The Pakistan Credit Rating Agency Limited
RATINGS (FEBRUARY 2011) RATING RATIONALE AND KEY RATING DRIVERS
ADAMJEE LIFE ASSURANCE The rating reflects Adamjee Life's association with financially sound business groups – Nishat and
COMPANY (ALAC) Hollard. The rating draws comfort from the sponsors' long established presence in the local and
international markets. Meanwhile, established business relationships and extensive outreach of its
NEW PREVIOUS group companies, mainly Adamjee Insurance and MCB Bank, would help ALAC in developing its
Insurance client base. As the company is in its development phase, its ability to build strong internal controls,
Financial A A requisite IT infrastructure, efficient systems and procedures, and sound business policies is important.
Strength The rating is dependent on the management's ability to timely and successfully establish ALAC’s
position amidst a competitive landscape and its relatively different business model. Meanwhile,
execution of the company's aggressive growth strategy would remain challenging. Retention and
cohesiveness of senior management is critical to ensure consistency in policies and strategy. As the
FINANCIAL DATA company’s overall performance is expected to remain under pressure over the medium term, continuous
(PKR (mln) support from the parent groups would remain critical.
Total Assets 555 576 Over the decades, life insurance sector of Pakistan has experienced slow growth mainly due to
Equity 369 489 nationalization of insurance sector in 1972. The government allowed private entrants in the industry in
Policy holders’ liability 104 11 1990. However, with two-thirds of the population living in non-urban areas coupled with low literacy
rate, the insurance sector faces various hurdles in its growth. With growing population, the industry
Net Premium Revenue 168 24 offers exponential growth prospects.
Initially Adamjee Life is mainly focusing on generating business from conventional life insurance
Underwriting Results* (34) (47) schemes while gradually expanding its product range to offer a wide variety of investment schemes.
Loss Ratio (%) 4.6 15.2 Overall, the company would focus on low ticket size insurance products, matching the requirements of
Expense Ratio (%) 115.5 277.8 urban and rural population considering relatively low per capita income levels in the country. This is
* Net of management expenses expected to help the company in establishing its position while maintaining its risk exposures at an
During 9 months ended Sep10, the company earned net premium of PKR168mln. Owing to the
company’s development phase, wherein it is setting up distribution channels and requisite IT
infrastructure, management expenses stood at PKR106mln. Hence, high acquisition costs resulted in
Going forward, the company has formulated an aggressive growth strategy. Unlike the current agent-
driven business procurement practices in the life insurance industry, Adamjee Life is using automated
and third party distribution channels for marketing its products, which is a relatively different business
model. So far, the products have been launched using various means including online selling,
bancassurance, call centre and mobile selling. Meanwhile, the company intends to use group
ANALYSTS companies’ selected branches, particularly MCB Bank Limited and Adamjee Insurance Company
Limited, to reach its potential customers. The company’s overall performance is expected to remain
Ayesha Saleemi under pressure over the medium term, continuous support from the parent groups would be vital.
+92 42 35869504 The senior management team of ALAC comprises qualified and young professionals, though having
email@example.com relatively less experience in life insurance industry. Retention and cohesiveness of senior management
would remain critical to ensure consistency in policies and strategy.
Rana M. Nadeem
The company, with the help of AICL and Hollard, has designed and implemented various policies and
+92 42 35869504
manuals which include reassurance manual, underwriting manual, claims manual and risk management
framework. All the procedures and systems are fully automated to help the company in providing
quality services to its customers while bringing efficiency in its overall operations.
The company has formulated an investment policy. The investment book is projected to be dominated
by government securities (60%), followed by remunerative bank deposits (20%) and equity securities
During initial years of operation, the company intends to keep risk at low level. Hence, retention levels
are expected to remain lower. The company, with a cession level of 70%, has reinsurance arrangement
with an international reinsurance company - Munich Re (rated ‘AA-’ by ‘Standard and Poor’s)..
ALAC’s capitalization is currently at an adequate level. However, due to higher initial setup cost, initial
operating losses may further consume the equity base. Nonetheless, the sponsors have shown their
commitment to support the company, as and when the need arises.
Adamjee Life Assurance Company Limited (ALAC) is a newly setup life insurance company operating
in Pakistan. The company was formed in 2008 as a result of a partnership between Adamjee Insurance
(55%) and Hollard Insurance (45%). Adamjee Insurance is a part of Nishat group - a leading
conglomerate of Pakistan with strong presence in banking, insurance, textiles, and cement sector.
Hollard Group is a leading insurance group of South Africa.
The company’s BoD comprises seven members, including the CEO of the company. There are three
directors each from the two main sponsors, while one director is independent. Mr. Fredrik de Beer, the
Chief Executive Officer of ALAC, has significant experience of over two decades in various sectors
including life insurance business. He is assisted by a team of young professionals educated from local
and foreign institutions.
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