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FOR IMMEDIATE RELEASE
LONDON - AUGUST 08, 2014 10:41 AM (EDT)
A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of "bbb" of Middle East Insurance Company Plc (MEICO) (Jordan). The outlook for both ratings remains negative.
The ratings of MEICO reflect its sound domestic franchise and strong track record of profitability. An offsetting rating factor is the economic and financial risks associated with operating in Jordan. The negative outlook continues to reflect MEICO's highly concentrated investment profile resulting in a marginal and potentially volatile level of risk-adjusted capitalisation.
MEICO remains a leading insurer in Jordan, with gross written premiums rising 9% in 2013 to JOD 31 million (USD 44 million). MEICO's business profile is well diversified with strong market positions in property and life business lines, and a leading position in marine. MEICO's earnings have generated a profit in every year of its operation. In 2013, the company continued to produce sound profitability across all business segments with the combined ratio improving to 88% (2012: 93%), mainly as a result of strong performance in motor and marine. Furthermore, A.M. Best notes the company has recorded sound underwriting returns, supplemented by good investment returns, in the first half of 2014.
MEICO's risk-adjusted capitalisation remained stable during 2013. Despite benefiting from a strong reinsurance panel and low underwriting leverage, MEICO's capital requirements are largely driven by a concentrated investment profile. MEICO's investments are heavily weighted toward equity and real estate, which account for approximately 90% of total invested assets. Strategic initiatives are in-place to reduce its real estate exposure during 2014 and further de-risk its investment portfolio in subsequent years. Prospective risk-adjusted capitalisation is dependent on MEICO's future level of earnings retention to support growth and the ability to de-risk its investment portfolio.
Negative rating pressures would arise from a deterioration in capitalisation, which could stem from fluctuations within the investment portfolio or insufficient internal capital generation to support growth. Upward rating pressure is unlikely in the near term; however, a revision in the outlook to stable may arise from a strengthening of risk-adjusted capitalisation.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure .
This rating announcement has been issued by A.M. Best Europe - Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.