A.M. Best affirms Jordan International Insurance Company at B+
A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of bbb- of Jordan International Insurance Company (JIIC) (Jordan). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect JIIC’s strong risk-adjusted capitalisation, improving underwriting performance and adequate enterprise risk management (ERM). Offsetting rating factors include the company’s limited business profile and the high levels of economic, political and financial system risks associated with operating in Jordan.
JIIC’s risk-adjusted capitalisation remained strong at year-end 2016, with capital consumption driven by investment risk due to the concentration of equities and real estate in the company’s investment portfolio. Offsetting rating factors include the company’s dependence on reinsurance, which is partly mitigated by the good credit quality of its reinsurance panel. A.M. Best expects moderate internal capital generation to support an increase in underwriting risk resulting from an annual growth in gross written premiums (GWP) of approximately 15% between 2017 and 2019.
JIIC’s underwriting performance has consistently improved since 2012, following the company’s decision to withdraw from a number of loss-making accounts, including all motor business. In 2016, the company generated an underwriting profit of JOD 289,000 (USD 409,000) and a combined ratio of approximately 94%. Whilst JIIC’s non-life operations generated profits in both 2015 and 2016, its life business was unprofitable due to a lack of economies of scale.
The company’s investment result has been the principal driver of its overall operating earnings in recent years. Prospectively, A.M. Best expects JIIC to report non-life combined ratios of approximately 95%, marginal losses on its life account and good investment profits.
JIIC’s business profile remains limited, with a 3.5% share of the relatively small Jordanian insurance market based on GWP as at year-end 2016. Additionally, the company’s operations are concentrated in medical business, which accounted for 70% and 91% of its gross and net written premiums, respectively, in 2016. In 2016, the company underwrote GWP of JOD 21.1 million (USD 29.9 million), which represented an increase of approximately 60% from the prior year.
The annual growth in premiums was mainly driven by a large two-year contract of approximately JOD 5 million in the medical segment. Although the company is expected to expand its business, its profile is likely to remain limited over the medium term. JIIC has an adequate approach to ERM, with improving identification and quantification of key risks.