A.M. Best Gives Adamjee Insurance Company of Pakistan 'A' Rating

A.M. Best Co. has affirmed the "A" (Excellent) rating of Adamjee Insurance Co. Ltd., Pakistan, reflecting the company's leading position within the Pakistan insurance market. The company has produced technical profits for the last five years demonstrating excellent distribution, professional management, modest exposure to reinsurers and a good capital position. Offsetting these strengths are the modest size of the company relative to international companies, the challenging economic environment within Pakistan and the poor performance experienced by the company's attempts to expand into the United Kingdom during 1997.

Adamjee now holds approximately 35% of the non-life market in Pakistan and is more than 50% larger than its nearest rival. This position has been achieved through a sound distribution strategy and an innovative approach to business. The company enjoys the largest branch network in Pakistan and, with the absence of brokers in the Pakistan market, has secure access to business.

According to A.M. Best Co., Adamjee's underwriting performance has been spectacular by international standards, with a combined ratio averaging 90.1% over the last five years. Together with strong investment earnings, this performance has enabled the company to pay attractive and regular dividends while strengthening the capital base.

The relatively small size of the company on a global scale offsets some of these factors with a capital base of just $21 million. The prospect of the Pakistani market opening to foreign competition could present significant challenges for Adamjee.

A.M. Best Co. also noted the prolonged state of recession in Pakistan as a factor likely to depress short-term organic growth. The company also faces the difficulties of adopting suitable investment strategies within an environment of significant inflation.

Although the company's long-standing branches in the United Arab Emirates and Saudi Arabia have been consistent performers, Adamjee's expansion of its United Kingdom contact office into a branch in 1997 proved disastrous. Poor controls on underwriting authorities led to an overexposure to loss-making motor business. The company reacted quickly to emerging losses and has now ceased underwriting from the U.K. branch. This highlights the dangers of expanding away from the core Pakistan-based business, where Adamjee clearly outperforms most of its competitors.

A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source.