"Good credit quality" reinsurance panel a key driver for SFIC's latest credit ratings

“Good credit quality” reinsurance panel a key driver for SFIC’s latest credit ratings | Insurance Business New Zealand

Reinsurance

“Good credit quality” reinsurance panel a key driver for SFIC’s latest credit ratings

Strong balance sheet and adequate operating performance also cited

Reinsurance

By
Kenneth Araullo

Driven by the “good credit quality” of its reinsurance panel, AM Best has confirmed the financial strength rating of B++ (Good) and the long-term issuer credit rating of “bbb+” (Good) for First Insurance Company (SFIC) based in Jordan, maintaining a stable outlook for these ratings.

The ratings reflect SFIC’s robust balance sheet strength, which is considered very strong by AM Best, along with its adequate operating performance, constrained business profile, and appropriate enterprise risk management. Additionally, the ratings factor in the strategic significance of SFIC to its parent company, Solidarity Group Holding BSC (c) (SGH), a key provider of Islamic insurance solutions in Bahrain and Jordan.

SFIC’s balance sheet strength is supported by its risk-adjusted capitalization, which is rated at the strongest level according to Best’s Capital Adequacy Ratio (BCAR). AM Best evaluates the company’s risk-adjusted capitalization by combining its policyholders’ and shareholders’ funds, considering the robust nature of domestic regulation. This regulation requires the shareholders’ fund to support the policyholders’ fund.

AM Best also anticipates that SFIC’s future combined risk-adjusted capitalization will comfortably exceed the minimum required for the strongest assessment level in the medium term. The company’s balance sheet benefits from an unleveraged structure and high liquidity, with liquid assets at year-end 2022 covering net insurance reserves 1.4 times. However, challenges include elevated asset risk due to investment concentration in Jordan and the Gulf Cooperation Council, and a high reliance on reinsurance.

SFIC has demonstrated a history of adequate operating performance, with a five-year (2018-2022) weighted average return-on-equity ratio of 6.4%, underpinned by stable underwriting and investment outcomes. Despite the technical unprofitability of tariffed mandatory motor third-party liability business across Jordan’s insurance market, SFIC has maintained a solid five-year (2018-2022) weighted average combined ratio of 95.7%, as per AM Best’s calculation.

The company enjoys a competitive position in its domestic insurance market, bolstered by a strong distribution network. Over the past five years (2018-2022), SFIC has experienced consistent organic and inorganic growth, with a compound average growth rate of 7.3%, leading to gross written contributions of JOD58.9 million (US$83.0 million) in 2022. Nevertheless, the company’s growth prospects are limited by its focus on Jordan’s relatively small and highly competitive insurance market.

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