AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb” (Fair) of National Insurance Company (NIC) (Jordan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect NIC’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.

NIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by moderate internal capital generation and underwriting leverage. The balance sheet strength assessment reflects the company’s solid liquidity position, with cash and fixed-income securities covering net insurance liabilities by 163%, as of year-end 2023. However, partially offsetting factors include NIC’s exposure to the elevated financial system risk in Jordan, where its investments are primarily located, as well its relatively small capital base, which increases the potential for volatility in its risk-adjusted capitalisation. Additionally, the company has a moderate dependence on reinsurance for underwriting large-limit risks. Nevertheless, the credit risk associated with this dependence is partially mitigated through the use of a reinsurance panel of strong credit quality.

NIC has demonstrated a history of adequate operating performance, with a five-year (2019-2023) weighted average return-on-equity ratio of 9%. Since 2020, stringent underwriting practices have ensured technical performance has improved with NIC reporting a combined ratio (net/net), as calculated by AM Best, of 98.4% in 2023 (2022: 97.0%). The company’s operating earnings have historically been bolstered by modest investment income, consistent with its conservative investment strategy. AM Best expects that NIC’s profitability will continue to support adequate operating results prospectively.

NIC’s limited business profile assessment reflects its relatively small scale and concentration in Jordan. The company has a diversified profile on a gross basis; however, this is concentrated on medical and motor business lines on a net basis.

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