LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of ARABIA Insurance Company – Jordan (AIC-J) (Jordan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect the company’s adequate level of risk-adjusted capitalisation and track record of operating profits. Offsetting rating factors include the company’s modest business profile, weak underwriting performance and concentrated exposure to country risk in Jordan. AIC-J’s ratings receive enhancement from its parent company, ARABIA Insurance Company s.a.l. (AIC), due to its strategic importance and integration within the group.
AIC has a 51% stake in AIC-J and provides support to the company in areas such as governance, risk management, reinsurance purchasing and technical expertise.
AIC-J’s risk-adjusted capitalisation remains adequate for the rating level, benefiting from unrealised gains on real estate holdings, although growth in capital has been limited by the company’s low level of profit retention. Shareholders’ equity has grown at an average rate of 1.6% per annum over the past five years (2012-2016). Prospective capital adequacy will be driven by the company’s ability to generate and retain sufficient capital to support its strategic initiatives.
The company has a modest business profile in Jordan’s domestic insurance market and controls a small market share of approximately 3.3%. Total gross written premiums grew by 10% in 2016 to JOD 20.2 million (USD 28.7 million), attributable primarily to motor comprehensive and marine business lines, offsetting a small drop in life premium revenue.
Whilst AIC-J has a track record of generating positive operating earnings, the company’s technical returns have experienced volatility. In 2016, the company generated a profit after tax of JOD 620,000 (USD 878,000), a material improvement on the breakeven result delivered in 2015. The increases in operating income was driven by a decline in the non-life combined ratio, which dropped to 96.8% in 2016 from 103.8% in 2015, due to an improvement in the motor business portfolio. Profit has historically been weighted towards investment income, which has been stable in recent years. Technical margins are likely to remain slim due to stiff levels of competition in Jordan’s insurance market, which directly impacts the company as a result of its modest business profile.
AIC-J remains exposed to the heightened levels of economic, political, and financial system risk associated with operating in Jordan. Despite the company’s track record of successfully navigating these challenging conditions, A.M. Best continues to monitor the impact these external factors may have on the company.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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