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 balance sheet strength, which A.M. Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Adamjee’s strong balance sheet strength is underpinned by very strong risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). A.M. Best expects the company’s BCAR to remain at a very strong level into 2018, with partial retention of earnings supporting an anticipated increase in underwriting risk. An offsetting factor is the company’s relatively high-risk investment portfolio, which is the main driver of required capital.
The company has a solid, albeit volatile, performance record. Overall earnings are primarily driven by investment returns, with underwriting results typically accounting for a small portion of pre-tax profits. The company’s material exposure to domestic equities increases the potential for performance volatility. During 2016 and the first six months of 2017, Adamjee reported pre-tax profits of PKR 4.1 billion (2015: PKR 2.2 billion) and PKR 1.5 billion (half-year 2016: PKR 1.8 billion), respectively.
Although Adamjee maintains a strong competitive position in Pakistan, this remains a relatively small market by international standards. The company is the country’s second largest non-life insurer, based on domestic gross written premiums, and has a growing presence in the life segment through its joint venture subsidiary, Adamjee Life Assurance Company Limited. An offsetting rating factor is the concentration of its insurance operations in Pakistan, which has a high level of economic and political risks. This is partially mitigated by some geographical diversification, with approximately 30% of business written in the United Arab Emirates.
Adamjee’s risk management capabilities are considered as appropriately aligned with its risk profile. In particular, well-defined guidelines and controls have allowed the company to navigate successfully a challenging operating environment. Nevertheless, the prospects of the business remain closely linked to prevailing economic and political conditions in Pakistan.
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