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The Pakistan Credit Rating Agency Limited
Press Release

Date
12-Jun-18

Analyst
Nauman Mustafa
nauman.mustafa@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 Dawood Family Takaful Limited

Rating Type IFS
Current
(12-Jun-18)
Previous
(11-Dec-17)
Action Maintain Maintain
Long Term A- A-
Short Term - -
Outlook Stable Stable
Rating Watch - -

The rating denotes strong capacity of the company to meet policyholder and contractual obligations. The rating reflects DFTL's ability to continue capturing takaful volumes, though this is enough only to sustain market share (~0.65% in 2017). This is helping the company in gradually bridging the gap towards operational break-even. However, it requires continued business expansion and maintained efficiency. Herein, the company is eyeing bancassurance as an important source of contribution. A sound IT infrastructure provides support to the operational efficacy of DFTL. The company has adequate risk absorption capacity. However, investment book of shareholders' fund still has a proportion of non-performing sukuk investments; some of them are being repaid at agreed restructured terms.
The rating is dependent upon continued improvement in the company's system share, which has not seen rise over the years and surplus in takaful fund, sustained liquidity position. At the same time, upholding strong governance practices is critical. The sponsors' financial profile was relatively stretched, which is now improving.

About the Entity
Dawood Family Takaful Limited (DFTL) is an unlisted Shariah-compliant Life Insurer which came into existence in May 2007 and commenced operations beginning 2009. It operates through a branch network of 42 branches, with the Head Office in Karachi. DFTL is majorly owned by First Dawood Group (FDG) holding 51% stake, followed by the Bank of Khyber (15%), and the GulfCap (8%).

The auditors of the company are Deloitte Yousuf Adil. They gave un-modified report on the financial statements of 2017. DFTL has a seven-member BoD, which includes CEO, three representatives of Dawood Group, including one executive director, one of BoK, and two independent directors. Mr. Ghazanfar-ul-Islam, who had been associated with the company for eight years as CFO, was appointed as CEO in Mar’18. Mr. Ghazanfar has vast insurance industry experience and Islamic finance experience prior to that. CFO position is being overseen by Mr. Muhammad Rizwan now, an experienced professional with vast industry experience. A team of professionals assists the CEO.

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.