PACRA Maintains IFS Ratings of 5th Pillar Family Takaful Limited

Life Insurance market is dominated by the public sector (~58% share as of 6MCY24). At the same time, the private sector holds only ~42% of the market share. GPW of the industry stood at ~PKR 185bln during 6MCY24 (6MCY23: ~PKR 206bln), showing a YoY dip of ~10%. On the claims end, net claims declined by ~9% (6MCY24: ~PKR 167bln, 6MCY23: ~PKR 184bln). The total investment book of the insurance industry stood inclined by 19% (6MCY24: ~PKR 2,144bln, 6MCY23: ~PKR 1,802bln), yielding an investment income of ~PKR 187bln during 6MCY24 (6MCY23: ~PKR 127bln). Going forward, the sector's overall outlook is expected to remain stable.
The ratings of 5th Pillar Family Takaful Limited ('5th Pillar' or 'the Company') derive comfort from the Sponsor's stable financial footing from the businesses held in the international and local markets. The Company has an emerging profile in the life insurance/family takaful sector and holds a unique business model, which combines commercial rationality and religious objectives into one binding package. The Company operates in the family takaful segment by offering Hajj and Umrah savings plans to lower middle and middle-class people in society. The Company commenced its operations with group family takaful plans; however, during CY23, the Company initiated individual family takaful plans that led to an uptick in the top line. The Company's product suite also comprises of other family takaful savings plans like children's education plans and marriage savings plans. In addition, the Company remains focused on enhanced customer experience and improved retention through strategic investments in digitization. Currently, the investment income of the Company is derived from the equity provided by the Sponsors, however, the same will continue to support the bottom line. On the financial risk front, the liquidity profile remains stable with an effective claim management system. However, the equity base needs to be strengthened. The Company holds Sponsors' commitment to support if needs be. This along with a strong re-insurer adds comfort to the rating.
The ratings are dependent on the continued support and guidance from the key Sponsors. The successful unfolding of the model is of absolute necessity. The equity of the Company needs to be kept liquid and in safe investment avenues.

About the Entity
5th Pillar Family Takaful Limited ("5th Pillar" or "the Company") was incorporated in Mar-20 as a public unlisted company. The Company operates in the Family Takaful / Life Insurance business. The Company is a joint venture between businesses from Kuwait and Pakistan. A major stake of ~41.75% is held by Kuwait International Investment Holding Company supported by ~26.25% held by 5th Pillar Holdings Limited and ~32% by Muhammadi Family & Associates. The Sponsors possess diversified experience in local and international investment and asset management services. The Company's Board is chaired by Mr. Saleh Saleh Naser Al-Selmi. While Mr. Nasar us Samad Qureshi serves as the Company's CEO. He is assisted by a team of experienced professionals.