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FOR IMMEDIATE RELEASE
LONDON - DECEMBER 20, 2019 11:52 AM (EST)
AM Best has revised the outlooks to negative from stable and 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).
These Credit Ratings (ratings) reflect MEICO’s balance sheet strength, which AM Best categorises as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The negative outlooks reflect ongoing downward pressure on the company’s risk-adjusted capitalisation, driven by the investment risk stemming from its significant exposure to equity and real estate holdings, combined with its limited organic capital generation.
MEICO’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). Offsetting factors include the company’s significant dependence on reinsurance, mitigated partially by a reinsurance panel of good credit quality, and concentration of investments in Jordan’s equity and real estate markets, which exposes its capital base to potential volatility.
MEICO has a long-standing track record of strong operating performance, supported by robust underwriting profitability, as evidenced by a five-year (2014-2018) weighted average combined ratio of 93%, and modest investment returns. However, over the last two years, fierce competition has increased pressure on MEICO’s technical margins, which has translated into a deterioration in the company’s combined ratios to 96% in 2017 and 97% in 2018. AM Best expects the remediation actions implemented by management to improve technical profitability. However, further negative pressure could be placed on the ratings should underwriting metrics not improve in the short to medium term.
MEICO has a good competitive position within Jordan, with gross written premium of JOD 42 million (USD 59 million) in 2018. However, the company’s business profile is concentrated in Jordan, which is small on a global basis. AM 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 demonstrated strong control over its underwriting operations, its ERM framework remains relatively undeveloped. The ERM assessment of appropriate takes into account improvements expected in the company’s ERM function over the next years.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data provider specialising in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.