PACRA Downgrades IFS Rating of Premier Insurance Limited
|IFS Rating||A (ifs)||A+ (ifs)|
Pakistan's insurance industry is relatively small when compared globally. Locally, among the service sector, share of insurance in GDP and density (premium per capita) remains modest as the sector remains underdeveloped as per its potential. In terms of GPW, Pakistan’s general insurance industry has a total size of ~PKR 41bln during 3MCY23 (3MCY22: ~PKR 34bln), showing a growth of ~21%. Moreover, improved underwriting and investment performance benefitted the industry's bottom-line by ~21% (3MCY23: ~PKR 4bln, 3MCY22: ~PKR 3.4bln). Despite economic challenges and unprecedented pressures in the locally economy, insurance industry overall outlook remains stable.
The rating reflects Premier Insurance Ltd.'s ('Premier Insurance' or 'the Company') association with Crescent Group, which holds significant presence in textile, sugar, steel and power segments of Pakistan. The Company's growth in GPW and resultantly its underwriting income remains sluggish. Moreover, the dwindling investment book's performance further impacted the Company's bottom-line and remains ineffective in offsetting the losses seeping in from the core business i.e., insurance. The combined ratio has slightly improved, however remains inflated due to higher legacy claims from the fire & property segment. Consequently, the Company reported significant losses during that period. The management remains cognizant and needs a cautious approach to manage the risk profile of the Company. Despite strong coverages, stretched claim efficiency stretches the financial risk of the Company. However, equity base and reinsurance agreements remain stable.
The rating is dependent on the performance matrix. Additionally, the management must prudently handle the insurance asset liability structure, ensuring timely premium realization and efficient claims settlement. A sustained improvement in its financials, coupled with effective risk mitigation remains crucial to the rating. The risk profile of the Company needs to be monitored diligently.
Premier Insurance was incorporated as a listed concern, on PSX, in 1952. The Company operates through two business hubs: South and North. The Crescent Group (the Group) and its associated companies hold ~70% shareholding of the Company, followed by State Life Insurance Corporation holding ~11% stake. The Group operates in diversified sectors of textile, steel, sugar, and power.
Premier Insurance's Board is chaired by Mr. Khalid Bashir. While, the Company is headed by Mr. Nadeem Maqbool, as the CEO. He is aided by a team of experienced professionals.