AICL Briefing: Company to now target underwriting margins in the range of 7% to 9%

December 7, 2020 (MLN): Adamjee Insurance Company Limited (AICL), recently conducted its analyst briefing session to discuss about company’s latest financial performance and its outlook.

To highlight, the company reported net profits of Rs 1.19 billion for 9MCY20 with an EPS of Rs 3.40 per share, which is 17% higher than the profits witnessed in the same period of last year.

The key takeaways of the briefing covered by JS Global, revealed that company’s operations during the period were severely impacted by the pandemic as the company is facing fierce competition, economic slowdown and impact on business from the pandemic situation in its UAE operations.

The Investment Income of the company increased by 13%, however dividend income declined as SBP had imposed a moratorium on dividend payouts by banks. To note, investment portfolio of AICL comprises 40% of MCB Bank (MCB).

Discussing the outlook of the general insurance industry, the management said that insurance industry is expected to witness flat growth in CY20, while in CY21 it could pick up some pace with 5% YoY growth.

The management does not anticipate massive growth unless there are changes in regulations that support the general insurance industry, as practiced in other countries, or without any evident industrialization, the report said.

The management also highlighted that the strategy of the company from here onwards is to target underwriting margins in the range of 7% to 9%. However, in the past couple of years, a lot of business has come from projects that were high in volume and therefore earned lower margins. In this regard, the company underlined two high margins sectors Motor and Marine Insurance as the key segments of growth and focus.

Speaking of Adamjee Life Insurance’s performance, which is now a 100% wholly owned subsidiary of AICL, as the company acquired 25.72% of the remaining holding from IVM lntersurer B.V. this year, the management said that it has been witnessing higher growth from bancassurance channels. However, given the tightening regulations and impact of the pandemic, the company is expanding its sales stream by adding agency channels.

The company currently has 60 branches, which it intends to further expand by 10-15 branches in CY21, especially in the Punjab region. The management expects 10-15% growth in the life insurance industry. Moreover, the management also re-iterated intentions of listing Adamjee Life Assurance Co. at the local bourse, report highlighted.

On outlook for Hyundai Nishat Motors (Pvt) Ltd (10% holding), the management expects high demand of Tuscon and more launches in the passenger car segment to result in profitability in the next one to two years.

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