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The Pakistan Credit Rating Agency Limited
Press Release

Date
20-Jul-20

Analyst
Maryam Ijaz
maryam.ijaz@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 Assigns IFS Rating to Askari Life Assurance Company Limited

Rating Type IFS
Current
(20-Jul-20)
Action Initial
Long Term A-
Short Term -
Outlook Stable
Rating Watch -

Askari Life, under the umbrella of Army Welfare Trust (AWT), is an emerging life insurance company. The rating incorporates ensuring synergistic and oversight benefits from its association with the sponsor along with explicit commitment for further financial support. AWT already has significant presence in the general insurance market through Askari General (rated AA). The other major shareholder in Askari Life also has presence in general insurance through East West General (rated AA-); have presence on the BoD. They were erstwhile owners of the company before acquisition by AWT. The company is witnessing losses due to initial years of operations, however the demonstrated growth together with improving profitability bodes well for the long-term prospects. Askari Life aims to garner high volumes using both Agency and Bancassurance distribution channels. Efforts are also being undertaken to underwrite captive business. The risk absorption capacity and capitalization levels are moderate. Any dilution therein has the comforting backing of the sponsor. Increase in market share along with converting underwriting losses into profitability is crucial. Moreover, maintenance of adequate capital in wake of increasing business volumes and consequent support from sponsors would remain important.
Prior to COIVD-19, the life insurance industry witnessed miniscule growth of 1% YoY as single premium declined due to the underperformance of equity markets, which made the unit-linked investment funds unattractive to policy holders for investment purposes. The current pandemic has further affected the life insurance industry, with the growth expected to plummet. Additional reduction in investment linked policies and heightened claims are expected. Moreover, increase in surrenders is likely as a result of economic stagnation. The large investment book is however likely to cushion any impact. The industry intends to sustain its existing position while aiming to launch innovative products.
The rating is dependent on sustained improvement in business and financial risk profile of the company in line with its relative positioning with in the industry. At the same time, liquidity profile should continue to cushion the policyholder's liabilities. Growth in topline and underwriting profits are essential.

About the Entity
Askari Life Assurance Company Limited (ALAC), formerly known as East West Life Assurance Company Limited, a quoted public company, listed on the Pakistan Stock Exchange, commenced operations in Feb-1993. With its head office in Karachi, the company operates in main cities with branches in Lahore, Islamabad and Karachi. The company is majority owned by Army Welfare Trust (AWT) with a stake of 54.5%. AWT was set up in 1971 by Pakistan Army for promoting the welfare of retired personnel of the Army and their families through the creation of income and employment generating activities. AWT is currently engaged in real estate, security services, sugar, and lubricants. It manages a sizable book of strategic investment, which yields a significant amount of dividend every year to the fund.
ALAC’s board comprises of eight members including the CEO. The board includes retired army officials, senior executives of AWT, and two independent members. Mr. Jehanzeb Zafar, having significant experience of the life insurance industry, is the CEO. A team of professionals assists him.

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.