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FOR IMMEDIATE RELEASE
LONDON - NOVEMBER 01, 2018 10:08 AM (EDT)
A.M. Best has revised the outlooks to negative from stable and 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 ratings reflect JIIC’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 (ERM).
The negative outlooks reflect the company’s weak technical performance in 2017 and 2018 year-to-date, arising from a single underperforming contract, which has raised concerns regarding JIIC’s risk management practices, particularly the management of concentration risk within the portfolio.
JIIC’s balance sheet strength assessment is underpinned by the company’s strongest risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), and robust liquidity, with cash and equivalents comfortably covering net claims reserves. Offsetting factors include the company’s dependence on reinsurance, which is mitigated partly by the good credit quality of its reinsurance panel, and weak asset quality arising from a concentration of investment holdings in equities and real estate.
Following the company’s exit from Jordan’s motor market in 2012, technical performance improved; however, in 2017 JIIC’s earnings deteriorated due to poor performance on a large group medical contract, which resulted in a technical and operating loss for the year. A.M. Best expects performance to improve following corrective management actions; however, technical operations are expected to generate a loss in 2018. JIIC’s ERM framework and capabilities are considered appropriate given the size and complexity of operations. However, recent losses and earnings volatility have raised concerns over JIIC’s ERM, notably with regard to the management of concentration risk.
JIIC’s business profile is limited, as a mid-tier player in Jordan’s relatively small insurance market. The company’s operations are concentrated in medical business, which accounted for 65% and 90% of its gross and net written premiums, respectively, in 2017. JIIC has launched a project to write international facultative reinsurance business in the Middle East and outside Jordan, although this is expected to remain a small contributor to premium volume over the medium term.
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