LONDON, 31 March 2016
A.M. Best has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of "bbb-" of ARABIA Insurance Company - Jordan (AIC-J) (Jordan). The outlook for both ratings remains stable.
The ratings of AIC-J reflect the company's supportive risk-adjusted capitalisation and good performance over recent years. Offsetting factors include the company's modest business profile, low retention of profits and high levels of economic and financial system risk associated with operating in Jordan. AIC-J's ratings receive enhancement from its parent company, ARABIA Insurance Company s.a.l. (AIC).
AIC has a 51% shareholding in AIC-J and provides support to the company in areas such as governance, risk management, reinsurance purchasing and technical expertise.
AIC-J's risk-adjusted capitalisation has deteriorated in recent years but remains appropriate for the ratings, partly supported by unrealised gains in the company's real estate portfolio. The deterioration has chiefly been driven by AIC-J's onerous dividend policy, and prospective capital adequacy will largely be driven by the company's ability to generate and retain sufficient capital to support its strategic initiatives.
Whilst AIC-J has a track record of generating good results, the company is expected to report a modest profit for 2015, driven by reduced investment income and an underwriting loss, with an expected non-life combined ratio of approximately 105%. Motor and medical lines, which account for about three quarters of AIC-J's gross written premium, tend to have higher loss ratios than other lines of business in Jordan due to stiff levels of competition, which directly impact the company as a result of its modest business profile.
Although AIC-J plans to diversify its portfolio and grow in the medium term, neither its business mix nor its competitive position is likely to change substantially in Jordan's fragmented and competitive market.
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