Adamjee Insurance (KSE: AICL) is losing its footing. Sliding profits and segmental losses have been the highlighting traits of the firm since the beginning of CY14. And the financial results for the nine months ended September 2014 further cemented that waning trend.
AICLs topline grew by a decent 13 percent year-on-year in 9MCY14. However, despite the managements aggressive book-cleaning efforts, claims have continued to grow. As a consequence, claims ratio shot up by nearly 400 bps, thus toning down the underwriting profits during this period.
Recall that until the 1HCY14 end, hefty losses in motor segment were blamed to be the culprit. However, in 9MCY14, spiraling claims of fire and property damage segment turned out to be the guilty party, posting a loss of Rs24 million.
To add to the woes, the investment portfolio disfavoured the bottom line one more time, with investment income dwindling by Rs330 million during the period. AICLs investment managers, perhaps, need to re-evaluate the investment-mix. Quite contrary to its peers, Adamjees investment portfolio is excessively parked in equities, thus ringing alarming bells.
Had the firm invested a higher proportion in government securities, the bottom line would have experienced a massive growth. Prevention is better than cure: its time for AICL to avoid investment mistakes!
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Adamjee Insurance
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Rs (mn) 9MFY14 9MFY13 Chg
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Net premium revenue 4,613 4,100 13%
Net claims -3,024 -2,552 18%
Expenses -1,198 -1,162 3%
Net commission -327 -306 7%
Underwriting result 64 80 -20%
Investment income 1,686 2,016 -16%
Other income 85 76 12%
General & admin expenses -294 -218 35%
Profit before taxation 1,514 1,957 -23%
Tax -125 -222 -44%
Profit after taxation 1,389 1,735 -20%
EPS (Rs.) 3.97 4.96 -20%
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Source: KSE announcement