The Pakistan Credit Rating Agency Limited
13-May-23
Analyst
Muhammad Noor Ul Haq
noorulhaq@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
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PACRA maintains IFS Rating of TRAFCO Insurance Company Limited
| Rating Type | IFS | |
|
Current (13-May-23 ) |
Previous (13-May-22 ) |
|
| Action | Maintain | Initial |
| IFS Rating | BBB+ (ifs) | BBB+ (ifs) |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
TRAFCO Insurance Company Limited is the emergent player in general insurance space. The rating reflects group support by way of planned synergetic benefits between different ventures of TRAFCO Group. The Company's underwriting portfolio is currently in development stage, which will be growing as envisaged by the management. The Company deals in “Fire and Property Damage”, “Marine, Aviation and Transport”, “Motor” and “Miscellaneous” segments. The rating factors in TRAFCO’s weak solvency, which remains below the regulatory requirement. The Company’s ultimate forte resides with the motor segment ~65.37% followed by fire & property (~18.67%) and miscellaneous (~15.94%). Further, TRAFCO continues to report weak profitability with high underwriting losses, thereby resulting in net losses of PKR 8mln during CY22. The underwriting losses can partially be accredited to a negligible net insurance premium. Presently, TRAFCO does not maintain an investment book. The quantum of liquid profile stood at PKR 2mln as at end-Dec22. TRAFCO's liquidity profile needs significant improvement.
The Company's success in achieving GPW targets and the expectation of financial support from the sponsor is essential. This should translate in improved underwriting performance and augmented liquidity. The rating would gain benefit provided the Company meets all statutory requirements and captures a sizeable share in the market while achieving breakeven in its core operations. At the same time, the liquid earning investments profile of the Company must rise.
About
the Entity
TRAFCO Insurance Company Limited was incorporated in Pakistan as an unlisted public limited company on October 25, 1979.The Company operates within the conventional general insurance space through three branches in Pakistan and has no Window Takaful operations. The registered office and principal place of the Company is located at TRAFCO House, Lahore. The company’s seven-member board is chaired by Mr. Tahir Malik. The composition of the board consists of four non-executives, an independent and two executive members. The CEO, Mr. Muhammad Nawaz Shahid, is assisted by a team of professionals, possesses around three decades of related experience.