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.

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