PACRA Maintains IFS Rating of The Universal Insurance Company Limited

The IFS ratings of The Universal Insurance Company Limited ("Universal Insurance" or "the Company") reflect its strong association with the Bibojee Group, which continues to provide multifaceted support through capital injections, when required, and access to a stable stream of captive business. The Company transitioned from a co-insurance arrangement to directly underwriting the Group's captive business, marking a strategic shift in its operating model. This transition resulted in a meaningful recovery in business volumes. The motor segment remained the dominant line of business, accounting for approximately 68% of GPW in CY25 compared to 58% under the previous co-insurance structure. Consequently, GPW increased by approximately 143%. Despite the sharp growth, the Company's business profile remains concentrated, with premium generation largely dependent on captive business. Operating performance also improved during CY25. Although underwriting operations remained loss-making, the underwriting loss narrowed by approximately 74%, reflecting improved portfolio performance and scale benefits following the revised underwriting strategy. Meanwhile, the investment portfolio expanded and generated investment income of approximately PKR 27mln, compared to an unrealized investment loss of PKR 11mln in the previous year. The combined recovery in underwriting and investment performance enabled the Company to return to profitability, reporting a net profit of approximately PKR 40mln in CY25 compared with a net loss of PKR 5mln in CY24. Performance during 1QCY26 indicates that the recovery remains in its formative stage. GPW increased SPLY basis, reflecting continued support from captive business. However, underwriting operations remained in deficit, albeit significantly lower than loss reported in the corresponding period last year. Investment income improved modestly but remained insufficient to fully offset underwriting losses, resulting in a net loss of approximately PKR 6mln for the quarter. While underlying trends remain positive, these results suggest that the Company's earnings recovery is yet to become self-sustaining. On the financial risk front, the Company's capitalization continued to strengthen. Equity increased to approximately PKR 730mln as of Mar’26 (CY24: PKR 670mln), supported by retained earnings and fair value gains on available-for-sale investments. Nevertheless, paid-up capital remained at PKR 500mln, against the SECP's minimum paid-up capital requirement of PKR 1,000mln effective by end-2026. Management has communicated its intention to inject the remaining capital by Dec'26 to achieve regulatory compliance, while these new funds will be utilized to generate investment incomes. PACRA draws comfort from the Sponsors' demonstrated willingness to provide financial support, which remains a key rating consideration. Management has also articulated a broader strategic roadmap aimed at reducing reliance on captive business by gradually re-entering the open market from 2027 onward through branch network expansion and broader customer acquisition. While this strategy, if successfully executed, has the potential to materially strengthen the Company's business profile, its implementation remains at an early stage. Accordingly, PACRA maintains the Rating Watch, reflecting the Company's limited operating track record following its strategic transition, its continued dependence on a single-source captive business model, and the pending execution of its capital augmentation and retail expansion plans.
The rating is dependent upon sustained improvement in the relative position of the Company, augmenting its sustainability as envisaged. Timely execution of the planned PKR 500mln paid-up capital injection by Dec’26 (to meet SECP's MCR) and successful transition from a captive to an open-market underwriting base from 2027 are now key, near-term milestones for the rating.

About the Entity
The Company, incorporated in 1958, is listed on PSX. The Bibojee Group holds the majority stake in the Company (~86%), remaining shares held by Directors, Executives, and Corporations (~3%), and the General Public (~11%). The Board, chaired by Mr. Lt. Gen (Retd.) Ali Kuli Khan Khattak, is dominated by the sponsoring group. Dr. Shahin Juli Khan Khattak, appointed as CEO in Nov-23, leads the Company with Mr. Amir Raza as the Principal Officer, supported by a team of experienced professionals.