AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” of Jordan French Insurance Company Limited (JOFICO) (Jordan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect JOFICO’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
JOFICO’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Offsetting factors in the assessment include JOFICO’s high levels of receivables, marginal liquidity position, and small capital base, which heightens the sensitivity of its solvency position to potential shocks. Additionally, the assessment factors in the company’s moderately high dependence on reinsurance, although the associated risk is mitigated partially by a reinsurance panel of good credit quality.
JOFICO has a track record of adequate operating performance, demonstrated by a five-year (2016-2020) weighted average return-on-equity ratio of 13.5%. The company’s operating performance is supported by its good underwriting profitability, with a five-year (2016-2020) weighted average combined ratio of 96.0%. In 2020, technical results improved to JOD 2.0 million (2019: JOD 1.8 million), primarily driven by lower claims frequency in the motor line of business following government restrictions imposed in response to the COVID-19 pandemic; this was partially offset by weakened results in the medical segment. AM Best expects the company to maintain a double-digit return-on-equity ratio over the medium term, supported by solid technical profitability.
JOFICO has a limited business profile as a mid-tier insurer in Jordan, ranking seventh in the local insurance market based on 2019 gross written premiums. Although the company’s competitive position benefits from a number of long-term client relationships, the insurance market in Jordan is relatively small by international standards with limited growth opportunities.
JOFICO’s ERM framework is developing, with control and oversight of key risks conducted on a silo basis, and typically reactive in nature. Despite this, JOFICO’s risk management capabilities typically are aligned with the profile of its key risks.
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