General Insurance - pacra.com.pk · Large Sector Performance Adamjee Insurance EFU Gen. Ins. Ltd....
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General Insurance Pakistan Credit Rating Agency May 2020
Transcript of General Insurance - pacra.com.pk · Large Sector Performance Adamjee Insurance EFU Gen. Ins. Ltd....
General Insurance
Pakistan Credit Rating Agency
May 2020
Large Companies
No. of Companies:
5
GPW (PKR mln):
62,217
Market Share (%): 66
Medium Companies
No. of Companies: 8
GPW (PKR mln):
23,873
Market Share (%): 25
Small Companies
No. of Companies: 13
GPW (PKR mln):
7,834
Market Share (%): 8
Large Companies
No. of Companies:
5
GPW (PKR mln):
67,238
Market Share (%): 65
Medium Companies
No. of Companies:8
GPW (PKR mln): 27,271
Market Share (%): 26
Small Companies
No. of Companies: 13
GPW (PKR mln):
9,339
Market Share (%): 9
Insurance Sector Overview
Dec’19
Total No. of Companies: 26
Total GPW (PKR mln): 103,848
Total Market Share (%): 100
Dec’18
Total No. of Companies: 26
Total GPW (PKR mln): 93,924
Total Market Share (%): 100
Large Sector Performance
Adamjee Insurance EFU Gen. Ins. Ltd.Jubilee General
InsuranceIGI Insurance United Insc.
GPW Dec'19 23,720 22,064 10,477 5,613 5,365
GPW Dec'18 21,489 20,813 10,069 4,608 5,238
Market Share Dec'19 23% 21% 10% 5% 5%
Market Share Dec'18 23% 22% 11% 5% 6%
23,720
22,064
10,477
5,613 5,365
21,489
20,813
10,069
4,608 5,238
23%
21%
10%
5%
5%
23%
22%
11%
5%
6%
0%
5%
10%
15%
20%
25%
-
5,000
10,000
15,000
20,000
25,000
Mar
ket
Sh
are
(%)
PK
R (
mln
)
Gross Premium Written
Medium Sector Performance
UBL Insurer TPL Insc. East West Insc.Askari Gen.
Insc.Security Gen.
Insc.Atlas Insc. Alfalah Insc.
Allianz EFUHealth
GPW Dec'19 4,511 3,685 3,443 3,401 3,227 3,202 3,005 2,798
GPW Dec'18 3,830 3,466 3,124 3,179 2,516 3,061 2,601 2,096
Market Share Dec'19 4% 4% 3% 3% 3% 3% 3% 3%
Market Share Dec'18 4% 4% 3% 3% 3% 3% 3% 2%
4,511
3,685
3,443 3,401 3,227 3,202
3,005
2,798
3,830
3,466
3,124 3,179
2,5163,061
2,601
2,096
4%
4%
3% 3% 3%3%
3%
3%
4%
4%3%
3%
3%
3%
3%
2%
0%
1%
1%
2%
2%
3%
3%
4%
4%
5%
5%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Mar
ket
Sh
are
(%)
PK
R (
mln
)
Gross Premium Written
Small Sector Performance
HabibInsc.
CenturyInsc.
TakafulPakista
nSPI Insc.
SindhInsc.
Reliance Insc.
PakQatar
PremierInsc.
AsiaInsc.
Shaheen Insc.
Universal Insc.
AlphaInsc.
