book of the Company comprises debt instruments (~68%), followed by equity instruments (~25%), followed by cash & bank (~6%), and subsidiaries (~1%). During CY24, the Company reported an investment income of ~PKR 300mln (CY23: ~PKR 116mln), primarily due to higher returns on debt securities.  During 3MCY25, the Company witnessed a decline in investment income reported at ~PKR 58mln (3MCY24: ~PKR 61mln), due to a decrease in returns on debt securities due to a reduction in policy rate.  Effective investment book management is required to maintain an adequate level of investment income going forward.


Sustainability

Going forward, the Company is planning to add value through process automation and also offering various savings plans, including: Children's Education, Marriage Savings, Retirement, and Pension Plans.


Financial Risk
Claim Efficiency

As of CY24, the Company reported outstanding claims of ~PKR 44mln (CY23: ~PKR 31mln), an uptick of ~42%. As of 3MCY25, the outstanding claims were reported at ~PKR 67mln (3MCY24: ~PKR 25mln). The increase in outstanding claims is due to an uptick in claims incurred during the period. The Company remains efficient in clearing the claims.


Re-Insurance

The Company has re-takaful arrangements with an international and considerably strong re-takaful provider, “Hannover Re” (rated “AA-” by S&P).


Cashflows & Coverages

As of CY24, liquid assets-borrowings/ outstanding claims cover stood at ~15.1x (CY23: ~22.7x) due to an increase in claims outstanding along with a decrease in liquid assets by ~3% (CY24: ~PKR 770mln, CY23: ~PKR 795mln). As of 3MCY25, the cover stood at ~9.1x (3MCY24: ~24.6x) due to an increase in outstanding claims. As of 3MCY25, liquid assets were reported at ~PKR 711mln (3MCY24: ~PKR 697mln). The liquid cover is expected to improve, going forward.


Capital Adequacy

As of CY24, the shareholders’ equity was reported at ~PKR 1,780mln (CY23: ~PKR 1,833mln). The decrease in equity is due to an increase in accumulated losses. As of 3MCY25, the shareholders’ equity stood at ~PKR 1,712mln (3MCY24: ~PKR 1,791mln), a decrease due to an increase in accumulated losses. Going forward, the Company needs to control equity erosion by achieving profitability.
 
 

Aug-25

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5th Pillar Family Takaful Limited

financial summary

(PKR mln)

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Mar-25
3M		 Dec-24
12M		 Dec-23
12M		 Dec-22
12M
Management Audited Audited Audited
A. BALANCE SHEET
1. Investments 2,261 2,039 1,779 482
2. Insurance Related Assets 96 68 42 31
3. Other Assets 202 162 145 43
4. Fixed Assets 277 273 259 194
Total Assets 2,836 2,542 2,224 749
5. Underwriting Provisions 0 0 0 0
6. Insurance Related Liabilities 341 207 133 53
7. Other Liabilities 677 454 164 25
8. Borrowings 107 101 93 78
Total Liabilities 1,124 762 391 155
Equity 1,712 1,780 1,833 594
B. INCOME STATEMENT
1. Gross Premium Written 435 560 180 53
2. Net Insurance Premium 388 444 117 22
3. Underwriting Expenses (119) (220) (78) (5)
Underwriting Results 269 225 39 17
4. Management Expenses (103) (461) (359) (156)
5. Investment Income 58 300 116 56
6. Other Income / (Expense) (285) (228) 138 (12)
7. Net Change in Reserve for Policyholders' Liabilities (5) (3) (15) 0
Profit Before Tax (65) (167) (81) (95)
8. Taxes 8 28 10 8
Profit After Tax (58) (140) (71) (86)
C. RATIO ANALYSIS
1. Profitability
Loss Ratio (Net Insurance Claims / Net Insurance Premium ) 5.6% 10.6% 28.7% 14.5%
Combined Ratio (Loss Ratio + Expense Ratio) 57.1% 153.2% 372.9% 737.8%
2. Investment Performance
Investment Income / Operating Profit 25.7% 471.6% -56.5% -68.1%
3. Liquidity
(Liquid Assets - Borrowings) / Outstanding Claims 9.06 15.09 22.71 8.68
4. Capital Adequacy
Liquid Investments / Equity 1.32 1.14 0.97 0.81

Aug-25

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5th Pillar Family Takaful Limited

rating scale

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Aug-25

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5th Pillar Family Takaful Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
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    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
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