Lahore, December 06, 2017 (PPI-OT):The rating draws comfort from the investments-holding company structure of IGI Insurance. This, while generating non-core revenue stream, provides strong risk absorption capacity to the company, engendering high level of resilience and flexibility against varied risks. The company continued to march on growth trajectory, invariably in all segments, while maintaining diversification of premium mix. Advanced IT platform supports efficient operations, particularly superior claims handling system. Comfort is drawn from the sound governance practices of the group.
The rating is placed on rating watch, with developing status. The sponsors of IGI group intend to redesign the overall structure of its multiple businesses engaged primarily in the ambit of financial services. Formation of a financial services Holding Company (Holdco) structure is proposed. A two-step transaction is envisaged which comprises of i) merger of IGI Investment Bank Limited (IGI IBL) with and into IGI Insurance company (IGI) and ii) de-merger of Insurance division and certain investments along with corresponding liabilities held by IGI Insurance into IGI General Insurance Ltd. and IGI Investments (Private) Limited respectively.
The merger and de-merger would be under share swap arrangement; whereby shareholders of IGI IBL will be issued IGI’s shares according to a swap ratio of 1:92, while swap ratio of hived down insurance entity is yet to be decided. The Company has filed a petition for sanctioning of the Scheme of Amalgamation under Sections 284 to 288 of the now repealed Companies Ordinance, 1984 in the High Court of Sindh for approval of merger and then de-merger.
The hearing has been smooth in the Sindh High Court. There was no major challenge as such and the court has reserved the order which is yet to be announced. The merger of IGI IBL with and into IGI have minimal impact on profile of IGI, due to its small size (1.6% of merged entity). However, hived-down of insurance would change the entire corporate structure, and, hence, would necessitate rating review. The de-merger to form a holding company will bring further focus to the group’s strategy to deliver various financial services. PACRA would continue to monitor these developments and the rating would be updated accordingly.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425