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AM Best Downgrades Issuer Credit Rating of Adamjee Insurance Company Limited

AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb” (Fair) from “bb+” (Fair) and affirmed the Financial Strength Rating (FSR) of B (Fair) of Adamjee Insurance Company Limited (Adamjee) (Pakistan). The outlook of the FSR has been revised to negative from stable, while the outlook of the Long-Term ICR is negative.

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

The downgrade of the Long-Term ICR reflects a weakening of Adamjee’s balance sheet strength following the downgrade of Pakistan’s sovereign rating, resulting in higher charges being applied to some of the company's investments when considered under Best’s Capital Adequacy Ratio (BCAR). As a result, the company’s 2022 risk-adjusted capitalisation, as measured by BCAR, deteriorated to the strong level from the very strong level. Investment risk remains the primary driver of Adamjee’s required capital, with a high concentration to Pakistan equity securities and affiliated investments. The company benefits from some diversification through term deposit holdings in the United Arab Emirates to support its branch operations. However, in AM Best’s view, Adamjee remains exposed to potential capital volatility, especially in light of heightened economic, political and financial system risks in Pakistan. The negative outlooks reflect the elevated country risk in Pakistan and its potential impact on Adamjee’s credit rating fundamentals.

Adamjee has a history of robust operating profitability, with profit before tax ranging from PKR 2.2 billion to PKR 4.3 billion between 2018 and 2022. Consolidated underwriting performance has strengthened in recent years, supported by profits from the company's life subsidiary. However, non-life underwriting performance deteriorated in 2022 owing to high losses stemming from the UAE motor portfolio, resulting in a combined ratio of 100.6%, significantly higher than the five-year (2017-2021) weighted average combined ratio of 96.2%. The company’s investment income remains the largest contributor to earnings, accounting for approximately 70% of total profit over the past five years (2018-2022).

Adamjee maintains a good competitive position in Pakistan, as the country’s second-largest non-life insurer, with a strong position in the commercial and infrastructure risks sector. The company writes a diversified non-life portfolio, offering conventional and Takaful products, as well as life products domestically. In addition, Adamjee generated close to 30% of its premium income through UAE branch operations in 2022, with this business increasing strongly in 2022. However, at approximately PKR 35.2 billion (USD 155.8 million) of non-life gross written premium, the company remains small on a global basis.

AM Best views Adamjee’s ERM as appropriate given the size and complexity of its operations. The company's risk profile has increased recently as a result of Pakistan’s deteriorating risk environment. Whilst AM Best notes the company’s historical operational resilience to country risk factors, risk management challenges are presented by its concentration of business and assets in Pakistan.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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