AM Best Removes From Under Review With Developing Implications and Affirms Credit Ratings of First Insurance Company

AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of ‘bbb+’ (Good) of First Insurance Company (SFIC) (Jordan).

The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect SFIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider, in the form of lift, SFIC’s strategic importance to its parent company, Solidarity Group Holding BSC (SGH), a leading provider of Islamic insurance solutions in Bahrain and Jordan.

The rating actions follow the completion of the acquisition by Al Salam Bank B.S.C. of Ithmaar Holding B.S.C.’s majority share (55.9%) in SFIC’s intermediate parent, SGH. In AM Best’s view, the change in SFIC’s ultimate parent does not materially impact the credit fundamentals of either the company or SGH, as their financial structures, strategic targets and management teams remain unchanged following the transaction.

SFIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best assesses the company’s risk-adjusted capitalisation on a combined basis, including its policyholders’ and shareholders’ funds, due to the strength of local regulation and the resulting expectation that the shareholders’ fund would have to support the policyholders’ fund if required. AM Best expects SFIC’s prospective combined risk-adjusted capitalisation to remain comfortably above the minimum required to support the strongest assessment over the medium term. The company’s balance sheet strength benefits from an unleveraged balance sheet and good liquidity, with liquid assets covering net insurance reserves 1.4 times at year-end 2021. Offsetting factors include the elevated asset risk due to the concentration of the company’s investments in Jordan and the Gulf Cooperation Council, as well as a high dependence on reinsurance, although the associated risks are mitigated partially by a reinsurance panel of good credit quality.

The company has a track record of adequate operating performance, demonstrated by a five-year (2017-2021) weighted average return on equity of 6.8%, supported by stable underwriting and investment performance. Despite tariffed mandatory motor third-party liability business being technically unprofitable across Jordan’s insurance market, the company has achieved a solid five-year (2017-2021) weighted average combined ratio of 95.6%, as calculated by AM Best.

SFIC benefits from a good competitive position in its domestic insurance market, supported by a strong distribution network. Over recent years, the company has consistently grown organically and inorganically, with a five-year (2017-2021) compound average growth rate of 4.4%, leading to gross written contributions of JOD 49.1 million (USD 69.2 million) in 2021. Growth potential remains, however, constrained by SFIC’s concentration to Jordan’s relatively small and highly competitive insurance 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 Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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