A M Best has assigned a Financial Strength Rating of B+ (Good) and a Long-Term Issuer Credit Rating of "bbb-" to EFU General Insurance Limited (EFUG) (Pakistan). The outlooks assigned to these Credit Ratings (ratings) are positive. The ratings reflect EFUG's balance sheet strength, which A M Best categorises as strong, as well as its strong operating performance, neutral business profile and marginal enterprise risk management (ERM).
The positive outlooks reflect the strengthening of EFUG's ERM capabilities. The company has benefited historically from sound 'silo' risk management practices; however, EFUG has undertaken steps in recent years to establish an enterprise-wide risk-aware culture and to implement tools to consistently manage its risk exposures. A M Best expects that further anticipated improvements will lead to an ERM framework that is appropriate given the scale and complexity of EFUG's operations.
EFUG's balance sheet strength is underpinned by very strong risk-adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR), supported by good internal capital generation. However, the company's balance sheet strength is offset by a concentrated investment portfolio, which is restricted by regulation to Pakistan, and its exposure to non-rated reinsurers through mandatory cessions to the state-owned reinsurer.
EFUG has a track record of solid operating performance, with a five-year average return on equity of 16.0% (2013-2017) supported by positive underwriting and investment activity. The company has generated robust and consistent technical profits, with a five-year (2013-2017) average combined ratio of 83.6%, demonstrative of EFUG's underwriting discipline and understanding of its operating market.
EFUG maintains a leading position in Pakistan's insurance market, with a market share (as measured by gross written premiums) of approximately 26 percent, writing a diversified portfolio across non-life business segments. In 2017, the company's gross written premiums reached PKR 20.4 billion ($185.1 million) when combining conventional and Takaful operations. EFUG has successfully leveraged its long-standing relationships with clients to maintain a defendable competitive advantage, demonstrating its ability to navigate its challenging business environment.-PR