Research Analyst
22 - 28, 2010

Adamjee Insurance Company Ltd. (AICL) established in 1960 to undertake general and life insurance business. The life insurance division of the company was nationalized in 1974. Since then, AIC has been investing its resources in general insurance covers for marine, fire, motor, and miscellaneous risks.

The company was a pioneer in launching new types of insurance policies, which are, home insurance, kidnap & ransom, personal accident, medical insurance & various types of covers for power generation/infrastructure projects.

Today AIC is the largest insurance company in Pakistan, and operates through its 1000 employees at its 84 branches across the country. It is the leader amongst 40 general insurance companies, and commands a 38% market share, as well as a reputation of being one of the most prompt and efficient settlers of claims. Its international offices include six branches each in Dubai, Abu Dhabi, Sharjah, Jeddah, Dammam, and London.

The company has earned a rating of "A" by A.M. Best Company Inc. AIC is public limited company and is listed on the Karachi stock exchange.


Gross Premium 7,405,108 7,873,638
Net Premium 5,187,372 5,463,868
Underwriting Results 557,316 163,661
Investment Income 2,296,039 2,925,975
Profit Before Tax 2,538,521 2,954,146
Profit After Tax 2,308,817 3,063,187
Earning per Share 20.53 27.24

The gross premium as well as net decreased by 6% and 5% in nine months ending September 2009 respectively over the corresponding period of last year. This is mainly due to slowdown of economy, intensification of war on terror, decline in Pakistan's exports, and global economic crisis. The net claims decreased by 14% in Jan-September, 2009 over the same period last year, and combined ratio improved from 97% to 89%. The underwriting results have grown phenomenally during nine months by 241% as compared to similar period last year.

The management should establish strong controls over implementing of effective risk management and efficient claims' settlement policies. The company's investment income shows a decrease of 22% as compared to the last year, which is mainly attributable to the overall position of stock markets in the country. The profit before and after tax declined by 14% and 25% respectively.


During the last 4 years, gross premium of general insurance companies in Pakistan grew by approximately 15% annually while the penetration of the sector reached 0.4% (Rs 33 billion) of GDP by the end of 2007. The growth in the gross premium was mainly attributable to the decent economic growth during this era. The gross premium of the general insurance was projected at Rs35 billion in 2008. While this would be a growth of 6% over 2007, insurance penetration was projected at 0.33% at the end of 2008 versus 0.4% a year earlier. The decline in insurance penetration is attributable to the overall economic slowdown, particularly tapered performance of auto sector.

The motor segment was regarded as the major growth propeller of insurance sector in last 5 years. This was mainly attributable to consumer credit off-take and rise in personal income. The growth of the sector, however, remained stagnant in 2008 on the back of subdued car sales and industrial production.

Moreover, slowdown in the trade activities amid global economic crisis also affected the marine insurance. Another causative factor was the increase in the reinsurance rates by the major reinsurance companies in the world. As reported in many international journals the reinsurance companies have increased their rates due to growing demand of reinsurance and changing risk environment.


Adamjee Insurance 3,064,485 Cooperative Ins. 11,284 PICIC Insurance 99,949
Agro Gen. Ins. Co. - Crescent Star 58,435 Premier Ins. ** 157,797
Alfalah Ins. Co 150,063 East West Insc. 201,004 Reliance Insurance 159,137
Alpha Insurance 32,694 Universal Ins. 181,859 Saudi Pak Ins. 69,787
Asia Insurance 16,311 Excel Insurance 6,222 Security Gen. Insc. 57,733
Askari Gen. Insc. 397,687 Habib Insurance 178,379 Shaheen Insurance 253,523
Atlas Insurance 224,801 IGI Insurance 285,268 Silver Star Insc. 97,856
EFU Gen Insurance 2,789,304 New Hampshire Ins. 198,658 TPL Direct Ins. 98,574
Central Insurance 6,107 New Jubilee Ins. 1,140,553 UBL Insurer 140,746
Century Insurance 100,012 Pakistan Gen. Ins. 56,057 United Ins. 284,672
NPR: Net Premium Revenue


Increase in federal excise duty from 5% to 10% will have a negative impact on the AICL's profitability. Moreover, exemption from the tax on unrealized gain from the non-life insurance companies as announced in the budget 2008-2009 will have a positive effect on the bottom-line of AICL.

Pakistan is a frontline state in the war on terror. Outbreaks of violence in Pakistan are common. Some of these have prompted significant insurance losses. Thus, rising instability in the country may pose high risks to Adamjee insurance company in terms of higher claim rates. The company should focus on increasing its underwriting base and improving operations to strengthen the business.