The Pakistan Credit Rating Agency Limited
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Maryam Ijaz

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PACRA Upgrades IFS Rating of Takaful Pakistan Limited

Rating Type IFS
(01-Feb-21 )
(28-Aug-20 )
Action Upgrade Maintain
IFS Rating A A-
Outlook Stable Stable
Rating Watch - -

Takaful Pakistan Limited, a dedicated Takaful company, has demonstrated unprecedented growth since the takeover by new shareholders and the CEO in 2018. Initially a motor-centric company, it has expanded its footprints into the other segment such as health and miscellaneous. The business has picked up sizably and consistent rapid growth is quite visible. The company has closed year 2020 at a significantly higher Gross Contribution Revenue at PKR 1.6bln and demonstrated a YOY growth of ~60%. The enlarged volumes have yielded profitability, resulting in improvement in combined ratio. Segmental concentration remains high, improvement is expected going forward. The equity position is being enhanced; as the shareholders have injected PKR 300mln as subscription money for the issuance of further shares other than right shares, subject to regulatory approval from SECP. This will boost liquidity and create room for further expansion. The shareholders are aligned on the business philosophy and share vision for future in a documented way. The company has increased focus on its customer service experience through interplay of technology and digital customer interactions which has provided an edge to the company-amidst high competition. It has diligently worked on innovative ideas by employing latest technologies and expects that such strategy will create value by improving customer service. In the foreseeable future, momentum is expected to continue as a result of sustained effort to propel business growth.

Prior to COVID-19, the general insurance industry witnessed a growth of 11% YoY. The current pandemic affected the volumes, which led to a contraction in the growth. However, volumes have picked up post-June 2020 amidst increase in economic activities throughout the country. The volumes need to sustain, indeed, improve in tandem with the longer historical trend. The interest rate regime would impact the fixed income stream, but the equity market is improving though requiring a prudent approach.
The rating is dependent on the management's ability to capitalize on the group's well-built platform for business expansion. Liquidity needs to be upheld, diversity in revenue stream and improved contribution from investments are essential factors.

About the Entity
Takaful Pakistan Limited (TP) is an unlisted public limited company incorporated in June 2006, with its registered head-office in Karachi.

Takaful Pakistan has a seven-member board. Mr. Rizwan Hussain is the CEO of Takaful Pakistan. He brings more than 30+ years of experience as a seasoned Insurance/Takaful industry professional. He has been able to build a team of qualified professionals in past two years. The leadership and team of experienced professionals have helped the company to maintain healthy profitability along with rapid growth. Along with Mr. Rizwan Hussain and Family, Mr. Salim Godil is also one of the major shareholders, he also owns significant business interests including Toyota Central Motors, one of the largest Toyota auto dealerships in Pakistan. Other shareholders include, Al Baraka Bank Pakistan Limited, House Building Finance Company (Owned by State Bank of Pakistan), Mal Al Khaleej Investment LLC and Sitara Chemical Industries Limited.

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.