A.M. Best affirms credit ratings of First Insurance Company
A.M. Best has removed from under review with positive implications and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of First Insurance Company (FIC) (Jordan).
The outlook assigned to the FSR is stable, while the outlook assigned to the Long-Term ICR is positive.
The Credit Ratings (ratings) reflect FIC’s balance sheet strength, which A.M. Best categorises as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also benefit from rating enhancement, reflecting FIC’s strategic importance to its ultimate parent company, Solidarity Group Holding BSC (c) (SGH), a leading provider of Islamic insurance solutions in Bahrain and Jordan. The positive Long-Term ICR outlook reflects the potential benefits of an enhanced business profile of the Solidarity group that would result from the successful integration of the recently acquired Al Ahlia Insurance Company B.S.C. (AAIC) into its operations.
FIC maintains a very strong balance sheet, benefiting from a low level of underwriting leverage, a reinsurance programme of good credit quality and a conservative investment profile. The company benefits from a good market position as the fourth-largest insurer in Jordan with gross written premium of JOD 37.7 million in 2016, and, following its successful merger with Yarmouk Insurance in 2015, continues to grow successfully at a faster pace than its competitors (+9 per cent in 2016). FIC operates solely within Jordan and therefore, its business profile remains constrained to this relatively small market.
FIC has a track record of adequate operating performance, demonstrated by a five-year (2012-2016) average return on equity of four per cent, supported by stable underwriting and investment results. The company achieved an improved loss ratio of 73.4 per cent in 2016 (74.8 per cent in 2015) (as calculated by A.M. Best) driven by a decrease in attritional claims; however, this has been offset by a higher expense ratio resulting in a marginally higher combined ratio of 93.2 per cent (93 per cent in 2015). The company reported a net result of JOD 2.1 million in 2016, up from JOD 1.3 million in 2015.
Whilst A.M. Best acknowledges the Solidarity group’s track record of successfully integrating a conventional insurance acquisition into FIC in Jordan, potential positive rating movement for FIC remains subject to the execution risk associated with the integration of AAIC into SGH given the size of the operations concerned. Furthermore, A.M. Best notes SGH’s operations and assets remain exposed to the high levels of political, economic and financial system risks associated with Jordan and Bahrain.