A.M. Best Europe Rating Services Limited has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of "bbb" of Middle East Insurance Company (MEICO) (Jordan). The outlook has been revised to negative from stable.
The affirmation of MEICO's ratings is a reflection of the company's sound domestic franchise and good track record of profitability.
MEICO ranks as the third-largest insurer in Jordan by gross written premium (GWP), which rose by 13.8% in 2012, accounting approximately 7% market share. MEICO's business profile is fairly well diversified by local standards. The company enjoys a leading market position in marine and ranks second in property and third in life, whilst holding lesser positions in the highly competitive motor and medical business lines. Management has taken a more selective approach to growth in these business lines, although given the high retention level on motor and medical, these remain the largest lines on a net basis.
MEICO's overall performance is fairly stable with a long track record of generating technical profits. Whilst the company's technical performance has shown some sign of deterioration in recent years, MEICO's five-year average combined ratio is very sound at 90%. Furthermore, A.M. Best notes the company has recorded sound underwriting returns in the first quarter of 2013. The company's life business continues to generate steady returns, with investment returns accounting for volatility within its profile.
The rating actions reflect MEICO's material exposure to real estate and equity investments, which has resulted in a decline in risk-adjusted capitalisation following a reassessment of country-specific investment charges in A.M. Best's capital model (Best's Capital Adequacy Ratio). Real estate and equities investments account for approximately 90% of MEICO's total invested assets and are the main drivers of capital consumption. However, MEICO is anticipated to take measures to de-risk its investment portfolio to alleviate capital pressures, and A.M. Best will monitor the effectiveness of MEICO's de-risking strategy to assess the impact on its risk-adjusted capitalisation.
Going forward, negative rating pressure could occur if MEICO fails to sufficiently improve its risk-adjusted capital position. Upward rating pressure is unlikely in the near 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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe Rating Services Limited Supplementary Disclosure
A.M. Best Europe Rating Services Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Contacts:
A.M. Best
Helio Correa, +(44) 20 7397 0311
Financial Analyst
helio.correa@ambest.com
Carlos Wong-Fupuy, +(44) 20 7626 0287
Senior Director
carlos.wong-fupuy@ambest.com
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
