AM Best confirms the credit ratings of Jordan Insurance Company Plc.
AM Best affirmed Jordan Insurance Company Plc’s financial strength rating of B (fair) and long-term issuer credit rating of ‘bb+’ (fair). (JIC) (Jordan). The outlook for 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 management of business risks.
The strength of JIC’s balance sheet is underpinned by its risk-adjusted capitalization which was at the very high level at the end of 2021, as measured by Best’s capital adequacy ratio (BCAR). JIC’s BCAR scores have improved since the end of 2018 thanks to measures taken by management to strengthen the balance sheet, including the suspension of dividend payments and the disposal of certain capital-intensive investments. AM Best views liquidity, as well as asset and liability management as partially offsetting rating factors, as the company maintains significant investment concentrations in the equity and real estate asset classes. The Company’s prospective liquidity position will depend on its ability to continue to de-risk its investment portfolio and reinvest in higher quality liquid assets. The ratings also take into account JIC’s moderate financial leverage, driven by overdrafts and borrowings incurred to fund the company’s regulatory capital requirements for its branch in the United Arab Emirates (UAE).
JIC has a track record of adequate operating performance, demonstrated by a five-year (2017-2021) weighted average return on equity of 2.6%. The company reported strong underwriting profitability in 2021, which resulted in a combined ratio of 96.2%, as calculated by AM Best. This compares to the 92.4% reported in 2020, when underwriting results were positively impacted by reduced claims for the company’s motor and medical businesses resulting from government restrictions in response to the COVID-19 pandemic. 19. AM Best expects JIC’s underwriting performance to remain positive in the coming years, due to increased underwriting discipline and in favor of proper valuation.
JIC has a good competitive position in Jordan, where it is ranked #2 based on Gross Written Premium (GWP) 2020. However, the Jordanian insurance market remains relatively small by international standards. The company benefits from some geographic diversification, with around 15% of its GWP coming from the United Arab Emirates.
JIC has demonstrated good controls and adequate risk management with respect to its underwriting operations. However, shortcomings in investment, liquidity and capital risk management negatively impact AM Best’s assessment of JIC’s ERM.
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