|07 July, 2018

A.M. Best affirms credit ratings of Arab Orient Insurance Company

The outlook of these Credit Ratings (ratings) remains negative.

LONDON — A.M. Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Arab Orient Insurance Company (gig-Jordan) (Jordan). The outlook of these Credit Ratings (ratings) remains negative.

The ratings reflect gig-Jordan’s balance sheet strength, which A.M. Best categorises as strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management (ERM). The ratings also factor in the financial strength of gig-Jordan’s parent company, Gulf Insurance Group K.S.C.P. (GIG), due to its strategic importance to the group. The negative outlooks reflect the execution risk associated with the company’s profitability targets.

gig-Jordan’s balance sheet strength is underpinned by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which remained at the strongest level as at year-end 2017. In November 2017, gig-Jordan received a loan from GIG that boosted its local solvency position.

A.M. Best expects consolidated risk-adjusted capitalisation to remain at the strongest level in the short-to-medium term. Offsetting factors to the balance sheet strength assessment include gig-Jordan’s high dependence on reinsurance and weak capital management capability. The assessment also considers gig-Jordan’s exposure to high levels of economic, political and financial system risk through operating exclusively in Jordan, although A.M. Best notes that this is driven partly by regulatory constraints.

Prior to 2016, gig-Jordan had historically returned underwriting profits, generating combined ratios below 90%, with operating earnings supplemented by stable investment returns. The company’s five-year (2013-2017) average combined ratio of 98.1% includes elevated combined ratios for 2016 and 2017, following a correction to the financial statements at each respective year end. Additionally, the company suffered technical losses on its underlying portfolio in 2017, stemming from poor risk selection and underpricing on its medical business line. The accounting correction was a one-off adjustment and will not impact financial results going forward, and management is taking strong actions to improve underwriting performance through focusing on tightening underwriting discipline, and exiting unprofitable segments. A.M. Best anticipates that it will take a period of time for the full extent of management actions to translate into long-term improvement in operating performance.

The business profile assessment reflects gig-Jordan’s leading position in its domestic insurance market, with a consolidated market share of 16% as at year-end 2017. However, gig-Jordan operates exclusively in Jordan, and its portfolio continues to be heavily concentrated toward medical and motor risks, which is a common characteristic in the region. gig-Jordan appointed a new chief executive officer during the first quarter of 2018, and A.M. Best will continue to monitor any strategic developments under the new leadership team.

Whilst gig-Jordan has developed an ERM framework, given the material financial and underwriting control failures the company experienced during the past 18 months, A.M. Best has concerns regarding risk management practices and the risk culture within the company. The company has made a number of enhancements to its processes and framework in 2017 and 2018; however, further time is required for these improvements to be embedded throughout the company.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

© Press Release 2018

Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.

The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.

To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.

More From Press Releases