By S Ziauddin Ahmed, M.Com, FCA, 
Executive Director Finance,
 Adamjee Insurance Company Limited

Aug 12 - 18, 2002

Adamjee Insurance with almost extraordinary performance over last 25 years, suffered heavy losses in the UAE resulting into the company having to post a loss of Rs 500 million in the year 2001 Annual Accounts.

This has been a matter of concern for the management of the company and quite naturally steps had to be taken to avoid recurrence of such a loss and make-up the loss in the coming years. Happily the year 2002, which is now subject to quarterly accounts by the Security & Exchange Commission of Pakistan, has already shown a profit of Rs 53 million.

This is a good start of the recovery process and the management expects that by the end of the year the company will have a reasonable profit, which will be a major step forward.

Some of the positive things about the company are that it has an exceptionally strong client base with majority of the multinational and international companies supporting the company and yield a premium of Rs 1 billion or more, in Pakistan. Similarly all major Pakistani clients in every industry are Adamjee clients and have shown great loyalty to the company in the recent months.

The total premium of the company within Pakistan is expected to be Rs 3.5 billion during the year 2002. The overseas business, principally in Dubai and Sharjah has been curtailed, and we expect to make a total income of Rs 4 billion, at the end of the year. Better quality premium with better rates is expected to yield higher profit, which is the need of the hour for the company.

Another factor helping the company is the improvement of the stock market, which is showing an upward trend, and at the present time the value of the index of 100 companies is close to 1,800 points as against 1,300 points as at 31st December 2001. This improvement makes considerable difference to a company like Adamjee who has, and rightly so, prudently invested in stocks and shares of companies from the stock exchange. The company has always benefited in the past from the stock exchange and it is hoped that by the end of the year the market will show even better strength, to give the company considerable increase in its invested wealth.

On the subject of profit or loss of insurance companies, it is desirable to submit that the best companies of the world also produce underwriting losses and some of the very best show an underwriting loss almost every year. They rely on the profit on their invested income, built by them over hundreds of years.

In Pakistan we have had no opportunity to build companies on international lines, mainly due to paucity of business, anxiety of the domestic market to pay a dividend more and more and, show better underwriting profit every year.

It may be surprising to know that the total volume of premium of Pakistan is a mere US $ 262 million as compared to world's total premium volume of US $ 909 billion. Our share in the world volume is a mere 0.03%. With this kind of premium we cannot be seen to be performing like a high quality international company. If we were to examine the performance of international companies it will be apparent that the combined ratio of top 100 insurance companies of the world is 110.35%. The combined ratio consists of premium on the one hand and loss, acquisition cost, and expense combined on the other. There is a clear indication of top international companies of the world losing money. However they do manage to pay some dividend to their shareholders entirely out of their investment income, built by them over hundreds of years, with the support of strong international market.

It is very unfortunate that Adamjee Insurance has been criticized for losing money for one year, that is in 2001, which was entirely because of heavy Dubai losses. However we have turned the situation around and the company is now in profit. Al hamdo lillah and inshallah it will continue to produce positive result quarter after quarter.