LONDON: AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Jordan based Arab Orient Insurance Company (gig-jordan) with a stable outlook.
The ratings reflect gig-Jordan’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings also factor in enhancement from gig-Jordan’s parent company, Gulf Insurance Group K.S.C.P. (GIG), reflecting the strategic importance of gig-Jordan to the group.
gig-Jordan’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), at the strongest level. The company acquired Arab Life & Accident Insurance Co. (P.S.C.) during 2021, which negatively impacted risk-adjusted capitalisation; however, AM Best expects gig-Jordan’s BCAR scores to remain comfortably at the strongest level. gig-Jordan benefits from a liquid investment portfolio, good financial flexibility and a comprehensive group-wide reinsurance programme of sound credit quality. The assessment also considers gig-Jordan’s exposure to high levels of economic, political and financial system risk from operating exclusively in Jordan.
The company’s ERM framework has evolved under its new management team and robust controls appear to be in place. Significant steps have been taken to integrate the company with GIG’s ERM practices and improve the risk culture in the company. GIG continues to integrate operationally with its subsidiaries, providing support in areas such as reinsurance purchasing, risk management, pricing and reserving, and investment management. In addition, GIG has demonstrated its commitment to gig-Jordan through a subordinated loan granted in 2017, which remains in force.
The company’s technical performance has improved since 2017, following a change in its management team that led to improved risk selection and a more balanced medical insurance portfolio, and it achieved a combined ratio of 86.1% in 2020. The company’s five-year (2016-2020) average combined ratio of 102.2% is skewed negatively by poor performance in 2016 and 2017. AM Best expects gig-Jordan’s underwriting profitability to be maintained at levels similar to that achieved in 2019 and 2020. Overall operating performance is supported by relatively modest but stable investment income, with the company returning an investment yield (including capital gains) of 4.6% in 2020, which was above its five-year average (2016-2020) of 4.2%.
gig-Jordan has a leading position in its domestic insurance market, with a market share of approximately 14%. However, the company’s underwriting portfolio is concentrated heavily toward medical and motor risks on a net premium basis, which is a common characteristic of insurers in the region. AM Best expects the acquisition of Arab Life & Accident Insurance Co. (P.S.C.) to contribute positively to the gig-Jordan’s earnings over the long term and provide diversification benefits, subject to successful integration and growth.