LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” of Jordan Insurance Company Plc. (JIC) (Jordan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect JIC’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.
JIC’s balance sheet strength is underpinned by risk-adjusted capitalisation that was at the strongest level at the end of 2020, as measured by Best’s Capital Adequacy Ratio (BCAR). JIC’s BCAR scores have been improving since year-end 2018 as a result of measures taken by management to strengthen the balance sheet, including the suspension of dividend payments and the divesture of capital-intensive investments. Nonetheless, the company’s exposure to real estate and equities remains high, pending further de-risking of the investment portfolio, which is expected in the near term. The ratings also consider JIC’s weak level of liquidity and moderate financial leverage, driven by overdrafts and loans contracted to fund the company’s regulatory capital requirements for its branch in the United Arab Emirates (UAE).
JIC’s operating performance is adequate over the underwriting cycle, as illustrated by a five-year weighted average (2016-2020) return on equity (ROE) of 3.0%. Profitability has been improving since 2017, and the company’s combined ratio decreased to 92% in 2020. This improvement was driven partly by the non-renewal of unprofitable business in recent years, and by the reduction in claims levels for motor and medical business resulting from the restrictions imposed by the government in response to the COVID-19 pandemic. JIC is expected to maintain a low single-digit ROE and a combined ratio below 100% over the medium term.
JIC has a good competitive position within Jordan, where it is ranked No. 2 based on 2019 gross written premiums. However, Jordan’s insurance market remains relatively small by international standards. The company benefits from some geographic diversification, with approximately 20% of its premium emanating from the UAE.
JIC has demonstrated good controls and adequate risk management in respect of its underwriting operations. However, deficiencies in the management of investment, liquidity and capital risks have a negative impact on AM Best’s assessment of JIC’s ERM.
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