Insurance: ADAMJEE INSURANCE COMPANY LIMITED - Year Ended December 31, 2006 (Audited)
"Our passion is to provide leadership to the Insurance Industry" is a part of the Vision adopted by Adamjee Insurance Company Limited (Adamjee Insurance), a public limited company incorporated on September 28, 1960 under the Companies Act, 1913 (now Companies Ordinance, 1984).
Adamjee Insurance is listed on Karachi and Lahore Stock Exchanges and is engaged in the non-life insurance business comprising Fire, Marine, Motor and Miscellaneous. According to the Directors' Report, during the year under review JCR-VIS has maintained the Insurer Financial Strength rating of Adamjee Insurance as "AA" (Double A).
The Statutory Auditors in the second last paragraph of their Report to the Members state: "Without qualifying our opinion, we draw attention to note 13 to the financial statements which explains certain contingencies, the ultimate outcome of which cannot be presently determined.
Accordingly, pending final resolution of the related matters, no provision has been made for any liability that may arise as a consequence thereof". They further state that the Statutory Auditors, who audited the financial statements of the company for the year ended December 31, 2005 had expressed an unqualified opinion thereon, however, had included an emphasis of matter paragraph in the audit report to draw attention of the members to contingencies disclosed in the notes to the financial statements for the year ended December 31, 2005.
Note 13, referred to above, pertains Contingencies in respect of four income tax assessments of the company for various years involving additional tax liability of Rs 95.141 million and the appeals of the company against such assessments.
The said note is closed with the words: "Pending resolution of the above mentioned appeals filed by the company, no provision has been made in these financial statements for the aggregate amount of Rs 95.141 million (2005: Rs 53.784 million) as the management is confident that eventual outcome of the above matters will be in favour of the company".
The authorised capital of Adamjee Insurance is Rs 1.5 billion, comprising 150 million shares of Rs 10 each. As on December 31, 2006 the paid up capital was Rs 1.022 billion, which was held by 5,321 shareholders, of which general public held over 28% shares. On this date MCB Bank Limited, Adamjee Foundation and Allied Bank Limited, associated undertakings held 29.375%, 8.506% and 1.078% respectively of total shares. Holding by the Insurance Companies was 6.866%. The Directors, CEO, their spouse and minor children held 2.5% of the voting interest. The rest of the shares were distributed among a number of corporate entities including banks and DFIs.
According to the Directors' Report, the company aim at maintaining a balanced portfolio and strives hard to focus all classes instead of increasing its volume of business in any particular class. The portfolio analysis (volume wise) is as under:
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Class 2006 2005
Fire 37% 41%
Marine 15% 19%
Motor 31% 28%
Misc. 17% 12%
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Total 100% 100%
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Total assets of Adamjee Insurance increased by 21% to Rs 11.139 billion on December 31, 2006 compared to Rs 9.182 billion on December 31, 2005. Investment increase by 48% to Rs 4.503 billion (40% of Total Assets) compared to Rs 3.040 billion (33% of TA) as on December 31, 2005. Premium Due but Unpaid also saw 41% increase to Rs 2.053 billion as against Rs 1.458 on the corresponding date last year.
Net increase in assets has been largely balanced through increase in Shareholders Equity and Underwriting Provisions. Of the Investment, Adamjee Insurance had almost all of it in Available for Sale Securities. As per the notes to the financial statements, on December 31, 2006, the fair value of Available for Sale securities was Rs 8.039 billion (2005: Rs 6.580 billion).
As per the company's accounting policy, Available for Sale investments are stated at lower of cost or market value (market value being taken as lower if the reduction is other than temporary). Had these investments been measured at fair value, their carrying value as on December 31, 2006 would have been higher by Rs 3.523 billion (2005: Rs 3.502 billion). Shareholders Equity on December 31, 2006 as percentage of Total Assets was 34% (2005: 26%), which reflects its high financial strength.
Total gross premium recorded during the year ended December 31, 2006 was Rs 7.912 billion as compared to Rs 6.682 billion showing a year over year growth of 18%. The net premium revenue for the year however increased by 32% to Rs 5.280 billion as compared to Rs 3.997 billion for last year.
The underwriting profit for the year was 57% higher at Rs 482 million (9% of net premium revenue) compared to Rs 306 million (8% of the net premium revenue) for the previous year. The company's investment income for the year under review was Rs 1.515 billion as compared to Rs 1.147 billion last year manifesting a growth of 31% over last year. Total income for the year crossed two billion at Rs 2.117 billion compared to Rs 1.518 billion for the previous year.
