Insurance: ADAMJEE INSURANCE COMPANY LIMITED - Analysis of Financial Statements Financial Year 2004 - 2001 Q 2009.

The insurance industry of Pakistan forms a meagre part of the GDP as compared to other nations of the world. With a very low penetration level, the industry is still in its nascent stage in consequent of lower demand.

The concept of insurance in Pakistan is not acceptable on account of many reasons; most prominently being the positioning, marketing and distribution related issues. Furthermore, the demand for insurance depends on real disposable income of the prospective policyholder, the individual's preference about the need for financial security, economic environment, interest rates, inflation and insurance premium rates; factors which are all missing in the Pakistani scenario. Then the cultural and religious factors also play an integral part.

Pakistan's insurance sector is reaping the benefits of a growing economy coupled with the insurance sector reforms, soaring trade activities, improving per capita income and competition among insurance sector companies, which are driving the current growth in the insurance sector. The gross premiums and net premiums of the insurance industry have shown an increasing trend, thanks to the better marketing environment. Also, the percentage of gross premium to GDP also showed an increasing trend over the period under assessment. This trend is indicative of growth of insurance penetration in the economy.

At present there are 54 insurance companies out of which 49 companies offer non-life insurance and 5 offer life insurance services. The non-life insurance industry also includes six companies that provide health insurance coverage as well.

NON-LIFE INSURANCE

There is a monopolistic competition within the non-life insurance sector in Pakistan as there are around 49 non-life insurance companies. The promulgation of insurance ordinance in 2000 and subsequent regulatory changes strengthened the regulatory and supervisory infrastructure for NLI companies. For instance, enhancement in paid-up capital requirement improved the equity structure and reduced the number of non-profitable companies. The non-life insurance sector's profitability has jumped by 17 percent in the 1st half of current year over the same period last year.

The demand for auto insurance, marine insurance, and fire insurance augmented owing to availability of consumer financing at low interest rates, unprecedented rise in trade volumes and increased uncertainty due to terrorist attacks in many regions, surge in industrial activity and high growth construction business respectively. The structure of the NLI sector is still skewed. The top 5 companies have more than 70 percent in the overall assets and net premium of the sector.

Claim ratio of the sector depicted a declining trend while combined ratio of the sector stood at 79 percent versus 80 percent in 2006. Moreover, expense ratio of the sector stood at the level of last year, i.e. 18 percent. With the enhancement in the insurance products, further growth is expected in this sector.

Adamjee Insurance Company Limited (AICL) was incorporated as a public limited company on September 28, 1960. The primary business of the company is to provide general insurance at retail and corporate levels. It is listed on Karachi and Lahore stock exchanges of the country. The company is also registered with the Central Depository Company of Pakistan Limited (CDC). AICL is broadly involved in underwriting the following classes of businesses:

It offers three products in the retail insurance …