March 26, 2025 (MLN): The title page of Adamjee Life Insurance’s Financial Report 2023, featuring a paper plane soaring in the sky, sparked my curiosity – was it just a promotional gimmick or a true representation of growth? The report offers a deep dive into the company’s financial trajectory, seeking to address this very question.
Growth in Gross Written Premiums (GWP)
The first milestone for any life insurer is the securing of its Gross Written Premium (GWP). Thereafter, incremental growth in GWP shape-up the prospects of a life insurer in years to come.
Adamjee Life has exhibited robust growth in GWP, rising at a Compound Annual Growth Rate (CAGR) of 16% over the past six years. Growing by 2% more than industry average which was 14% in 2023 (Source: SECP Report).
Adamjee Life now commands 21% of the total Gross Written Premiums in the private sector, ranking as the third-largest player, following Jubilee Life (40% market share) and EFU Life (31%), despite being a relatively new entrant (Source: 3rd Quarterly Report 2023).
Revenue Sources: GWP vs. Investment Income
While GWP is the primary revenue source, investment income plays an equally critical role for long-term growth and profitability. Together, these two components constitute over 80% of total revenue in general, including Adamjee Life.
Key Revenue Drivers for Life Insurers:
Following are what life insurers actively pursue to enhance revenue from the core and auxiliary operations.
- Growth in New Business → Expansion into new markets & policies
- Retention of Existing Business → Higher policy renewal rates (Persistency)
- Increase in Investment Income → Sustainable and well-managed investments
The illustration below maps how life insurers drive revenue growth:
With 16% CAGR in gross premiums, Adamjee Life has equally been successful in maintaining a high persistency ratio over years. Even surpassing the leader in the industry, State Life Insurance, which has a first-year persistency ratio of 72.4% (PACRA Report).
It is to be noted that a higher persistency ratiosignals strong customer loyalty and confidence, whereas a low ratio may indicate poor product fit or dissatisfaction, leading to lower renewals.
Investment Growth and Stability
Adamjee Life has experienced consistent investment growth, with its investment portfolio expanding at a CAGR of 29% over the past four years. Investment income has also grown at 16% CAGR, reinforcing financial resilience.
To ensure stable return even in a volatile market, securing financial security to long-term policy-holders obligation and reduce dependency on underwriting profits, Adamjee Life has strategically allocated 75% of its investment portfolio to government securities (Annual Report 2023).
Life Cycle Impact on Investment Income:
The graph below illustrates that during the early years, life insurers rely more on underwriting profits, as investment reserves are still accumulating. And as they mature, investment incomeexceeds net premium income, becoming the primary revenue driver:
With cognizance of the fact, Adamjee Life strategically aligned itself with industry best practices.
| Year | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| A Life | 53% | 58% | 85% | 83% | 79% |
| Jublee Life | 46% | 56% | 90% | 92% | 79% |
| EFU Life | 39% | 52% | 66% | 72% | 67% |
Key to Profitability: Wealth Generation & Expense Management:
It is the profitability that first catch the attention of stock investors. Once the revenue streams in place, life insurers focus on Wealth generation for profitability. They ensure it primarily by optimizing claims costs, reducing acquisition costs & increasing investment income.
Net Claims to Net Premiums Ratio:
A high Net Claims to Net Premium ratio suggests that the insurer is paying out a significant portion of premiums as claims, which could indicate high-risk policies or poor underwriting. Contrary to it, a low ratio indicates strong profitability, as fewer claims are being paid out compared to premiums collected. Thus, it is a measure of how much of gross premiums convert into net premiums, a direct indicator of cash inflow. Adamjee Life’s ratio has shown fluctuations but remains below the industry average (92% in 2023).
| Year | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| Net Claims/Net Premiums | 80.0% | 83.7% | 70.0% | 45.0% | 41.0% |
For reference,Jubilee Life’s claims ratio reached 107% in 2023, while EFU Life had lower ratio (SECP Report).
Similarly, The Expense Ratioof a life insurer measures how efficiently the company manages its operating expenses in relation to its net premium income. It is a key indicator of the insurer’s cost management and profitability. Adamjee Life’sexpense ratio rose from1.69% in 2023 to 2.59% in 2024, largely driven by new business acquisition costs.
Adamjee Life: Performance at a Glance:
The table below offers a bird eye view of operating performance of Adamjee visa viz life insurance industry.
If past performances are foretold of future, then the title is the true representation of growth of Adamjee Life.
And now
The company has announced an increase in its authorized capital from Rs. 2.5 billion to Rs. 3.0 billion through the issuance of 300 million right shares at Rs. 10 per share. With a healthy cash and bank balance of Rs. 6.245 million the company is well-positioned for expansion.
Adamjee Life’s Gross Written Premium (GWP) for 2024 stood at Rs. 30.285 billion, marking a significant increase from Rs. 22.686 billion in 2023. This upward trend in premium revenue reinforces the company’s expanding market presence.
If this growth trajectory continues, the estimated GWP for 2025 could reach approximately Rs. 35.0 billion. Given an acquisition cost of 1.6%, the financing requirement for new business acquisition would be Rs. 562 million, which remains well within the company’s available cash and bank reserves.
Supporting this growth outlook, a low leverage ratio, debt-to-equity ratio of 0.12, suggest that the fresh capital injection is likely to aim accelerate the growth further, alongside other strategic objectives such as debt reduction, regulatory compliance, and liquidity management.
