JCR-VIS assigns Management Quality Rating of AM3 to HBL Asset Management Limited

JCR-VIS Credit Rating Company Limited has assigned a Management Quality rating of AM3 (AM-Three) to HBL Asset Management Limited (HBL AMC).

HBL AMC is a wholly owned subsidiary of Habib Bank Limited (HBL) and started operations in April 2006. The AMC benefits from the franchise of its parent entity, with HBL positioned as the largest private sector bank, both in terms of deposits held by the bank and the size of branch network.

During its short operational history, the organization has launched three funds with diverse asset classes. The returns posted by the funds have been comparable to their respective peer groups. While personnel for key fund operations are in place, the company is in the process of strengthening risk management and compliance capacity.

The company has managed to put in place satisfactory operational systems. The internal audit function has been outsourced to a professional firm. As the organization grows and more funds are launched from its platform, HBL AMC is expected to further enhance its investment management capabilities and strengthen procedures.

JCR-VIS upgrades IFS Rating of EFU Life Assurance Ltd to AA- from A+ with a Stable Outlook

JCR-VIS Credit Rating Co. Ltd. (JCR-VIS) has upgraded the Insurer Financial Strength (IFS) rating of EFU Life Assurance Ltd (EFU Life) to AA- (Double A Minus) from A+ (Single A Plus) with a Stable Outlook.

EFU Life has completed 15 years of operation and has become the leading private sector life insurance company in Pakistan. Market share of the company has grown due to having a sizeable sales force and focus on productivity (through training) and persistency (through better client serving). There has also been significant focus on forging alliances and distribution through bancassurance channel. The major avenue of growth has been individual life insurance which primarily comprises unit-linked policies. The unit-linked schemes are linked to funds under management which have yielded attractive returns to policyholders. Group life insurance has also shown good growth and contributed positively to overall company profitability. The company is adequately capitalized and has strong liquidity vis-à-vis liabilities. Investments of unit linked funds are well matched with the liabilities of the policyholders. Performance of underwriting operations has improved contributing a significant portion of the surplus to net profit. Investment returns mostly stemming from capital gains have also been strong during 2007.

Senior management of EFU Life comprises experienced personnel backed by a team of experienced and qualified professionals including accountants, actuaries and underwriters. There has been stability in top management over the years and Management Information Systems are effective. While the management is also making efforts at improving the overall control environment and setup, the function of internal audit requires further strengthening. The management is making efforts at improving the overall internal control environment and setup. The panel of reinsurers of EFU Life is strong with business being reinsured by top reinsurers of the world.

JCR-VIS Credit Rating Company Limited has assigned preliminary medium to long term rating of A- (Single A Minus) to the proposed Sukuk of Rs 1 billion (with additional green shoe option of Rs. 0.5 billion) of Quetta Textile Mills Limited (QTML). The outlook on the rating is Stable. The preliminary Sukuk rating will be converted into final rating on review of the signed legal documents incorporating the structure of the transaction.

The assigned ratings take into account the long history of QTML in the textile industry and its policy of continuous up-gradation of plant and equipment. This has, however, also resulted in high debt leverage for the company as well as debt servicing pressure which is mitigated through the proposed structure of the transaction. The said structure entails a corporate guarantee of Rs. 200m from at least an A rated financial institution and standby credit lines, also from an A rated financial institution, for each upcoming installment payment. The proposed Sukuk will be issued for a term of seven years inclusive of one year grace period on principal repayment which will subsequently be redeemed in 12 unequal semi annual tranches with markup payable semi annually in arrears.