Adamjee Insurance

Armed with an asset base of Rs 28 billion, and an issued and paid-up capital of Rs 3.5 billion, Adamjee Insurance ranks as the third largest player in the private non-life insurance sector of Pakistan. Incorporated in 1960 as a public limited company, the company is involved in the business of general insurance. Not only it has the presence in Pakistan, the firm runs two branches in UAE as well. The company is listed on all three stock exchanges of Pakistan.
Adamjee Insurance with Hollard Insurance based in South Africa have commenced life assurance operations through a separate entity named as Adamjee Life Assurance Company Limited.
MARKET SHARE: The company possess a decent market share of 16 percent in the private non-life insurance sector of Pakistan. The sector comprises a total of 26 companies, of which Adamjee Insurance is positioned as the third largest insurer, based on premiums written according to the latest statistics gathered by Insurance Association of Pakistan (IAP).
INSURANCE PORTFOLIO: With regards to the insurance portfolio, Adamjee Insurance is involved in the underwriting of fire and property, engineering, health, marine, motor, and miscellaneous business. Motor segment continues to contribute the major share to the total premiums of the firm. As of June 2014, motor segment contributed 45 percent, followed by miscellaneous (28 percent), fire and property (16 percent) and marine, aviation and transport (11 percent).
1HCY14: REVIEW OF FINANCIAL PERFORMANCE The company's financial started falling since the beginning of CY14. During 1HCY14, profitability dipped by 49 percent year-on-year despite a decent growth of 13 percent year-on-year in net premiums. Thanks to the underwriting losses in motor and miscellaneous segments. Growth in claims outpacing the growth in premiums remains the major culprit behind the erosion of underwriting profits of these segments. Rising claims also led the claims ratio to climb up by 400 bps to 65 percent (1HCY13: 61 percent).
To add to the woes, investment ratio reduced nearly by half. Dwindling investment income is the outcome of impairing gains on sale of available for sale investments. This coupled with shrinking dividend income and returns on term finance certificates kept a lid on bottomline growth during the period.
CY13: REVIEW OF FINANCIAL PERFORMANCE Although net premiums inched down a tad in CY13, the year ended on a happy note for Adamjee Insurance on account of recovery in underwriting losses. Underwriting profit clocked in at Rs 136 million from an underwriting loss of Rs 413 million in the corresponding period last year. Moreover, burgeoning investment income furthered the case for Adamjee Insurance during the year. Investment income jumped by a whopping 77 percent, taking the investment ratio to 43 percent (CY12: 23 percent). Consequently, profit after tax clocked in at Rs 1,966 million from Rs 627 million in the preceding year.
INDUSTRY DILEMMAS AND THE WAY AHEAD: Pakistan's insurance sector has remained listless for the past many years. Lack of innovation, absence of technical expertise, slow economic growth, pressure of premiums and rising claims are amongst the many dilemmas being face by the insurers. Although Bancassurance network has been a major breakthrough for life insurance companies, non-life insurance insurers still need to get ahead through the introduction of alternative distribution channels and launch of innovative products.
Currently, agency distribution channel is the key distribution channel in place. Usage of technology to come up with alternative mediums can serve as a quantum leap for the industry. To mention a few, ATMs and UBLOmni are some of the many ways to increase the outreach. Moreover, development of low cost and high need based products remains crucial.
Unfortunately, the growth of non-life insurance sector is closely linked to the overall economic growth. The performance of insurance industry gets better in times of uplifting economy. Similarly, rising levels of disposable income can also give a boost. Last but not the least, lack of familiarity and knowledge about insurance products deters people to invest in insurance schemes. Although insurance companies are devoting efforts to create awareness by way of active advertisement campaigns, the journey is still long and strenuous. In this context, the introduction of microinsurance regulations is a crucial development. By way of microinsurance, the low-class segment of the society are being brought under the realm of insurance. Also, Pakistan being an agrarian economy has a huge scope of agri-insurance.

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Adamjee Insurance (P&L)

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Rs (mn)                      2012        2013      1HCY14

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Net premium revenue         5,672       5,506       3,055

Net claims                (4,143)     (3,487)     (1,981)

Expenses                  (1,583)     (1,535)       (847)

Net commission              (359)       (348)       (196)

Underwriting result         (413)         136          31

Investment income           1,332       2,357       1,018

Other income                  164         148          50

General & admin expenses    (411)       (445)       (169)

Profit before taxation        669       2,210         930

Tax                          (42)       (244)        (86)

Profit after taxation         627       1,966         844

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