A.M. Best affirms ratings of First Insurance Company
- Jordan: Saturday, January 26 - 2013 at 14:06
- PRESS RELEASE
A.M. Best Europe - Rating Services Limited has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of (bbb) of First Insurance Company (FIC) (Jordan). The outlook for both ratings is stable. The ratings reflect FIC's strong level of risk-adjusted capitalisation, good overall financial performance and improving business profile.
FIC's risk-adjusted capitalisation of combined policyholders' and shareholders' funds is supported by the company's low level of business leverage, a reinsurance programme of good credit quality and a conservative investment profile.
In the first nine months of 2012, FIC wrote gross written premiums of JD18m ($25m) against a capital base of JD25m ($35m). Although risk-adjusted capitalisation is likely to decrease over the medium term as the company grows its profile, it is likely to remain at a strong level.
FIC's financial performance is good on both the policyholders' fund and shareholders' fund. In 2011, the policyholders' fund turned into a surplus after the fund repaid the totality of its Qard Hassan. The policyholders' fund benefits from a good and improving level of technical performance and a stable investment income.
The combined ratio decreased from 129% in the company's first year of operation (2008) to 92% in 2011, and invested assets backing the policyholders' fund returned JOD 40,431 (after discounting for the shareholders' share of investment income).
Furthermore, return over adjusted capital and surplus totaled approximately 2% in 2011 and 2010. FIC has successfully established itself within the Jordanian market since inception in 2007, growing to become a medium-sized company in only five years of operation. At half-year 2012, FIC was the fourth-largest insurance company by premium volume in Jordan with a market share of approximately 5%. Additionally, during 2012, FIC became the largest takaful company in the Jordanian insurance market, one of its targets at inception.
SGH is an international Islamic-orientated financial service group based in Bahrain that invests in Islamic-orientated companies operating in the financial market, exclusively in insurance and asset management. SGH is one of FIC's founding shareholders. In 2012, SGH acquired an additional 25.9% stake in FIC, making it FIC's major shareholder with 50.9% ownership.
Going forward, downward pressures could occur if FIC fails to execute its business plan or suffers a material deterioration of its risk-adjusted capitalisation. Upward movement is unlikely over the medium term.
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. Key criteria utilised include: 'Risk Management and the Rating Process for Insurance Companies', 'Takaful (Shari'a Compliant) Insurance Companies', 'Rating Members of Insurance Groups', 'Evaluating Country Risk', and 'Understanding Universal BCAR'.
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