The Pakistan Credit Rating Agency Limited
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Mahina Majid

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PACRA Revises IFS Rating of Premier Insurance Limited

Rating Type IFS
Action Maintain Maintain
Long Term A A
Short Term - -
Outlook Stable Stable
Rating Watch - -

The rating captures sizeable erosion in risk absorption capacity, emanating from significant losses on net account. While there is a surge in claim expense, outstanding claims net of reinsurance went up significantly. At the same time, the quantum of operating expenses have strained the company's profitability. Hence there is dip in the equity. The company is holding the liquidity position by stretching insurance-related payables, notably co-insurance balances. The management is working to streamline operations. The focus is to shed loss making business, bring efficiency to operating platform and book quality business only.

The rating draws comfort from sizeable liquid investment book. This, while providing alternative revenue stream, provides cushion to absorb losses. At the same time ratings take comfort from sustained interest of the sponsoring shareholder in the company.

The rating has a negative outlook reflecting pressure on the financial and business profile of the company. Any further dilution in the risk profile of the company may impact the rating.

About the Entity
Premier Insurance was incorporated in 1952 and is listed on Pakistan Stock Exchange. It holds 2% market share at end-Sep'16 and operates through two business Hubs - South and North. Crescent Group holds 70% shareholding, exercising control through Mr. Zahid Bashir. State Life Insurance Company is another major shareholder (11%). The Crescent Group (CG) has been in the business since 1910, and, through its different streams as of now, operates in diversified sectors of textile, steel, sugar, software, and power. The end-Jun'16 accounts of the company were reviewed by M/s Deloitte Yousuf Adil while M/s Ernst and Young Ford Rhodes Sidat Hyder are engaged for the annual audit.

The eight-member board, including CEO, includes six representations of Crescent Group and one of State Life Insurance. Currently, the company has no independent director. Mr. Muhammad Asif Arif, CEO of the company since Apr-15, possesses insurance related experience of over three decades.

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.