LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Adamjee Insurance Company Limited (Adamjee) (Pakistan). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Adamjee’s adequate risk-adjusted capitalisation, robust, albeit volatile operating results and strong business profile in Pakistan. Offsetting rating factors include Adamjee’s concentrated investment portfolio, and the high level of economic and political risk associated with the company’s operations in Pakistan.
Adamjee’s risk-adjusted capitalisation remained adequate and stable in 2015, with growth in underwriting and investment risks sufficiently absorbed by the company’s expanding capital base, which increased by 11.1% to PKR 15.3 billion (USD 147.2 million), driven by the retention of earnings. A.M. Best anticipates that Adamjee’s prospective risk-adjusted capitalisation will remain commensurate with the current ratings, supported by internal capital generation and controlled underwriting growth.
During 2015 and the first nine months of 2016, Adamjee generated robust operating results and reported pre-tax profits of PKR 2.8 billion (USD 27.2 million) and PKR 3.4 billion (USD 33.0 million), respectively. However, Adamjee’s investment portfolio, which is weighted toward domestic equities, and in particular affiliated companies, has resulted in somewhat volatile operating performance in the past five years (2011-2015). Furthermore, the company’s overall earnings are reliant on investment income, with underwriting profits typically accounting for a small portion of reported pre-tax profits. Whilst the balance of earnings is not expected to change significantly over time, underwriting performance has improved materially in recent years, with strong non-life combined ratios of less than 95% expected to be reported over the medium term.
Adamjee maintains a strong business profile in its domestic market, leveraging its position as one of the oldest insurers in Pakistan. The company maintains a leading position in the non-life segment and a growing presence in the life market through its joint venture subsidiary, Adamjee Life Assurance Company Limited.
An offsetting rating factor remains the high level of economic and political risk associated with operating in Pakistan. Whilst Adamjee has achieved some diversification through its operations in the United Arab Emirates, the company’s portfolio remains focused in Pakistan. Adamjee’s management has navigated the company successfully through a challenging operating environment; however, the business remains susceptible to the country’s future economic and political conditions.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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