LONDON--(BUSINESS WIRE)--A.M. Best has removed from under review with negative implications and downgraded the Financial Strength Rating to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Rating to “bbb-” from “bbb” of Jubilee General Insurance Company Limited (Jubilee) (Pakistan). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings were placed under review with negative implications on 13 October 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). The ratings have been removed from under review as A.M. Best has completed its analysis of Jubilee under the updated BCRM.
The rating downgrades reflect A.M. Best’s opinion that the rating fundamentals of Jubilee, as analysed under the updated BCRM, are supportive of the revised Long-Term ICR. The ratings reflect Jubilee’s balance sheet strength, which A.M. Best categorises as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
Jubilee’s balance sheet strength is underpinned by very strong risk-adjusted capitalisation, supported by good internal capital generation. The company’s paid-up capital increased in 2017 to PKR 1.8 billion (USD 16.4 million) from PKR 1.6 billion (USD 15.2 billion) in 2016. Offsetting rating factors for the company’s balance sheet strength assessment are Jubilee’s investment portfolio, which is restricted by regulation to domestic assets, and its exposure to non-rated reinsurers. A.M. Best expects prospective balance sheet strength to remain at a strong level over the medium term, supported by continued good internal capital generation.
Jubilee’s operating performance track record is strong, as demonstrated by a five-year average return on equity of 19.2% (2013-2017). Over the same period, the company delivered a robust average combined ratio of 91.1%. Despite strong technical results, investment income dominates the company’s operating profits. In 2017, the company achieved profits before tax of PKR 1.6 billion (USD 14.7 million), a modest decrease from PKR 1.9 billion (USD 17.9 million) in 2016.
As Pakistan’s third-largest non-life insurer, Jubilee maintains a good competitive position in its domestic market. The company writes a diversified portfolio, offering conventional and Takaful products. Going forward, Jubilee seeks additional market share through the development of its retail operations, which are expected to benefit from the company’s innovative online platforms.
An offsetting rating factor is Jubilee’s concentrated investment and underwriting exposure to Pakistan. A.M. Best views Pakistan as having high levels of political and economic risk. Despite Jubilee’s history of strong operating performance within this challenging market, the possibility of significant business disruption remains high. A.M. Best will monitor developments in Pakistan continually and assess for any potential impact on Jubilee’s ratings.
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