LONDON–(COMMERCIAL THREAD) –AM Best confirmed the financial strength rating of B ++ (good) and the long-term issuer credit rating of “bbb +” (good) of Arab Orient Insurance Company (gig-Jordan) (Jordan). The outlook for these credit ratings (ratings) is stable.
The ratings reflect the strength of gig-Jordan’s balance sheet, which AM Best believes to be strong, as well as its adequate operational performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also take into account the improvement of gig-Jordan’s parent company, Gulf Insurance Group KSCP (GIG), reflecting the strategic importance of gig-Jordan to the group.
The strength of gig-Jordan’s balance sheet is underpinned by its risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR), at the highest level. The company acquired Arab Life & Accident Insurance Co. (PSC) in 2021, which had a negative impact on the risk-adjusted capitalization; however, AM Best expects gig-Jordan’s BCAR scores to remain comfortably at the highest level. gig-Jordan benefits from a liquid investment portfolio, good financial flexibility and a comprehensive group-wide reinsurance program with good credit quality. The assessment also takes into account gig-Jordan’s exposure to high levels of economic, political and financial risk related to the operating system exclusively in Jordan.
The company’s ERM framework has evolved under its new leadership team and robust controls appear to be in place. Significant steps have been taken to integrate the business into GIG’s ERM practices and improve the risk culture within the business. GIG continues to integrate operationally with its subsidiaries, providing support in areas such as purchasing reinsurance, risk management, pricing and reserves, and investment management. Additionally, GIG has demonstrated its commitment to gig-Jordan through a subordinated loan granted in 2017, which remains in effect.
The technical performance of the company has improved since 2017, following a change in its management team which led to better risk selection and a more balanced medical insurance portfolio, and it reached a combined ratio of 86 , 1% in 2020. 2020) the average combined ratio of 102.2% is negatively biased by the poor performance in 2016 and 2017. AM Best expects the technical profitability of gig-Jordan to remain at similar levels to those achieved in 2019 and 2020. Overall operating performance is supported by stable investment income, with the company delivering an investment return (including capital gains) of 4.6% in 2020, above its five-year average (2016-2020) by 4.2%.
gig-Jordan occupies a leading position in its national insurance market, with a market share of around 14%. However, the company’s underwriting portfolio is heavily focused on medical and automotive risks on a net premium basis, which is a common feature of insurers in the region. AM Best expects the acquisition of Arab Life & Accident Insurance Co. (PSC) to contribute positively to the long-term profits of the Jordanian company and provide diversification benefits, subject to integration and consolidation. successful growth.
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