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 (FSR) of B++ (Good) of First Insurance Company (Solidarity First Insurance Company or SFIC) (Jordan). The outlook of the Long-Term ICR has been revised to stable from positive, while the outlook of the FSR remains stable.
The Credit Ratings (ratings) reflect SFIC’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings consider, in the form of lift, SFIC’s strategic importance to its parent company, Solidarity Group Holding BSC (c) (SGH), a leading provider of Islamic insurance solutions in Bahrain and Jordan. The Long-Term ICR upgrade reflects the improvement in the business profile of SGH, achieved through a stronger competitive position in Bahrain, following the integration of Al Ahlia Insurance Company B.S.C. (AAIC), acquired in 2016.
SFIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), its very good level of liquidity and the absence of borrowings. The balance sheet strength assessment also considers SFIC’s high dependence on reinsurance, and the elevated asset risk due to the concentration of its investments in Jordan and the Gulf Corporation Council.
SFIC has a track record of adequate operating performance, demonstrated by a five-year (2014-2018) weighted average return on equity of 7%, supported by stable underwriting and investment performance. Recent results have benefited from a three-year tax exemption following the acquisition of Yarmouk Insurance Company in 2015. Despite the issues associated with mandatory motor third-party liability (MTPL) business experienced across Jordan’s insurance market, the company has achieved a solid five-year (2014-2018) weighted average combined ratio of 93%, as calculated by AM Best. Headwinds for prospective profitability include the performance of the mandatory MTPL business, which SFIC will look to offset with the continued profitability in its comprehensive motor, medical and marine lines of business.
SFIC benefits from a good position in its domestic market, as the fourth-largest insurer, supported by a strong distribution network. Over recent years, the company has consistently grown at a faster pace than its market peers, with a five-year (2014-2018) compound average growth rate of approximately 14% (approximately 4% for the market) leading to gross written contributions of JOD 44 million in 2018. Nonetheless, the company’s business profile is constrained by its concentration in Jordan, which is a relatively small and very competitive insurance market.
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