The Pakistan Credit Rating Agency Limited
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Waqas Ahmad

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PACRA Assigns Initial IFS Rating to Postal Life Insurance Company Limited

Rating Type IFS
(21-Oct-22 )
Action Initial
IFS Rating A+ (ifs)
Outlook Stable
Rating Watch -

The assigned rating derives assurance from “Postal Life Insurance Company Limited” being wholly owned subsidiary of the Govt. of Pakistan (GoP), through Ministry of Communications. GoP has also injected equity of PKR 4bln, which is a testimony of GoP’s vision and commitment to the Company. Rating derives comfort from outreach of Postal Life through vast branch network of the Pakistan Post, spread across country. Postal Life has been enjoying a long-standing history since its establishment in 1884. GoP formulated Postal Life as a separate legal entity, in Mar’20, which operates under regulatory framework of the Securities & Exchange Commission of Pakistan (SECP). Composition of Board of Directors (BoD) has been approved by the Cabinet. BoD of the Company includes three Govt. officials i) Federal Secretary for Communications ii) Additional Secretary Finance and iii) Director General, Pakistan Post. The Company is in process of approval of "Postal Life Insurance Act, 2021" from the Cabinet. Postal Life has two separate funds namely: i) Post Office Business Fund (POBF) & ii) Pakistan Business fund (PBF) for distinct management of legacy and new businesses. POBF is established for claims related to legacy business. Whereas, PBF is established to pay off obligations related to new business of Postal Life. Additionally, GoP is committed to provide fund amounting to PKR 48bln, along with any outstanding amount duly determined by actuarial valuation. Whereas, actuarial valuation report has shown policyholder liabilities amounting to PKR 59.936bln net off outstanding policy holder loans. Rating also factors in healthy capital position, strong risk absorption capacity, represented by sufficient liquidity and quality of its investment portfolio. Majority of the Company’s investment book is invested in government securities. The Company has written a Gross Premium Written (GPW) of PKR 1,593mln and net profitability of PKR 458mln during 6MCY22. GPW of Life Insurance industry in Pakistan stood at PKR~95bln during 1QCY22 (1QCY21: PKR~62bln; CY21: PKR~291bln), showing a YoY growth of ~53%. Major growth was observed in Govt. sector. CY21 has shown recovery in business and a positive trend in growth of the industry, compared to corresponding period. Hike in policy rate will be a source of safe return for the Companies on Govt. investments.
The Company’s continued self-subsistence of statutory funds, ability to improve its market position and strengthening of core profitability are integral to the rating. Moreover, prudent management of risk in wake of increasing business volumes and agency model remain important. Moreover, approval of "Postal Life Insurance Act, 2021" from the Parliament of Pakistan, realization of accrued interest income on the promissory note, remains crucial to the rating.

About the Entity
Postal Life Insurance Company Limited was established in 1884. The Government of Pakistan formulated Postal Life as a separate legal entity, in Mar’20. Postal Life conducts its operations through a vast branch network of post offices with five regional offices (located in Lahore, Multan, Karachi, Quetta and Peshawar) and two circles (Lahore & Karachi). Whereas, the principal office is located in Islamabad. The Company has finalized draft financial accounts for CY21, which are to undergo audit process. Audit committee has recommended M/S BDO Ebrahim & Co, Chartered & Accountants for appointment as external auditor for CY21.
Postal Life is wholly owned by Govt. of Pakistan through Ministry of Communications. Postal Life's has a seven-member BoD, three of them are non-executives, three independent and one executive member. Capt.(R) Mr. Muhammad Khurram Agha is Chairman of BoD. Mr. Hassan Akhtar Khan is acting CEO of the Company. He is accompanied by a team of 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.