Adamjee Insurance (AICL’s) underwriting profits to Rs 232 million in the first quarter (Q1) of 2010

 The turnaround in the auto industry which registered a volumetric growth of 79 percent along with revival in car financing schemes propelled Adamjee Insurance (AICL’s) underwriting profits to Rs 232 million in the first quarter (Q1) of 2010, up 17 percent year on year (YoY). The most encouraging aspect of AICL’s results in Q1 2010 was the impressive performance of its core business. Gross premium for the segment registered a growth of 23 percent YoY to Rs 1 billion. A 951 bps fall in claim ratio to 65 percent further supported the profitability of the company. Adamjee Insurance (AICL) recently announced its Q1 2010 results posting earnings of Rs 248 million, down 44 percent YoY. The main reason for the decline in earnings was the absence of ‘reversal of provision for Available For Sale (AFS) investments’ during the period under review. On the whole the company continued with its commendable underwriting results where the total claim ratio and the combined ratio fell to 62 percent and 87 percent, respectively, from 64 percent and 89 percent in Q1 2009. In contrast to the core business, AICL’s investment income fell by 43 percent YoY to Rs 221 million mainly due to a one off impairment provision reversal worth Rs 231 million recognised in Q1 2009. Despite lower return from its investments, the equity portfolio still remains a major source of attraction and value for AICL. AICL is one of the few insurance companies in Pakistan, which has worked tremendously to improve its insurance business and focus on writing qualitative premiums. This is reflected in the company’s Q1 2010 underwriting margins, which improved by 230bps to 13.5 percent. Moreover, the company’s Middle East operations, though holding a smaller market share, provide healthy underwriting margins to AICL. “Going forward, we believe improved economic fundamentals and reduced business risk remain major positives for AICL’s core business,” said Bilal Qamar, an analyst at JS Research.