AM Best


AM Best Downgrades Credit Ratings of Adamjee Insurance Company Limited


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Emily Thompson
Financial Analyst
+44 20 7397 0291
emily.thompson@ambest.com

Salman Siddiqui, ACA
Director, Analytics
+44 20 7397 0331
salman.siddiqui@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
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james.peavy@ambest.com

FOR IMMEDIATE RELEASE

LONDON - FEBRUARY 07, 2020 11:20 AM (EST)
AM Best has downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating to “bb+” from “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.

The rating downgrades reflect deterioration in AM Best’s view of the company’s risk-adjusted capitalisation to a strong level from a very strong level, as measured by the AM Best’s Best Capital Adequacy Ratio (BCAR). Adamjee’s risk-adjusted capitalisation has been affected by unrealised investment losses, recognised in 2017 and 2018 through other comprehensive income, stemming from Adamjee’s exposure to equity market volatility in Pakistan. As at year-end 2018, equities represented 60% of the company’s shareholder investments. Equity indices in Pakistan remained volatile through 2019. Nevertheless, AM Best expects the company to maintain BCAR scores at the strong level for 2019. Prospective risk-adjusted capitalisation is highly sensitive to domestic equity market fluctuations.

The company has reported solid underwriting and operating performance in recent years, with pre-tax profits of PKR 2.2 billion (USD 16.2 million) generated in 2018 (2017: PKR 1.9 billion). Overall earnings are driven by investment returns, with underwriting results typically accounting for a small, albeit growing portion of pre-tax profits. The recent improvement in technical results has been driven by Adamjee’s strict underwriting discipline and better risk selection, as well as tariff increases for motor products in the United Arab Emirates (UAE). Adamjee generated a healthy combined ratio of 91.0% in 2018 (2017: 93.1%).

Adamjee maintains a leading competitive position in its domestic market, which is relatively small by international standards, as Pakistan’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 geographical diversification through branch operations in the UAE, which account for over 30% of the company’s GWP.

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 Guide to 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 credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.


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