Crescent Star
GPW Dec'19 1,706 1,389 1,032 964 902 726 701 633 584 350 139 115 99
GPW Dec'18 1,345 1,248 375 839 439 979 678 685 563 423 63 83 114
Market Share Dec'19 2% 1% 1% 1% 1% 1% 1% 1% 1% 0% 0% 0% 0%
Market Share Dec'18 1% 1% 0% 1% 0% 1% 1% 1% 1% 0% 0% 0% 0%
1,706
1,389
1,032 964
902
726 701 633
584
350
139 115
99
1,345
1,248
375
839
439
979
678 685
563
423 63
83
114
2%
1%
1%1%
1%
1% 1%1%
1%
0%
0%
0% 0%
1% 1%
0%
1%
0%
1%
1%1%
1%
0%
0%
0%
0%
0%
0%
0%
1%
1%
1%
1%
1%
2%
2%
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mar
ket
Sh
are
(%)
PK
R (
mln
)
Gross Premium Written
Industry Dynamics (CY19)- Overall
LARGE MEDIUM SMALL
No. of Companies
Investment Income
U/W Results
Equity
Investment + Cash & Bank
5
5,284
2,123
57,600
62,776
TOTAL
26
7,932
4,435
97,509
108,460
8
1,966
2,184
26,757
32,633
13
683
128
13,152
13,052
*Financials in PKR (mln)
Investment Income U/W Results Equity Investment+ Cash & Bank
1,381 726 21,839 27,054
2,387 503 20,033 16,575
955 327 9,028 14,331
*Financials in PKR (mln)
Industry Dynamics (CY19)- Large Companies
Market Share (%)
23%
21%
10%
485 205 2,622 3,6005%
76 362 4,078 1,2155%
Industry Dynamics (CY19)- Medium Companies
*Financials in PKR (mln)
107 494 1,863 1,1884%
Investment Income U/W Results Equity Investment+ Cash & BankMarket Share (%)
135 215 491 2,0034%
26 300 1,512 1,2683%
224 222 2,179 2,8763%
1,037 299 14,969 16,5223%
243 611 3,816 5,7153%
111 93 1,458 2,2113%
83 -51 468 8483%
Industry Dynamics (CY19)- Medium Companies
*Financials in PKR (mln)
95 101 1,295 1,4652%
Investment Income U/W Results Equity Investment+ Cash & BankMarket Share (%)
35 142 1,908 2,0321%
13 1 474 6261%
21 2 815 5061%
361 72 1,784 3,2801%
105 63 1,059 1,0811%
5 0 649 5981%
-134 -234 1,008 9031%
Industry Dynamics (CY19)- Medium Companies
*Financials in PKR (mln)
53 -63 1,051 8521%
Investment Income U/W Results Equity Investment+ Cash & BankMarket Share (%)
67 65 621 5870.3%
14 7 822 2320.1%
43 -56 706 7960.1%
5 28 960 940.1%
Segment Dynamics
• Industry wide, Fire and Motor segments are the leading segments• The large companies dominate the fire segment on the account of corporate
business• Motor segment dominated the Takaful sector through the banking channels• Health segment is mostly avoided by all companies and usually taken up in
combination with business of other segments.
Large Medium Small Window Takaful Total
Fire 43% 28% 36% 14% 35%
Marine 9% 9% 14% 4% 8%
Motor 29% 25% 31% 62% 32%
Health 7% 10% 9% 14% 9%
Others 12% 27% 10% 6% 15%
43%
28%
36%
14%
35%
9% 9%14%
4%8%
29%25%
31%
62%
32%
7%10% 9%
14%9%
12%
27%
10%6%
15%
0%
10%
20%
30%
40%
50%
60%
70%
Per
cen
tage
(%
)
Segment-wise Business
Fire Marine Motor Health Others
Motor Segment• Major portion of Motor Insurance is driven by bank and economic activity in
the country• Auto Sales were already witnessing major downturn since 2019 with higher
exchange and interest rates – over 50% decline in sales.• The COVID-19 lockdown resulted in further decline due to lower demand and
manufacturers temporarily shutting down operations
CY15 CY16 CY17 CY18 CY19
Auto Loan* (PKR mln) 96,953 126,000 169,000 210,688 225,000
Vehicles Sold ('000) 151 181 185 216 207
Motor GPW (PKR mln) 16,985 20,123 25,175 28,392 32,584
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
-
50,000
100,000
150,000
200,000
250,000
Mo
tor
GP
W (
PK
R m
ln)
Au
to L
oa
ns
(PK
R m
ln)
Auto Loan* (PKR mln) Vehicles Sold ('000) Motor GPW (PKR mln)
*Auto loan by commercial banks, outstanding balance at year end**No. of vehicles include Cars, Buses & Trucks
Motor Segment
Large51%
Medium22%
Small5%
Takaful22%
Motor Segmentation• The reduced interest rates will beef upthe auto financing providing increasedvolumes.
