AM Best Affirms Credit Ratings of Adamjee Insurance Company Limited

Business Wire

LONDON--(BUSINESS WIRE)-- AM 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 AM Best categorises 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 a very strong level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by sufficient liquidity. AM Best expects the company’s BCAR to remain at a very strong level in 2019, with increased underwriting risk met absorbed by the partial retention of earnings. Offsetting rating factors for the company’s balance sheet strength assessment include the company’s investment strategy, which whilst diversified geographically is deemed relatively high risk, owing to its concentrated exposure to equity risk. Furthermore, as a Pakistani insurance company, Adamjee is subject to mandatory cessions to the non-rated state reinsurer.

The company’s operating and underwriting performance have shown solid improvements in recent years, with pre-tax profits of PKR 1.5 billion (USD 13.7 million) generated in the first nine months of 2018 (first nine months of 2017: PKR 1.6 billion). Overall earnings are driven primarily by investment returns, with underwriting results typically accounting for a small, albeit growing portion of pre-tax profits. Improved technical results stem from Adamjee’s strict underwriting discipline, strengthened risk selection and increased regulatory governance, most notable on the motor market within the United Arab Emirates (UAE). As a result, Adamjee generated a healthy combined ratio of 91.6% in the first nine months of 2018 (first nine months of 2017: 95.1%).

Adamjee maintains a leading competitive position within its domestic market, albeit a relatively small market by international standards, as Pakistan’s second-largest non-life insurer, based on gross written premiums (GWP). The concentrated exposure of its insurance operations to Pakistan carry high levels of economic and political risks. This is mitigated partially by some geographical diversification. Approximately 30% of Adamjee’s GWP emanates through its branch operations in the UAE.

This press release relates to Credit Ratings that have been published on AM 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 AM 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. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.