Crystal Insurance Company Limited - Credit Rating Agency of ...

CRAB Ratings
General Insurance
Rating Report (Surveillance)
Crystal Insurance Company Limited
Ratings
Previous Ratings
Long Term : BB 2 Long Term : BB 3
Short Term : ST-4 Short Term : ST-5
Date of Rating : 12 April, 2009
Validity : 05 April, 2010
Analyst
Fareba Naz Shaule
Financial Analyst
fareba.naz@crab.com.bd
Particulars 2008 2007
Gross Premium 115.48 139.43
Net Premium 72.34 66.95
Underwriting Profit 8.55 2.91
Net Profit (before tax) 11.31 5.95
Paid up Capital 60.00 60.00
Shareholders’ Equity 73.79 64.69
Investment 88.80 77.34
Investment Yield (%) 9.93% 10.68%
Combined Ratio (%) 105.38% 121.25%
ROAA (%) 8.19% 5.08%
Current Ratio (times) 2.74 2.88
Risk Retention Ratio (%) 62.64% 48.01%
200
150
100
25
20
15
10
50
5
‐
‐
11.31
8.55
115.48
5.95
2.91
2008 2007 2006
Underwriting Profit
139.43
72.34 66.95
2008 2007 2006
Gross Premium
Net Premium
Pretax Profit
153.40
80.02
8.13
6.81
01. RATIONALE
Credit Rating Agency of Bangladesh Limited
(CRAB) has upgraded the long term rating
of Crystal Insurance Company Limited
(hereinafter referred to as “Crystal” or the
Company) to BB 2 (pronounced double B two)
and short term rating to ST-4 rating review
conducted based on audited financial
statements of year ended 2008 and other
relevant information.
Insurance Companies rated ‘BB 2 ’ have
MARGINAL financial security characteristics.
Positive attributes exist, but adverse
business conditions may lead the Company
to insufficient ability to meet financial
commitments. Insurance Companies rated
‘ST-4’ in the short term are regarded as
VULNERABLE and has significant speculative
characteristics. Such insurance companies
currently have the ability to meet their
financial commitments on short-term policy
obligations; however, they may be facing
major ongoing uncertainties which can lead
to the insurer’s inadequate ability to meet
their financial obligations.
CRAB performed the present rating
assignment based on the audited financial
statements of 31 December 2008 and other
relevant information. The rating takes into
account both quantitative and qualitative
indicators which include market share,
growth potential, corporate governance,
underwriting quality, claim paying ability,
profitability, capital adequacy, investment
performance and liquidity. The solvency
status, re-insurance capacity of the
Company and adequate reserve base are
also key drivers of rating analysis.
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CRAB Ratings
General Insurance
In 2008 net premium and net claim of Crystal increased by 8.06% and 153.33%
respectively. Management expense decreased by 19.21% but it was still 28.88% higher
than the allowable management expense.
Crystal Insurance Company started its operation in 1999 and incurred underwriting loss up
to 2003. In 2008 the underwriting profit increased by 193.62% from BDT 2.91 million in
2007 to BDT 8.55 million. The net profit increased by 90.07% from BDT 5.95 million in 2007
to BDT 11.31 million. The investment & other income also increased by 2.09% due to
14.81% increase in the investment. For the last few years’ investment & other income was
dominating the total revenue but for the first time in 2008 the underwriting profit was
slightly higher than the investment & other income. The overall profitability of Crystal was
higher in 2008 than that of 2007. In 2008 ROAE and ROAA of Crystal have also increased.
The ROAE has increased from 9.53% to 16.33% in 2008.
Crystal’s management comprises of experienced and efficient people who have immense
exposure in diversified industrial sectors. Crystal has a separate Audit & MIS department to
inspect overall business of the Company. The IT infrastructure of the Company is in the
primary stage and Crystal is yet to adopt a computerized system and professional software
for accounts, underwriting, claims and reinsurance.
The investment portfolio of Crystal was BDT 88.80 million in 2008 mainly in the form of
bank deposit and government bonds which enabled the Company to secure their return.
The claim settlement ratio of Crystal has increased from 86.26% in 2007 to 93.54% in
2008. In 2008 BDT 12.50 million out of total claim of BDT 13.36 million was settled. The
Company has paid up capital of BDT 60 million, so it is yet to go for public offering to raise
the paid up capital to required level of BDT 150 million. The liquid asset was BDT 122.24
million registering a growth of 13.64%. The liquidity position of Crystal declined from 2.88
times in 2007 to 2.74 times in 2008. On the other hand, the solvency margin has increased
from 2.83 times to 3.26 times.
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