Muhammad Noor Ul Haq
PACRA assigns initial IFS Rating to TRAFCO Insurance Company Limited
|IFS Rating||BBB+ (ifs)|
TRAFCO Insurance Company Limited is the emergent player in general insurance space. The sector has been highly competitive. The Company's underwriting portfolio is currently in development stage, which will be growing as envisaged by the management. The Company has been granted permission to commence underwriting business, after they met the related requirements. The management has a clear vision for business expansion. The rating reflects group support by way of planned synergetic benefits between the different ventures of TRAFCO Group. The business strategy envisages first focus on the motor insurance and later on other conventional lines, as the re-insurance arrangements for the lines are finalized. The rating factors in TRAFCO’s weak solvency, which remains below the regulatory requirement. Minimum capital requirement is also being met, which is important. Further, TRAFCO continues to report weak profitability with high underwriting losses, thereby resulting in net losses of PKR 94mln in CY21. The underwriting losses can partially be accredited to a one-time expense pertaining to the assets written off incurred by TRAFCO, amounting PKR 79.71mln. Management is focused on achieving breakeven in upcoming year. The enhancement in scale of operations is warranted for strengthening profitability profile. The quantum of liquid profile stood at PKR 9mln as at end-Dec21. TRAFCO's liquidity profile needs significant improvement.
The Company's success in achieving GPW targets and the expectation of financial support from the sponsor is essential. This should translate in improved underwriting performance and augmented liquidity. The rating would gain benefit provided the Company meets all statutory requirements and captures a sizeable share in the market while achieving breakeven in its core operations. At the same time, the liquid earning investments profile of the Company must rise.
TRAFCO Insurance Company Limited was incorporated in Pakistan as an unlisted public limited company on October 25, 1979.The Company operates within the conventional general insurance space through three branches in Pakistan and has no Window Takaful operations. The registered office and principal place of the Company is located at TRAFCO House, Lahore.
The company’s seven-member board is chaired by Mr. Tahir Malik. The composition of the board consists of four non-executives, one independent and two executive members. The CEO, Mr. Muhammad Nawaz Shahid, is assisted by a team of professionals, possesses around three decades of related experience.