A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of bbb- of Middle East Insurance Company Plc (MEICO) (Jordan). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect MEICOs balance sheet strength, which A.M. Best categorises as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
MEICOs balance sheet strength is underpinned by risk-adjusted capitalisation at the very strong level, as measured by Bests Capital Adequacy Ratio (BCAR). Despite significant exposure to investment risk stemming from the companys equity and real estate holdings, A.M. Best expects prospective capitalisation to remain at the very strong level, supported by steady internal capital generation. Offsetting factors include risk associated with the companys dependence on reinsurance, which is mitigated partially by a reinsurance panel of good credit quality, and concentration of investments in Jordans equity and real estate markets, which exposes its capital base to potential volatility.
MEICO has a track record of strong operating results, with a five-year (2013-2017) average return on equity of 6.7%, supported by robust underwriting performance and modest investment returns. Over the last two years, fierce competition in Jordans insurance market has increased the pressures on technical margins, and MEICOs combined ratio deteriorated to 95.8% in 2017 (88.8% in 2015). Despite the prevailing soft market conditions, A.M. Best expects the company to continue to maintain good technical profitability over the medium term, with a loss ratio of approximately 70.0%, benefitting from a disciplined underwriting approach. However, significant exposure to Jordans equity market could introduce volatility in prospective operating performance.
Although MEICO has a good competitive position within Jordan, with gross written premium of JOD 42.2 million in 2017, this is a relatively small market on a global scale. The company has a well-diversified business portfolio on a gross basis but is concentrated in the motor line of business on a net basis. A.M. 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 evidenced strong control over its underwriting operations, the companys ERM framework lacks sophistication. However, A.M. Best expects the company to develop the framework over the short to medium term whilst continuing to enhance its governance structure.
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Aneela Mather-Khan, CA
20 7397 0319
Ghislain Le Cam, CFA, FRM
20 7397 0268
Manager, Public Relations
908 439 2200, ext. 5159
Director, Public Relations
439 2200, ext. 5644