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The Pakistan Credit Rating Agency Limited
Press Release

Date
07-Oct-24

Analyst
Mir Muhammad Hamza
Mir.Hamza@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

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

Rating Type IFS
Current
(07-Oct-24 )
Previous
(20-Oct-23 )
Action Maintain Maintain
IFS Rating A+ (ifs) A+ (ifs)
Outlook Stable Stable
Rating Watch Yes -

Pakistan's Life Insurance market is dominated by the public sector (~66.6% share as of Dec-23), while the private sector holds only ~33.4%. The sector players have shifted their focus from first-year persistency to second-year, prioritizing Gross Premium Written (GPW) growth. During CY23, overall GPW showed a YoY growth of ~7.7%. Out of this total, ~46.6% of the GPW pertains to renewals, followed by group life without cash value (~37.2%). Net Premium also showed a YoY increase of ~7.4%. As policy maturities and surrenders have largely trickled in, net claims grew by ~31%. To adapt, the industry holds a substantial investment book (CY23: PKR 2,021bln, CY22: PKR 1,747bln) stabilizing the overall industry's outlook.
The assigned rating of Postal Life Insurance Company Ltd. ('Postal Life' or 'the Company') incorporates its evolving presence across the country through Pakistan Post and its wide spread offices. Government of Pakistan (GoP), through the Ministry of Communications, established Postal Life as a separate legal entity in Mar-20. The Company operates through Post Office Business Fund (POBF) for claims related to legacy business, and Pakistan Business Fund (PBF) to pay off obligations related to new businesses. During CY23, the Company's GPW declined by ~46%; this coupled with increased claims, significantly impacted Postal Life's underwriting performance. Persistency ratio for first year and renewals, remain low. The Company holds an elevated combined ratio. While, the bottom-line gathers support primarily from the income received from the Government of Pakistan (GoP) related to Postal Life's legacy business. The Company's liquidity position remained stable. On the qualitative side, financial transparency is impacted and timely completion of audit financials remains crucial. Rating has been assigned a 'Watch' as the overall business performance of the Company remains under pressure. Moroever, governance framework requires to be streamlined.
The Company's ongoing ability to independently sustain statutory funds and enhance its market position along with core profitability remain critical to rating. The streamlining of audit procedure remains integral for sustaining the rating. Moreover, prudent management of risk and agency models are important along with the realization of accrued interest income on the promissory note holds significance for the 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 The Company operates as life insurance company.
The Government of Pakistan (GoP) formulated Postal Life as a separate legal entity in Mar-20. Mr. M. Salman is the acting CEO of the Company. He 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.