AM Best has upgraded the Financial Strength Rating to B (Fair) from B- (Fair) and the Long-Term Issuer Credit Rating to “bb” from “bb-” of National Insurance Company (NIC) (Jordan). The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
The ratings reflect NIC’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile, and marginal enterprise risk management.
The rating upgrades reflect NIC’s improved balance sheet strength assessment, following the strengthening of its risk-adjusted capitalization to the strongest level at year-end 2019, as assessed by Best’s Capital Adequacy Ratio (BCAR), benefiting from good internal capital generation and reduced underwriting leverage.
The balance sheet strength assessment also factors in the company’s heavy exposure to the high financial system risk associated with Jordan, where all its investments are held. NIC’s investment portfolio offers nonetheless a good level of liquidity, with bank deposits and fixed-income securities covering net technical provisions by 100% at year-end 2019. Offsetting factors in AM Best’s balance sheet strength assessment include the company’s small capital base and moderate dependence on reinsurance for large risks.
NIC has a track record of adequate operating performance over recent years, with a five-year (2015-2019) weighted average return-on-equity ratio of 7.2%. Technical results improved in 2019, following the poor results of NIC’s motor and medical segments in 2018, albeit remained negative with a combined ratio of 106.3% (2018: 113.5%). Improvement was the result of actions implemented by management to turnaround technical profitability, including portfolio pruning and enhanced underwriting discipline. AM Best expects continued improvement in NIC’s technical profitability to support adequate operating results prospectively.
NIC’s limited business profile assessment reflects the company’s relatively small size and concentration to Jordan’s intensely competitive insurance market, where it maintains a 3.1% market share (based on total market premiums in 2019).
NIC’s risk management framework is developing, and AM Best views its risk management capability to be marginal relative to its risk profile.
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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City.