Chubb Insurance Pakistan Limited - Amazon S3

JCR-VIS Credit Rating Company LimitedRating ReportTechnical Partner – IIRA, Bahrain JV Partner – CRISL, BangladeshRATING REPORTChubb Insurance Pakistan LimitedREPORT DATE:RATING DETAILSJanuary 4, 2019RATING ANALYSTS:Muniba KhanMuniba.khan@jcrvis.com.pkRating CategoryIFSRating DateRating OutlookLatest RatingLong-termPrevious RatingLong-termAAAADecember 31, 18StableDecember 29, 17StableCOMPANY INFORMATIONExternal auditors: A.F. Ferguson & Co. CharteredAccountants (a member firm of PwC Network)Public Limited Company (Unlisted)Chief Executive Officer: Mr. Humzah ChaudhriKey Shareholders (with stake 10% or more):Chairman: Mr. Syed Umer Ali ShahChubb INA International Holdings Limited, USA – 100%Incorporated in 2001APPLICABLE METHODOLOGY(IES)JCR-VIS Entity Rating Criteria Methodology – General Insurance (March 1702.pdf

JCR-VIS Credit Rating Company LimitedRating ReportTechnical Partner – IIRA, Bahrain JV Partner – CRISL, BangladeshChubb Insurance Pakistan LimitedOVERVIEW OFTHEINSTITUTIONIncorporated in 2001,Chubb Insurance PakistanLimited is engaged inunderwriting non-lifeinsurance business.Financial statements for2016 were audited by A.F.Ferguson & Co. CharteredAccountants (a memberfirm of PwC Network).The company has total staffstrength of 15.Profile of Chairman:Mr. Shah is the formerCEO of Chubb InsurancePakistan Limited, andformer Managing Directorof Chubb ArabiaCooperative InsuranceCompany, KSA. Mr. Shahholds an MBA inInsurance Managementfrom The College ofInsurance N.Y., a BSdegree in Insurance &Economics, and a B.Sc.degree in Physics, Chemistryand Mathematics, and isalso a Certified Directorfrom The Institute ofChartered Accountants ofPakistan. Prior to joiningChubb, Mr. Shah workedwith New Jubilee InsuranceCompany Limited, AbuDhabi National InsuranceCorporation, and UnitedBank Limited.Profile of CEO:Mr. Chaudhri is aChartered ProfessionalAccountant (CharteredAccountant) from Canadaand is a member of theChartered ProfessionalAccountants Canada,RATING RATIONALEChubb Insurance Pakistan Limited (CIPL) operates as a wholly owned subsidiary of Chubb INAInternational Holdings Limited (U.S.A). Prior to incorporation, the company functioned as a branch ofone of the group companies. The assigned rating derives strength from the sponsor profile of ChubbGroup, representing the world’s largest property and casualty insurers. The rating also reflects thetechnical and financial assistance provided to CIPL. The company also receives support in the form ofsizeable treaty capacities, largest in the domestic context from the group.Key Rating DriversBusiness MixThe company continues to maintain a diversified portfolio mix with fire and property contributing thehighest share. During the years, management has adopted a cautious approach with regards to itsportfolio due to high incidence of claims. As a result, CIPL’s carried out a consolidation strategy whichtranslated into variability in the top line. In 2017, CIPL was able to grow its business to Rs. 528.2m visà-vis Rs. 392.6m in the corresponding period last year. This growth has largely been emanated from theengineering projects that were underwritten. However, with the prevailing political uncertainty, theseexposures were not renewed in the ongoing year, reducing the company’s gross business to Rs. 166.6min HCY18. In order to cater to this trend in top line, management plans to launch of new productsalong with increase its focus on bancassurance, going forward. In HCY18, the company alsosignificantly increased its accident and health segment.Table 1: Gross PremiumRs. in millionsHCY18CY17CY16CY15CY14CY13Fire and property damage63.4357.0295.8469.3612.3496.4Marine, aviation and 71.9Accident & .019.841.237.0Total Gross Premium166.6528.2392.6544.7777.9579.9Reinsurance CoverageIn line with the Group’s strategy, all reinsurance treaties have been arranged with Chubb TempestReinsurance Ltd., Bermuda (CTRL), belonging to the Chubb group as well. CTRL enjoys a strongcredit risk profile with a financial strength rating of ‘AA’ from Standard & Poor’s. Reinsurance treatiesof the company include risk coverage for both inside and outside Pakistan, enabling the portfolio to begeographically diversified. Moreover, in comparison to peers, CIPL holds the largest reinsurance treatycapacities for fire, engineering and catastrophic cover in Pakistan.Claims ExperienceSimilar to other market players, CIPL also focused on consolidating its business on account of higherclaims in business segments. Resultantly, CIPL was able to control its loss ratios within manageablelimits; gross and net loss ratios were reported at 4.2% and 7.5% respectively in HCY18. Claims2 P a g e

