The Pakistan Credit Rating Agency Limited
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Muhammad Harris Ghaffar

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PACRA Maintains IFS Rating of The Universal Insurance Company Limited

Rating Type IFS
(08-Feb-21 )
(21-Feb-20 )
Action Maintain Maintain
IFS Rating A- A-
Outlook Stable Stable
Rating Watch - -

The rating of Universal reflects strong parentage of the company – Bibojee group. The parentage has provided multi-faceted support to the company: a) injection of capital from different times of the crisis, b) sustenance in the cleansing period spanning over a couple of years, c) captive business. The business strategy envisages tapping captive business through co-insurance with an established group, with gradual entry into the market business in the pipeline. Currently, the company is underwriting captive business through a co-insurance agreement with a large sized company. Universal Insurance expects to start direct underwriting business operations in the near future, depending upon the strategic direction as decided by the BOD. All head of departments are in place; moving forward the company is ready to build a team of professionals once the direct underwriting commences. It has minimal amount of liabilities and claims on its balance sheet which will provide the company impetus moving forward. Enlistments with some of the leading banks have been completed as the management envisages improved business volumes moving forward.

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 upon sustained improvement in relative position of the company, augmenting its sustainability, as envisaged by the board and the management. Meanwhile, continued improvement in the business and financial profile of the company is also imperative for the rating.

About the Entity
Universal Insurance Company Limited, incorporated in 1958, is listed on Pakistan Stock Exchange (PSX). Majority ownership of the company is held by Bibojee Group (87%), through holding
company “Bibojee Services Private Limited” (BSL). Bibojee group is a well-established in having its presence in various industrial sectors including Textile, Auto, Tyres & Rubber and Engineering. Now company has six members BoD is constituted by four members from sponsoring family and two independent directors. One casual vacancy of chariman BOD is vacant due to resignation of director/ chairman Lt. Gen (R) Ali Kuli Khan Khattak. He has resigned in compliance of regulation No. 3 of Listed Companies (Code of Corporate Governance) Regulations 2019. Board is dominated majorly by sponsor family and is supported by Principal Officer – Mr. Amir Raza, who is an experienced insurance professional long associated with the company.

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.