LONDON--(BUSINESS WIRE)--AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb” and affirmed the Financial Strength Rating of B++ (Good) of Arab Orient Insurance Company (gig-Jordan) (Jordan). The outlook of these Credit Ratings (ratings) has been revised to stable from negative.
The ratings reflect gig-Jordan’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management (ERM).
The upgrade of the Long-Term ICR reflects the increased level of rating enhancement that gig-Jordan receives from its parent, Gulf Insurance Group K.S.C.P. (GIG). Group integration has improved significantly in recent years, with GIG providing support in areas such as reinsurance purchase, ERM, pricing and reserving, and investment management services. In addition, GIG has demonstrated its commitment to gig-Jordan through the provision of a subordinated loan in 2017 to alleviate regulatory capital pressures.
The stable outlooks reflect the recovery in technical earnings the company has achieved following difficulties in 2016 and 2017. Following a change in its leadership team, gig-Jordan has improved its risk selection and pricing, with an increased focus on underwriting a more balanced medical insurance portfolio. This has translated into a healthy combined ratio of 91.4% in 2018. The company’s five-year (2014-2018) average combined ratio of 98.4% includes a deterioration in performance for 2016 and 2017, following a correction to the financial statements at each respective year end, as well as technical losses suffered on large corporate accounts within its medical portfolio. AM Best expects technical profitability to be maintained at 2018 levels in the medium term.
gig-Jordan’s balance sheet strength is underpinned by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which remained at the strongest level as at year-end 2018. AM Best expects consolidated risk-adjusted capitalisation to remain at the strongest level in the short to medium term. An offsetting factor to the balance sheet strength assessment is gig-Jordan’s high dependence on reinsurance. The assessment also considers gig-Jordan’s exposure to high levels of economic, political and financial system risk through operating exclusively in Jordan.
The business profile assessment reflects gig-Jordan’s leading position in its domestic insurance market, with a consolidated market share of 14% as at year-end 2018. However, gig-Jordan’s portfolio continues to be concentrated heavily toward medical and motor risks, which is a common characteristic in the region.
gig-Jordan has strengthened its ERM framework, following material financial and underwriting control failures that the company experienced in 2017. The new management team has made a number of enhancements to its processes and framework, including the recent development of an internal actuarial function, and further integration into the GIG group-wide ERM function; however, these initiatives need to be embedded throughout the company.
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