JCR-VIS Credit Rating Company LimitedRating ReportTechnical Partner – IIRA, Bahrain JV Partner – CRISL, BangladeshChartered ProfessionalAccountants Ontario andThe Institute of CharteredAccountants of Pakistan.He holds a Bachelor ofCommerce Degree and aGraduate Diploma inPublic Accounting bothfrom McGill University,Montreal, Canada. He isalso a Certified Directorfrom The Institute ofChartered Accountants ofPakistan. Mr. Chaudhrihas over 12 years ofexperience in the financialsector. Prior to joiningChubb in 2012 Mr.Chaudhri was working forthe Royal Bank of Canadain Toronto.experience of CIPL compares favorably with peers and management expects it to remain at the lowerend given the risk selection and pricing procedure implemented at CIPL.Table 2: Loss RatiosGross Claims RatioHCY18CY17CY16CY15CY14CY13Fire and property damage0.6%17.9%77.5%169.1%2.8%95.4%Marine, aviation and 93.2%77.0%40.5%-110.8%Accident & .0%0.1%-17.9%-63.5%109.1%Total Gross Claims 15CY14CY138.6%15.7%17.6%78.6%4.3%19.3%MotorNet Claims RatioFire and property damageMarine, aviation and 1.0%93.2%77.0%51.7%-110.9%Accident & 0.5%0.4%-60.9%78.1%Total Net Claims Ratio7.5%10.2%17.7%58.8%4.2%19.2%MotorUnderwriting ProfitabilityAs a result of its business strategy, underwriting operations of the company depicted a positive bottomline amounting to Rs. 24.8m in 2017. Increase in profitability levels has largely been a function ofimproved business volumes and significantly lower claims in the accident and health segment. Barringits marine segment, all business segments have become profitable in 2018. With anticipated growth inbusiness in the coming years, management expects to maintain its underwriting profitability at similarlevels. With a lower claims ratio and controlled expense base, combined ratio of the company improvednotably to 56.9% (FY17: 77.0%, FY16: 101.0%) in HCY18. Ability to maintain these profitabilityindicators of the company will need to be monitored over time.Table 3: Underwriting PerformanceUnderwriting Profit (Loss)HCY18CY17CY16CY15CY14CY13Fire and property damage22.0(25.4)(7.6)Marine, aviation and Motor0.80.9(0.6)(0.2)0.53.7Accident & .31.2Total Underwriting Profit29.924.8(0.3)(77.6)116.654.6Capitalization & LiquidityIn line with the regulatory requirement, paid up capital of the company increased to Rs. 500m throughbonus and right share issuances of Rs. 50m each. On a standalone basis, shareholder’s equity increasedto Rs. 599.4m on the back of profit retention at end-June 2018. Nevertheless, capitalization levels ofthe company remain less favorable in comparison to peers. Leverage indicators are low and indicativeof significant room for growth. Liquidity profile of the institution is considered strong in view of3 P a g e

