AM Best Downgrades Issuer Credit Rating of Jubilee General Insurance Company Limited
09 Agosto 2024 - 9:49AM
Business Wire
AM Best has downgraded the Long-Term Issuer Credit Rating
(Long-Term ICR) to “bb” (Fair) from “bb+” (Fair) and affirmed the
Financial Strength Rating (FSR) of B (Fair) of Jubilee General
Insurance Company Limited (Jubilee) (Pakistan). In addition, AM
Best has revised the outlook of the Long-Term ICR to stable from
negative. The outlook of the FSR is stable.
The Credit Ratings (ratings) reflect Jubilee’s balance sheet
strength, which AM Best assesses as strong, as well as its strong
operating performance, limited business profile and marginal
enterprise risk management (ERM).
The downgrade of the Long-Term ICR reflects the impact of
Jubilee’s heightened risk profile on its ERM assessment, resulting
from the elevated economic, political and financial system risks
associated with Pakistan. Despite having a developed risk
management framework, Jubilee’s risk profile has increased over
recent years, owing to the company’s concentration domestically. As
a result of regulatory requirements, the company’s assets are held
in Pakistan and its investment portfolio is concentrated in
domestic government bonds of weak credit quality and equity
securities.
The revision of the Long-Term ICR outlook to stable from
negative reflects the expected stablisation of Jubilee’s
risk-adjusted capitalisation at least at the very strong level, as
measured by Best’s Capital Adequacy Ratio (BCAR). Future growth of
the company’s underwriting portfolio is expected to be supported
adequately by internal capital generation. However, the company’s
risk-adjusted capitalisation remains sensitive to changes in asset
risk, which is the primary driver of required capital. Other
partially offsetting rating factors include the company’s high
dependence on reinsurance and its exposure to a non-rated
reinsurance counterparty through mandatory cessions to the
state-owned reinsurer in Pakistan.
Jubilee has a history of strong earnings, with a five-year
(2019-2023) weighted average return on equity of 17.6%.
Underwriting performance has been resilient over this period, with
a weighted average combined ratio of 93.9%. Investment returns
remain the core driver of operating performance, with Jubilee
generating a weighted average net investment yield, including
capital gains, of 12.3% between 2019 and 2023, representing over
80% of the company’s profit before taxes 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 insurance portfolio, offering conventional and
takaful products principally to commercial customers. Despite
difficult market conditions, premium income increased by 31.5% in
2023, driven predominantly by rate increases and higher sums
insured following strong inflation during the year. However,
writing PKR 19.5 billion (USD 69.9 million) of gross premium in
2023, Jubilee remains small on a global scale.
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 Performance Assessments, 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. For more information,
visit www.ambest.com.
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Charlotte Vigier Senior Financial Analyst +44
20 7397 0270 charlotte.vigier@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Timothy Prince Director - Analytics +44 20 7397
0320 timothy.prince@ambest.com
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908 882 2318 al.slavin@ambest.com