The Pakistan Credit Rating Agency Limited
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PACRA Maintains IFS Rating of TRAFCO Insurance Company Limited

Rating Type IFS
(07-Jun-24 )
(09-Jun-23 )
Action Maintain Upgrade
IFS Rating BBB++ (ifs) BBB++ (ifs)
Outlook Stable Stable
Rating Watch - -

Pakistan's General Insurance industry has a total size of PKR 182bln during CY23 (CY22: PKR 143bln), exhibiting a growth of ~27%, in terms of Gross Written Premium (GWP). The industry reported a growth of ~46% in underwriting results (CY23: PKR 4.7bln, CY22: PKR 3.2bln). The net income of the industry also experienced an increase of ~60% to PKR 18bln during CY23 (CY22: PKR 11bln). Overall, the industry's overall outlook remains stable with substantial liquidity available with players.
TRAFCO Insurance Company Limited ("TRAFCO Insurance" or "the Company") rating reflects that the Company is currently in the developing stage, with the management making concerted efforts towards achieving financial stability. The Company is compliant with meeting the minimum capital requirements. Despite efforts that have been made to meet the minimum solvency requirements of PKR 150mln, the Company needs to address the concern in full as a deficit of PKR 85mln stands. The Company has reported growth of ~95% in its underwriting portfolio; yet, the portfolio size remains comparatively small. The management has taken substantial steps to minimize segmental concentration risk. During CY23, the fire segment accounts for ~36% of the total portfolio, making it the highest contributor, followed by the miscellaneous segment (~31%), motor segment (~29%), and the marine segment (~4%). TRAFCO Insurance requires a strategy revamp so as to generate profits in underwriting results trickling to net level. TRAFCO Insurance has made significant progress by securing reinsurance treaties, which provide the capacity for growth and offer a safeguard against underwriting risks. The Company needs to build a substantial investment book, which at present comprises PKR 3mln invested in TDRs, so as to generate a supplementary income. This is essential for addressing the liquidity concerns. The overall quantum of risk remains considerable.
The assigned rating is dependent on improved business to ensure financial stability. The rating would benefit from the resolution of compliance concerns related to the Insurance Ordinance, 2000. Additionally, the development of a healthy investment book, along with achieving breakeven from the core operations remains crucial for rating.

About the Entity
TRAFCO Insurance Company Limited (‘TRAFCO Insurance’ or ‘the Company’) was incorporated in Pakistan as an unlisted public limited company on 25-Oct-79. The Company operates within the conventional general insurance space through three branches in Pakistan.
Majority stake in the Company resides with Mr. Tahir Malik (~40%), followed by Mrs. Saboohi Tahir (~30%). While remaining (~30%) of the shares are held by other family members. The Board is chaired by Mr. Tahir Malik. While, the CEO, Mr. Muhammad Nawaz Shahid, is assisted 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.