JCR-VIS Credit Rating Company LimitedRating ReportTechnical Partner – IIRA, Bahrain JV Partner – CRISL, Bangladeshsizeable liquid assets in relation to liabilities and manageable level of insurance debt.Table 4: Capitalization 8.1Operating Leverage23.1%19.1%25.9%16.7%Financial Leverage36.5%56.9%131.1%270.6%4 P a g e

JCR-VIS Credit Rating Company LimitedTechnical Partner – IIRA, Bahrain JV Partner – CRISL, BangladeshChubb Insurance Pakistan LimitedAppendix IFINANCIAL SUMMARY(amounts in PKR millions)BALANCE SHEETCash and Bank DepositsInvestmentsInsurance DebtTotal AssetsNet WorthTotal LiabilitiesJUN 30, 201826.7567.294.9912.1599.4312.7DEC 31, 201738.2642.8107.31,165.7565.9599.8DEC 31, 201632.5437.5123.11,282.8469.2813.6DEC 31, 201551.4590.0227.51,897.5398.11,499.4INCOME STATEMENTNet Premium RevenueNet ClaimsUnderwriting ProfitNet Investment IncomeProfit Before TaxProfit After TaxJUN 30, 201869.35.229.914.946.932.6DEC 31, 2017108.111.024.826.656.842.4DEC 31, 2016121.421.5(0.3)2.627.916.8DEC 31, 201566.539.1(77.6)(32.0)(31.9)RATIO ANALYSISMarket Share (Gross Premium)(%)Cession Ratio (%)Gross Claims Ratio (%)Net Claims Ratio (%)Underwriting Expense Ratio (%)Combined Ratio (%)Net Operating Ratio (%)Adjusted Insurance Debt to GrossPremium (%)*Operating Leverage (%)Financial Leverage (%)Adjusted Liquid Assets toTechnical Reserves (%)JUN 30, 2018DEC 31, 2017DEC 31, 2016DEC 31, .6%271.2%211.5%79.9%59.5%5 P a g e

JCR-VIS Credit Rating Company LimitedTechnical Partner – IIRA, Bahrain JV Partner – CRISL, BangladeshISSUE/ISSUER RATING SCALE & DEFINITIONSAppendix II6 P a g e

JCR-VIS Credit Rating Company LimitedTechnical Partner – IIRA, Bahrain JV Partner – CRISL, BangladeshREGULATORY DISCLOSURESAppendix IIIName of Rated EntitySectorType of RelationshipPurpose of RatingRating HistoryChubb Insurance Pakistan LimitedInsuranceSolicitedInsurer Financial StrengthInstrument StructureStatement by the RatingTeamN/AJCR-VIS, the analysts involved in the rating process and members of itsrating committee do not have any conflict of interest relating to the creditrating(s) mentioned herein. This rating is an opinion on credit quality onlyand is not a recommendation to buy or sell any securities.JCR-VIS’ ratings opinions express ordinal ranking of risk, from strongestto weakest, within a universe of credit risk. Ratings are not intended asguarantees of credit quality or as exact measures of the probability that aparticular issuer or particular debt issue will default.Information herein was obtained from sources believed to be accurate andreliable; however, JCR-VIS does not guarantee the accuracy, adequacy orcompleteness of any information and is not responsible for any errors oromissions or for the results obtained from the use of such information.JCR-VIS is not an NRSRO and its ratings are not NRSRO credit ratings.Copyright 2019 JCR-VIS Credit Rating Company Limited. All rightsreserved. Contents may be used by news media with credit to JCR-VIS.Probability of DefaultDisclaimerRating DateMedium toRating OutlookRating ActionLong TermRATING TYPE: INSURER FINANCIAL /1/2011AAStableUpgrade7 P a g e

Chartered Professional Accountants Ontario and The Institute of Chartered Accountants of Pakistan. He holds a Bachelor of Commerce Degree and a Graduate Diploma in Public Accounting both from McGill University, Montreal, Canada. He is also a Certified Director from The Institute of Chartered Accountants of Pakistan. Mr. Chaudhri has over 12 .