AM Best Affirms Credit Ratings of Middle East Insurance Company Plc
AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of "bbb-" (Good) of Middle East Insurance Company Plc (MEICO) (Jordan). The outlook of these Credit Ratings (ratings) is negative.
The ratings reflect MEICO's balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The negative outlooks reflect ongoing pressure on the company's risk-adjusted capitalisation and operating performance, as capital generation has been constrained in recent years by a reduction in technical profitability.
MEICO's balance sheet strength is underpinned by risk-adjusted capitalisation, which improved to the strongest level in 2020, as measured by Best's Capital Adequacy Ratio (BCAR), benefiting from the disposal of a large single equity holding and the suspension of dividends. AM Best expects MEICO's risk-adjusted capitalisation to remain at least at the very strong level over the medium term, with capital generation constrained by dividend distributions, which were resumed in 2021. Offsetting factors in the balance sheet strength assessment include the company's significant exposure to real estate and equity investments in Jordan, and its moderately high dependence on reinsurance, albeit partially mitigated by a reinsurance panel of good credit quality.
MEICO has a track record of operating profitability, supported by conservative underwriting and reserving practices. However, fierce competition in Jordan has increased pressure on MEICO's technical margins in recent years, and has led to a progressive deterioration in the company's combined ratio, which averaged 97.9% over the past five years (2016-2020), up from the 10-year (2011-2020) weighted average of 95.0% (as calculated by AM Best).
MEICO is a midtier player in Jordan, with gross written premium of JOD 40.3 million (USD 56.9 million) in 2020. Growth has been moderate over the 2016-2020 period, as evidenced by a compounded annual growth rate of 1.0%, indicating the challenges the company faces to grow whilst retaining profitability in a very competitive market.
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 use of Best's Credit Ratings, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.
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