Adamjee Insurance Company Limited has gained 15.2%CYTD, outperforming the KSE‐100 Index by 2.4% in the process. While the market is attaching value to AICL’s investment portfolio (PkR56/share on Jun 30’15)  we believe it is ignoring recent impressive underwriting results.

Underwriting profit has summed to PkR519mn across the last 2qtrs, an unprecedented pace where previous high is PkR679mn achieved in full‐year CY09. While motor insurance is leading growth in premiums (+19%YoY in 1QCY15), the claims ratio has dropped to 58% (vs. last 10yr avg. of 67%).

Conscious focus on underwriting quality can sustain core uptick. On annualized 1QCY15 EPS of PkR2.11 (+17%YoY despite lower investment income), AICL trades at a P/E of 6.75x. While we do not cover AICL formally, convergence to mean market P/E of 9.45x can take the share to PkR80/share.

1QCY15 result review: AICL posted unconsolidated NPAT of PkR737.3mn (EPS: PkR2.11) in 1QCY15, up by 17%YoY on (i) 7.4x YoY jump in underwriting profits to PkR257mn on 19%YoY higher premiums and (ii) lower expenses, which countered the impact of a 9%YoY reduction in investment income to PkR636mn. Growth in premiums was led by Accident/Health (+32%YoY) and Motor (+16%YoY) while claims were notably lower for Fire (‐16%YoY) and Motor (‐14%YoY).

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