The Pakistan Credit Rating Agency Limited
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Muhammad Harris Ghaffar

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PACRA Maintains IFS Rating of SPI Insurance Company Limited

Rating Type IFS
(19-Apr-21 )
(20-Apr-20 )
Action Maintain Maintain
IFS Rating A A
Outlook Stable Stable
Rating Watch Yes Yes

The rating reflects the stable business profile of the company. In the recent period the growth has been muted due to multiple factors specially the slowdown in the economic environment of the country. The organization takes benefit from synergistic approach at group level – United International Group (UIG) - and replicate the group's established practices. The company is actively engaged in co-insurance both at group level and independently. The convergence of group business is expected to be streamlined in the form of a single company; sponsors are in the process of merging SPI Insurance into United Insurance. BOD approval has been received. Remaining process is expected to be accomplished in CY21.
The company witnessed minute decrease in turnover as at Dec-20. The contribution from alternative income stream – investment book – is small; needs to improve. The loss ratio is in acceptable range. The company booked a revaluation loss on its investment in Apna Micro Finance Bank whereas the liquidity is adequate considering the claims outstanding. However, the receivables are sizable in quantum, management needs to pay attention. The experienced board members provide comfort to the corporate governance structure.
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 new interest rate regime has added momentum to auto-financing, which is a good sign for the insurance industry.
The rating watch captures the challenges with regards to the company’s growth and its intention to build liquidity. At the same time, the level of liquidity must improve. The restricted growth in GPW should not translate into underwriting loss.

About the Entity
SPI Insurance Company Limited (SPI), an unquoted public limited company, was established in 2005. The company is majority-owned by UIG (70%), followed by Silkbank (23%) and Saudi Pak Leasing (7%). The overall control of the company vests in a BoD comprising seven members; five members represent UIG, whereas two members represent Silkbank. UIG is a diversified group having interests in insurance, tracking business, IT, agriculture, insurance brokerage and
microfinance-banking. Mr. M. A. Shahid, CEO/MD since beginning June 2011, is a law graduate having extensive insurance industry experience, especially with The United Insurance Company of Pakistan – a flagship company of UIG. He is assisted by a team of experienced professionals.

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.