A.M. Best has affirmed the financial strength rating of “B++ (Good)” and the issuer credit rating of “bbb” of Jubilee General Insurance Company of Pakistan. The outlook for both ratings remains stable.
According to the agency, the ratings reflect Jubilee’s “solid” risk-adjusted capitalisation, track record of good operating performance and “well-established” business profile in Pakistan. An offsetting rating factor is the high level of economic and political risk associated with Pakistan.
Jubilee’s risk-adjusted capitalisation strengthened during 2014 with capital and surplus rising by 13.9 percent to $54.1 million, following strong internal capital generation.
The company’s capital position benefits from material unrealised capital gains emanating from its equity and real estate portfolios, with the fair value of certain assets significantly higher than the reported statement values.
A.M. Best has confirmed that Jubilee’s risk-adjusted capitalisation is expected to remain solid and sufficient to absorb its projected underwriting growth over the next three years.
The company purchases catastrophe excess of loss reinsurance protection based on realistic disaster scenarios provided by its lead reinsurer and broker; however, catastrophe modelling in Pakistan remains “undeveloped and subject to uncertainty”, according to A.M. Best.
As a result, Jubilee’s capital position is exposed to volatility in the event of a severe earthquake in Karachi, which exceeds the loss protection purchased by the company.
Jubilee has a track record of good operating performance, with consistently increasing pre-tax profits reported between 2010 and 2014. The company reported a solid pre-tax profit of $12.7 million in 2014, equating to a return on equity of 21.3 percent.
Earnings continue to be driven predominantly by investment operations, with the technical result continuing to account for less than a quarter of the overall pre-tax result. Despite this, underwriting performance remains strong as evidenced by a five-year average combined ratio of 93.7 percent.
Jubilee maintains a well-established business profile in Pakistan, ranked as the third largest domestic company by 2014 gross written premiums. The company underwrites solely non-life business originating in Pakistan, with what A.M. Best has called a “well-diversified” portfolio by line of business.
A change in A.M. Best’s assessment of the economic or political situation in Pakistan or the company’s ability to navigate the challenging operating environment may result in positive or negative rating actions.
In addition, the agency has stated that negative rating pressure may arise from a “notable deterioration” in Jubilee’s risk-adjusted capitalisation and/or its operating performance.
