A.M. Best Rating Services has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of ARABIA Insurance Company–Jordan (AIC-J) (Jordan); the outlook for both ratings remains stable, CPI Financial reported.

The ratings reflect AIC-J’s good level of risk-adjusted capitalisation, said A.M. Best in a statement. Offsetting factors include the company's marginal historical operating performance and modest business profile in the Jordanian market. AIC-J receives rating enhancement from its parent company, ARABIA Insurance Company s.a.l. (AIC).

AIC-J benefits from being a part of the much larger ARABIA group, with support from AIC provided in the form of shared corporate governance and risk management guidelines, group reinsurance purchasing and a broad base of technical expertise.

AIC-J’s level of risk-adjusted capitalisation is expected to be maintained at a good level over the medium term and is supported by a moderate level of business leverage, with capital covering net written premiums at a ratio of around 1-to-1 in 2012. Risk-adjusted capitalisation is expected to be supported by an improving level of underwriting profitability. In 2012, the company generated an underwriting profit and a combined ratio below 100 per cent (including unallocated administrative expenses).

Both motor and medical business, which together account for nearly three quarters of gross written premiums, were loss making in 2012 and profits were driven by the company’s life insurance line and reserve releases from property business. AIC-J remains a fairly small player in a fragmented and competitive Jordanian market. Although the company is expected to grow over the medium term, its market position is not expected to change dramatically.

If AIC-J is able to improve its level of underwriting profitability over the medium term in core business lines while maintaining stable overall profitability and a good level of risk-adjusted capitalisation, there will be positive pressure on the ratings. A material deterioration in risk-adjusted capitalisation or removal of group support could result in a negative rating action.