Skip to main content

AM Best Downgrades Credit Ratings of EFU General Insurance Limited

AM Best has downgraded the Financial Strength Rating (FSR) to B- (Fair) from B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb-” (Fair) from “bb+” (Fair) of EFU General Insurance Limited (EFUG) (Pakistan). The outlook of the FSR has been revised to negative from stable, whilst the outlook of the Long-Term ICR is negative.

The Credit Ratings (ratings) reflect EFUG’s balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, neutral business profile and marginal enterprise risk management (ERM).

The rating downgrades reflect a weakening of EFUG’s balance sheet strength following the downgrade of Pakistan’s sovereign rating, resulting in higher charges being applied to some of the company’s investments when considered under Best’s Capital Adequacy Ratio (BCAR). With all investments held in Pakistan in line with regulatory requirements, EFUG’s risk-adjusted capitalisation, as measured by BCAR, is sensitive to asset risk and deteriorated to the weak level in 2022 from the very strong level. Investment risk remains the primary driver of required capital, with a high concentration to domestic government bonds and affiliated equity securities. In AM Best’s view, EFU remains exposed to potential capital volatility, especially in light of heightened economic, political and financial system risks in Pakistan. The negative outlooks reflect the elevated country risk in Pakistan and its potential impact on EFUG’s credit rating fundamentals.

EFUG has a history of robust operating profitability, with a five-year (2018-2022) weighted average return on equity of 11.9%, supported by positive underwriting and investment results. The company has generated solid underwriting profits over the same period, with an average combined ratio of 89.9%. Despite difficult market conditions and higher natural peril losses in recent years, AM Best expects prospective underwriting performance to remain strong.

EFUG benefits from a leading market position domestically in Pakistan, with an estimated market share of 21% in 2022. The company has a well-diversified underwriting portfolio across non-life business segments, and when combining conventional and takaful business, EFUG wrote consolidated gross written premium of PKR 32.0 billion (USD 141.6 million) in 2022. The company leverages its long-standing client relationships to maintain a defendable market position, which has helped it to navigate its challenging business environment.

In recent years, EFUG has formalised and strengthened its ERM framework and capabilities. However, in AM Best’s view, the company’s risk profile has increased recently as a result Pakistan’s deteriorating risk environment. Whilst AM Best notes EFUG’s historical operational resilience to country risk factors, risk management challenges are presented by its concentration of business and assets in Pakistan.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


Data & News supplied by
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.