The year under review, witnessed higher net profit despite prolonged uncertainty of litigation and reverses in the foreign operations. However the new management has made certain drastic decisions such as increased focus on domestic business.
These strategic decisions are most likely to prove viable in future because of one most single important factor, that is, the human resource. Adamjee Insurance Company is fortunate to have a vast reservoir of veteran professionals across the country coupled with worldwide correspondents. While the new management are bringing new ideas and new approaches but previous sponsors can also be seen at the apex body - Board of Directors. Over and above the company has also resolved to benefit from the working director Mohammad Choudhury.
In the backdrop of growing economy at a rapid pace the company should be able to harness the opportunities and at the same time overcome the unforeseen threats. The key to success will be availing the human resource and implementing Information Technology.
Adamjee Insurance Company is the largest general insurance (non life insurance) company of the country. It is a public limited company incorporated in Pakistan in September 1960.
The directors of the company, informed about certain significant developments that took place during the year under review. The previous management of the company had been under litigation with Muslim Commercial Bank Ltd which had acquired 29.4% shares of the company.
After the judgement of Hon. Supreme Court AGM of the company was held on May 29, 2004 and in addition to other matters, the election of the Directors was held and a new Board of Directors was formed based on the election.
The new Board took over the management of the company on June 12, 2004. On the said AGM date (May 29, 2004) 41st, 42nd and 43rd Annual General Meetings in respect of accounts for the years 2001, 2002 and 2003 were held and accounts approved by the shareholders.
According to the pattern of shareholdings dated December 31, 2004, 33.89% of the company's stock was held by local individual shareholders, Muslim Commercial Bank held 29.37% of the company shares and Adamjee Foundation owned 8.80% of the stock of Adamjee Insurance Company.
The company is listed on Karachi and Lahore Stock Exchanges. On 2nd August 2005, the closing price of Adamjee Insurance was recorded at Rs 77.35 per share which is close to 8 times of the par value of Rs 10. During the last one year market value of the share ranged between Rs 49.70 and Rs 99 per share.
Its branches in UK and Saudi Arabia have closed down their operations and are in run off status with effect from January 1, 1998 and October 1, 2003 respectively.
During the year under review the Board had decided to close down the operations of the company in UAE with effect from January 1, 2005. This decision was made with the objective of enhancing the company's profitability by ensuring greater concentration on the profitable domestic operations. They took the decision also after considering the adverse results of the UAE operations and apprehensions that the company will not be able to generate sufficient margins in future so as to continue these operations feasible.
During the year under review, FY2004, the company wrote Direct Premium at Rs 5.265 billion showing decline by Rs 0.32 billion from Rs 5.585 billion in the FY 2003.
However Net Premium Revenue at Rs 3,678.37 million shows increase by Rs 611.99 million as compared to Rs 3,066.38 million recorded in 2003. This has significantly improved the net premium to gross premiums ratio to 70% from 55% in the preceding which is a quantum jump of 15 percentage points.
The various components of underwriting profits, as noted in the performance statistics, show that all classes of insurance business generated sizable revenues. Motor Business was the single largest contributor of underwriting revenue as it was 44.5% the company's net premium revenue. On the other hand net claims at Rs 2.683 billion were 72.93% (2003: 69.01%) of net premium revenue.
The directors emphazied that the net claim ratio is higher because adequate provisions were made for all outstanding claims including incurred but not reported (IBNR).
Although Motor Business generated highest premium revenue but the highest profit was booked by marine aviation and transport business which is Rs 287 million. Total underwriting result of Rs 74.19 million is a low figure because fire and property business incurred loss at Rs 434 million. The second rank in profitability was of Motor Business at Rs 149 million.
The company posted net profit after taxation at Rs 327.5 million recording increase by Rs 17.1 million from Rs 310.4 million in 2003. The overall investment income which consists of dividend, interest capital gains increased by Rs 71.61 million.
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Performance Statistics (Million Rupees)
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31 December 2004 2003
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Share Capital-Paid-up: 826.14 624.68
Reserves: 213.12 834.58
Retained Earnings/(Accumulated Loss): 347.58 (399.88)
Shareholders Equity: 1,386.84 1,059.38
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Provision for Outstanding
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Claims (including IBNR) 3,683.38 2,725.49
Provision for Unearned Premium: 1,711.28 2,446.93
Additional Provision for Unearned Risk 40.00 85.00
Commission Income Unearned: 126.22 217.31
Total Underwriting Provisions: 5,560.88 5,474.73
Deferred Liability: 5.32 10.97
Creditors & Accruals: 1,044.56 1,110.29
Other Liabilities: 7.02 8.33
Cash & Bank Deposits: 755.07 849.63
Loans to Employees & Others: 32.75 40.87
Investments: 2,469.18 2,218.20
Deferred Taxation: 130.87 235.48
Other Assets: 4,415.16 4,125.16
Fixed Assets: 201.59 194.36
Total Assets: 8,004.62 7,663.70
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Revenue Profit & Pay Out Net Premium Revenue from:
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Fire & Property: 863.01 N.R
Marine Aviation & Transport: 789.52 N.R
Motor: 1,637.82 N.R
Miscellaneous: 350.67 N.R
Treaty: 37.35 N.R
Aggregate Premium (Net): 3,678.37 3,066.23
(Net Claims): (2,682.75) (2,115.93)
Premium Deficiency Reversal (Expenses) 45.00 (10.00)
(Expenses): (810.32) (789.44)
Net Commission: (156.11) (103.25)
Underwriting Result (Profit): 74.19 47.61
Investment Income: 493.60 421.99
Rental Income: 0.49 0.50
Other Income: 77.23 37.31
Gen & Admin (Expenses): (227.51) (204.93)
Exchange (Loss) Net: (6.85) (17.59)
Profit Before Taxation: 411.15 284.89
Profit After Taxation: 327.46 310.38
Earning Per Share (Rs): 3.96 3.76
Share Price (Rs) on 02/08/05: 77.35 -
Gross Premium Written: 5,265.72 5,585.00
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Financial Ratios:
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Price/Earning Ratio: 19.53 -
Book Value Per Share: 16.79 16.96
Price/Book Value Ratio: 4.61 -
Net Profit/Underwriting Result Ratio 441.38 651.92
Net/Gross Premium Ratio: 69.85 54.90
R.O.E. (%): 23.61 29.30
R.O.A. (%): 4.09 4.05
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COMPANY INFORMATION: Managing Director & Chief Executive: Syed Jawad Gillani; Directors: Shahzad Saleemi, Wasif Mohammad Khan; Executive Director (Finance) Syed Ziauddin Ahmed; Secretary/G.M. A. Aziz Chashmawala; Registered Office: Adamjee House, P.O. Box No 4850 I.I. Chundrigar Road Karachi; Web Address: www.adamjeeinsurance.com
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