LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” (Fair) 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 (ERM).
JIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the very strong level at year-end 2022, as measured by Best’s Capital Adequacy Ratio (BCAR). JIC’s BCAR scores have improved in recent years as a result of measures taken by management to strengthen the balance sheet, including the suspension of dividend payments and the divesture of some capital-intensive investments. Nonetheless, AM Best views liquidity, as well as asset and liability management as partially offsetting factors, as JIC still maintains significant investment concentrations within equity and real estate asset classes. The company’s prospective liquidity position will depend on its ability to continue de-risking its investment portfolio and re-investing in higher-quality liquid assets. The ratings also consider JIC’s moderate, albeit reducing financial leverage, associated with overdrafts and loans contracted to fund the company’s regulatory capital for its branch in the United Arab Emirates.
JIC has a track record of adequate operating performance, as demonstrated by a five-year weighted average (2018-2022) return on equity of 2.8%. Non-life underwriting profitability deteriorated in 2022, which translated into a combined ratio of 103.5%, as calculated by AM Best. This compares with 96.3% in 2021 and 92.4% in 2020, when non-life technical results were aided by a reduction in motor and medical claims due to restrictions imposed by the government in response to the COVID-19 pandemic. However, the non-life underwriting loss recorded by JIC in 2022 was offset by a return to profit for its life business in that year. AM Best expects JIC’s underwriting performance to improve in the coming years, due to increased underwriting discipline, and remain supportive of an adequate assessment.
JIC has a good competitive position within Jordan, where it is ranked No. 2 based on 2022 gross written premium. However, Jordan’s insurance market remains relatively small by international standards. The company benefits from some geographic diversification, with approximately 13% of its net written premium emanating from the UAE and Kuwait in 2022.
JIC has demonstrated good controls and adequate risk management in respect of its underwriting operations. Nevertheless, deficiencies in the management of investment, liquidity and capital risks have had a negative impact on AM Best’s assessment of JIC’s ERM.
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