Despite 81% increase in general, administrative and other expenses, Adamjee Insurance achieved 36% increase in its profit after tax for the year to Rs 1.577 billion as compared to Rs 1.163 billion for last year. ROE at 42% for the year is impressive though lower than the last year level (2005: 48%) due largely to increased equity at end of 2006.The Board recommended final cash dividend of Rs 1.80 per share, in addition to Rs 1.00 per share in cash and 12.5% bonus issue declared earlier on interim results. Performance statistics are given below.
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Performance Statistics (Audited) (Rs, 000)
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Balance Sheet (as on December 31,) 2006 2005
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Cash, bank and deposits: 883,228 1,428,180
Investments: 4,502,776 3,039,826
Premium due but unpaid: 2,053,498 1,458,221
Amounts due from re-insurers: 220,386 137,324
Salvage, premium, income accrued: 156,288 95,653
Re-insurance recoveries: 1,262,976 1,100,347
Other current assets: 1,700,820 1,592,219
Total Current Assets: 10,779,972 8,851,770
Total Fixed Assets: 359,127 330,610
Total assets: 11,139,099 9,182,380
Paid up capital: 1,022,351 826,142
Reserves & Retained earnings: 2,765,522 1,600,027
Net Shareholders Equity: 3,787,873 2,426,169
Underwriting provisions: 6,296,121 5,607,163
Total Creditors, accruals: 1,055,105 1,149,048
Total Liabilities: 7,351,226 6,756,211
Total Liabilities & Equity: 11,139,099 9,182,380
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Ratios: 2,006 2,005
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Cash and bank/Total Assets: 8% 16%
Investments/Total Assets: 40% 33%
Premium due but unpaid/Total Assets: 18% 16%
Reinsurance recoveries/Total Assets: 11% 12%
Total Current Assets/Total Assets: 97% 96%
Fixed Assets/Total Assets: 3% 4%
Shareholders Equity/Total Assets: 34% 26%
Underwriting Provisions/Total Assets: 57% 61%
Total Liabilities/Total Assets: 66% 74%
Book Value (Par Rs 10/share)-Rs: 37.05 29.37
Quoted Share Price (06-06-07) - Rs: 332.00 -
Quoted Price/Book Value Ratio-X: 8.96 -
Revenue Account (Y end December 31, 2006 2005
Net premium revenue: 5,280,128 3,997,327
Net claims: 3,354,851 2,511,532
Expenses, net commissions, etc: 1,443,338 1,179,775
Total, claims, expenses, commission: 4,798,189 3,691,307
Underwriting result: 481,939 306,020
Investment income: 1,515,259 1,147,012
Rental and other income: 120,198 64,610
Total Income: 2,117,396 1,517,642
Total Gen and admn. Expenses: 432,649 239,266
Profit before tax: 1,684,747 1,278,376
Provision for Taxation: 108,246 115,130
Profit after tax: 1,576,501 1,163,246
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Ratios: 2006 2005
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Underwriting result/Net prem. Revenue 9% 8%
Underwriting result/Total Assets: 4% 3%
Underwriting result/Total income: 23% 20%
Investment income/Total Income: 72% 76%
Profit after taxation/Total Assets: 14% 13%
Profit after tax/Total Equity: 42% 48%
EPS (Year end capital)-Rs: 15.42 14.08
Price Earning Ratio-Times: 21.53 -
Cash Flow Summary 2006 2005
Total cash flow from operating activities:-283,267 262,516
Total cash flow from Investing activities: 29,695 468,124
Total cash flow from Financing activities:-217,803 -131,559
Net cash from All activities: -471,375 599,081
Cash at beginning of period: 1,345,258 746,177
Cash at end of period: 873,883 1,345,258
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COMPANY INFORMATION: Chairman: Abdul Razak Adamjee; Managing Director & CEO: Arif Ijaz; Director: Ahmad Alman Aslam; Advisor: Mian Mohammad Mansha; Chief Operating Officer: Nasreen Rashid; CFO & Executive Director: Muhammad Ali Zeb, FCA; Company Secretary: Tameez-ul-Haque, FCA; Registered/Head Office: Adamjee House, P.O. Box No 4850, I.I. Chundrigar Road, Karachi; Auditors: A.F. Ferguson & Co, Chartered Accountants; Web Address: www.adamjeeinsurance.com
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