Best’s News & Research Service - December 09, 2021 09:42 AM (EST)
AM Best Affirms Credit Ratings of Jubilee General Insurance Company Limited
- December 09, 2021 09:42 AM (EST)
London //BestWire// - AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Jubilee General Insurance Company Limited (Jubilee) (Pakistan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Jubilee’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
Jubilee’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which improved to the strongest level in 2020, supported by a 9.6% increase in capital and surplus, combined with a marginal decrease in both underwriting and investment risk. AM Best expects risk-adjusted capitalisation to remain at the least at the very strong level over the medium term. Investment risk remains the greatest driver of required capital. The company’s investment portfolio is concentrated in Pakistan, in line with domestic regulatory requirements, which in AM Best’s view impacts asset quality and exposes the company to potential capital volatility. Jubilee’s dependence on reinsurance is relatively high; however, the associated credit risk is mitigated partially by a largely well-rated reinsurance panel, and the holding of collateral to reduce exposure to non-rated counterparties arising from mandatory cessions to the state-owned reinsurer in Pakistan.
Jubilee has a history of strong operating profitability, with a five-year (2016-2020) weighted average return on equity of 15.4% and return on premium of 32.9%, supported by positive underwriting and investment results. Technical performance has remained resilient over this period, with a weighted average combined ratio of 93.7%, albeit with comparatively weaker performance in 2020 (99.9%). AM Best expects underwriting performance to improve in the near term following corrective measures taken by management. Investment returns remain a core driver of operating earnings, with Jubilee generating a weighted average net investment yield including capital gains of 10.8% between 2016 and 2020, representing 85% of the company’s profit before tax over this period.
As Pakistan’s third-largest non-life insurer, Jubilee maintains a good competitive position in its domestic market. The company writes a diversified portfolio, offering conventional and takaful products, principally to commercial customers. Jubilee continues to seek additional market share through developing its retail operations, and the company continues to invest in innovation initiatives and the development of online platforms. Whilst challenging market conditions and the COVID-19 pandemic resulted in Jubilee’s premium income stagnating at approximately PKR 10 billion (USD 64.5 million) in 2020, the company has returned to growth over 2021 (with gross written premium up 16% for the nine months to 30 September 2021), benefiting from an increase in economic activity and its online distribution capabilities.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.