AM Best Affirms Credit Ratings of Adamjee Insurance Company Limited

LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” of Adamjee Insurance Company Limited (Adamjee) (Pakistan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Adamjee’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

Adamjee’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which strengthened over 2019 to reach the threshold of a very strong level of assessment, as measured Best Capital Adequacy Ratio (BCAR). However, AM Best notes that given Adamjee’s significant exposure to Pakistan domiciled equity investments, its capital adequacy remains highly sensitive to equity market fluctuations, which have introduced volatility to the company’s risk-adjusted capitalisation in recent years. Equity indices in Pakistan remained volatile through 2020 following the COVID-19 pandemic, although demonstrated recovery over the second half of 2020. AM Best expects the company’s prospective risk-adjusted capitalisation to remain at least at the strong level over the near term, despite the potential for volatility.

Adamjee has reported solid operating performance in recent years, with a five-year (2015-2019) weighted average return-on-equity ratio of 10.9%. Continued strengthening of underwriting performance in 2019 resulted in Adamjee’s overall earnings carrying equal weight between investment and underwriting results, and the company reported consolidated pre-tax profits of PKR 2.8 billion (USD 18.3 million) in the year (2018: PKR 2.2 billion). Adamjee’s focus on underwriting discipline and risk selection, as well as tariff increases for motor products in the United Arab Emirates have driven improved technical results in recent years, with the company generating a healthy combined ratio of 93.2% in 2019 (2018: 94.6%).

Adamjee maintains a leading competitive position in its domestic market of Pakistan, as the country’s second-largest non-life insurer, based on gross written premiums (GWP). The concentration of its insurance operations and assets in Pakistan exposes the company to high levels of economic and political risk. This is mitigated partially by geographic diversification through branch operations in the UAE, which accounted for over 30% of the company’s GWP in 2019.

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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 www.ambest.com.

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