Adamjee Insurance Company Limited achieved robust net profit growth of 93.2% at the end of the first quarter of the ongoing calendar year (1QCY24) compared to the corresponding period of CY23, reports WealthPK. This leap in net profit was attributed to a 71% increase in investment income mainly because of higher dividend income compared to the same period of last year. The net insurance premium increased by 18.1% to Rs5.7 billion in 1QCY24. Likewise, the insurance company managed to earn underwriting results of Rs145.6 million in 1QCY24 compared to a loss of Rs386.8 million in 1QCY23. During 1QCY24, the results of operating activities and profit-before-tax jumped by 98.81% and 95.95%, respectively. Thus, the improved financials pushed the earnings per share to Rs2.79 in 1QCY24 from Rs1.44 in the same period last year.

Liquidity and return to shareholders

The company's current ratios demonstrated variability but remained stable from 2018 to 2023, indicating consistent improvement in its ability to cover short-term obligations with current assets. In 2023, the insurance company posted a current ratio of 1.5 thanks to effective working capital and cash flow management over the six years. The company’s return on equity improved from 6.3% in 2018 to 7.4% in 2023, with the highest return of 12.4% in 2021. Return on assets measures a company’s efficiency in utilizing its assets to generate profits. It provides insights into how effectively the company deploys its resources to create value. Due to proper and efficient allocation and resource utilization, the company earned a positive return on assets of 2.5% for 2023. Starting from 2018, the company registered a return on assets of 2.6%, which peaked at 5.1% in 2021. Compared to 2022, the company’s return on equity and return on assets declined in 2023, primarily due to the rise in net insurance claims expenses.

Balance sheet analysis

Between 2018 and 2023, the company’s reserves increased to Rs7.9 billion, with two dips in 2020 and 2022. This signifies improved financial strength and successful strategic financial management initiatives over the years. The company’s equity observed a notable uptick from Rs19.66 billion in 2018 to Rs30.6 billion in 2023 mainly due to increased profitability. The increase in reserves and equity is mainly attributed to fair value gains of Rs3.803 million against available-for-sale investments. The total assets grew from Rs47.8 billion in 2018 to Rs90.12 billion in 2023, showing a steady rise of 22%. The company observed a spike of 34% in investments, which was the second largest asset, constituting 40% of the total assets. The total liabilities surged notably from Rs28.18 billion in 2018 to Rs59.4 billion in 2023, highlighting the increase in the company's borrowing, expansion initiatives and strategic investment decisions.

Insurance sector

In 2023, EFU General Insurance Limited posted a net profit of Rs3.28 billion with earnings per share of Rs16.41. Jubilee General Insurance Limited and Adamjee Life Assurance Company Limited reported a net profit of Rs2.99 billion and Rs908.07 million, respectively. The earnings per share for JGICL and ALIFE stood at Rs15.09 and Rs3.63, respectively, in 2023.

Future outlook

The prevailing economic uncertainty, coupled with the global slowdown in demand and inflation, pose a considerable risk for businesses. However, Adamjee Insurance Company’s management is constantly monitoring the ongoing developments in the rapidly changing economic environment and is particular in taking steps to ensure financial stability and further improve its outlook.

Company profile

Adamjee Insurance Company was established in Pakistan in 1960. The company is principally engaged in the general insurance business.

Credit: Independent News Pakistan