MEICO’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). Offsetting factors include the company’s significant dependence on reinsurance, mitigated partially by a reinsurance panel of good credit quality, and concentration of investments in Jordan’s equity and real estate markets, which exposes its capital base to potential volatility.
MEICO has a long-standing track record of strong operating performance, supported by robust underwriting profitability, as evidenced by a five-year (2014-2018) weighted average combined ratio of 93%, and
modest investment returns. However, over the last two years, fierce competition has increased pressure on MEICO’s technical margins, which has translated into a deterioration in the company’s combined ratios to 96% in 2017 and 97% in 2018. AM Best expects the remediation actions implemented by management to improve technical profitability. However, further negative pressure could be placed on the ratings should underwriting metrics not improve in the short to medium term.
MEICO has a good competitive position within Jordan, with gross written premium of JOD 42 million (USD 59 million) in 2018. However, the company’s business profile is concentrated in Jordan, which is small on a global basis. AM Best expects prospective growth to remain measured, with MEICO focusing on bottom line profitability, supported by an extensive direct sales network across Jordan.
Whilst MEICO has demonstrated strong control over its underwriting operations, its ERM framework remains relatively undeveloped. The ERM assessment of appropriate takes into account improvements expected in the company’s ERM function over the next years.
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