PACRA Maintains IFS Rating of Postal Life Insurance Company Limited | Assigns Rating Watch

Postal Life Insurance Company Ltd. ('Postal Life' or 'the Company') was established as a separate legal entity by the Government of Pakistan (GoP) through the Ministry of Communications in Mar-20. The Company operates nationwide through a widespread network of Pakistan Post Offices, and manages two distinct funds: the Post Office Business Fund (POBF) for legacy liabilities and the Pakistan Business Fund (PBF) for new business obligations. On the qualitative front, the Company's governance framework lacks coherence. Lately, the Federal Cabinet has shared a formal confirmation on the appointment of the four nominated Independent Directors. However, the appointment of the Company's CEO is still pending. This undermines the Company's governance and managerial practices. The Company operates in the life insurance sector, which is dominated by public-sector insurers with a ~61% market share. Overall, the sector saw a ~7% YoY increase in its GPW, with promising profits supported by a ~60% surge in the overall investment income, which expanded to PKR 2.5trln as of Dec-24. The sector's outlook is stable, supported by solid underwriting and robust investment returns. Postal Life's GPW growth of ~12% was accompanied by an inflated combined ratio, due to increased claims and subdued policy renewals. This impacted the Company's overall performance. The earnings remain heavily reliant on government support for its legacy portfolio of ~PKR 49bln as of Dec-24, a factor complicated by consistent delays in claim payments. Furthermore, despite stable liquidity, the lack of timely audits has compromised the financial transparency of the Company. PACRA assigns a Watch to the Company's IFS rating, registered by its considerably weak business and financial profile. This, along with governance-related challenges stemming from a considerable delay in the appointment of the CEO has also rendered the Company's managerial practices weak.
The assigned Developing outlook is contigent on firm adherence to a formally drafted and Board approved business plan. This, along with the Company's ability to sustain its market standing and independently manage the statutory funds are important. Key considerations include strengthening the Company's core profitability and developing a robust investment portfolio. Additionally, streamlining the audit procedures, demonstrating prudent risk management, and realizing accrued interest on promissory notes are all critical. Any further deterioration in the Company's financial profile will negatively impact the IFS rating.

About the Entity
Postal Life Insurance Company Ltd. ('Postal Life' or 'the Company') was established in 1884. Postal Life conducts its operations through a vast branch network of post offices. The Company operates as life insurance company. The Government of Pakistan (GoP), through the Ministry of Communications holds complete stake in the Company. Postal Life's Board requires approval from the Federal Cabinet, which has been lately finalized. While, the position of the Company's CEO is currently vacant. At present, an Executive Committe, comprises qualified professionals, manages the affairs of the Company.