• Large companies are expected to gainfurther market share while takaful riseson the back of Islamic banking volumes.
CY15 CY16 CY17 CY18 CY19
Vehicles Sold ('000) 151 181 185 216 207
Motor GPW (PKR mln) 16,985 20,123 25,175 28,392 32,584
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
0
50
100
150
200
250
Mo
tor
GP
W (
PM
R m
ln)
Veh
icle
s S
old
('0
00
)
Motor Segment Growth |No. of Vehicles
Vehicles Sold ('000) Motor GPW (PKR mln)
Takaful Snapshot
Companies having Window Takaful Operations and Dedicated Takaful Companies
2,290 20%
1,212 10%
1,179 10%
1,054 9%
1,032 9%
1,101 9%
701 6%
522 4%
GPW (PKR mln) Market Share (%)
14%
4%
62%
14%
6%
Takaful Segmentation
Fire
Marine
Motor
Health
Others
Loss Ratio-Analytical Analysis
• Loss Ratio decreased in proportion to the size of the company emphasizing large companies pay out more claims with respect to premium generated.
• Takaful operations of small sized operators suffer a higher loss ratio due to small size window size.
• Industry wide, Loss Ratio in Takaful operations remained stagnant at 65% reflecting stability (CY18: 66%)
59%
49%
41%
54%57%
46%40%
52%
68%64% 63% 65%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Large Medium Small Industry
Loss Ratio
Overall Conventional Takaful
Expense Ratio-Analytical Analysis
• Expense Ratio showed an inverse relation to the size of the company emphasizing large companies are better able to keep the expenses under control.
• This can be attributed to economies of scales along with quality of resource being hired by Large Companies as compared to Small Companies.
• Expense Ratio of Takaful Operations in Large and Medium sized companies is lower than Conventional Operation due to Share Services being utilized and charging of expenses in disproportional ratio to encourage Window Operations.
• The high expense ratio for smaller companies leads to underwriting losses or negligible profitability through core operations
28%35%
60%
33%33% 35%
87%
51%
22%
35%
12% 11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Large Medium Small Industry
Expense Ratio
Overall Conventional Takaful
Rating Paradigm
• Increased movement of entities in AA category paradigm.• Higher ratings reflect increased competition amongst the peers• Askari General and UBL Insurers moved to the AA category
AA+ AA AA- A+ A A-
CY19 3 6 3 3 8 3
CY18 3 4 3 6 7 4
CY15 2 3 2 6 7 5
0
1
2
3
4
5
6
7
8
Rating Universe- General Insurance
CY19 CY18 CY15
Challenges Posed by COVID-19
• The insurance industry is dependent on banking activity. Lack of trade
quantum and capital investment will directly affect the business volumes
for General Insurance
• With decrease in bank financing and slowdown in auto sector, the
insurance sector is bound to face intense competition amongst peer
companies
• Moral hazards may go up given the prevailing circumstances, leading to
rise in loss ratios
• The dip in business volumes and reduced margins are likely to decrease
the underwriting profits i.e. from core business
• Investment income is likely to plummet in the wake of depressing trends
in PSX and reduced interest rates
• Companies may need to cut management expenses while the launch of
innovative products would be the need of the hour, in order to engage new
customer base
• Regulatory efforts are afoot to sustain the banking industry and keep themanufacturing industry afloat. This in turn will support the insurancesector
Bibliography
1. PACRA’s in-house research and database
2. Insurance Association of Pakistan | Key Financial Data
3. Pakistan Economic Survey, issued by Finance Division, Government of Pakistan.
4. Swiss Re | Sigma
5. Pakistan Stock Exchange Limited | Market Information
6. Trading Economics
7. SECP | List of Insurers
Jhangeer Hanif
Unit Head
Faraan Taimoor
Supervisory Senior
Maryam Ijaz
Financial Analyst
DISCLAIMERPACRA has used due care in preparation of this document. Our information has been obtained
from sources we consider to be reliable but its accuracy or completeness is not guaranteed. The
information in this document may be copied or otherwise reproduced, in whole or in part,
provided the source is duly acknowledged. The presentation should not be relied upon as
professional advice.
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