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

The ratings reflect Adamjee’s balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, neutral business profile and marginal enterprise risk management (ERM).

The negative outlooks reflect pressure on the company’s non-life underwriting performance. Whilst Adamjee has a history of robust overall profitability, with profits before tax ranging from PKR 2.3 billion to PKR 8.7 billion between 2020 and 2024, consolidated operating performance has been increasingly supported by the company’s life insurance operations and investment activities, with the non-life business generating marginal results. The company’s non-life underwriting performance improved in 2024 due to corrective underwriting actions, but was adversely affected by the unprecedented rainfall in the United Arab Emirates, resulting in an overall combined ratio of 99.9%. The company aims to improve the underwriting performance of its non-life book through higher market rates and stringent underwriting practices.

Adamjee’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the adequate level, as measured by Best’s capital Adequacy Ratio (BCAR). At year-end 2024, risk-adjusted capitalisation declined from the previous year due to higher market values on affiliated investments and significant growth in its non-life portfolio. Investment risk remains the primary driver of required capital, with the investment portfolio highly concentrated in equity securities within Pakistan. Whilst some diversification was achieved through term deposit holdings in the UAE, Adamjee remains exposed to potential capital volatility. In addition, the company has a high dependence on reinsurance and exposure to non-rated reinsurance recoverables through mandatory cessions to the state-owned reinsurer in Pakistan.

Traditionally, the company maintains one of the leading positions in the market, writing a diversified life and non-life portfolio and offering conventional and takaful products. In addition, Adamjee generated close to 40% of its non-life premium income through branch operations in the UAE in 2024, which provides the company with geographical diversification to a more stable country risk environment.

The ERM assessment is viewed as marginal given the size and complexity of Adamjee’s operations. The company’s operations in Pakistan present exposure to very high levels of economic, political and financial system risks, some of which are beyond the company’s control.

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