A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of "bbb-" of ARABIA Insurance Company – Jordan (AIC-J) (Jordan).
The Credit Ratings (ratings) reflect AIC-J's balance sheet strength, which A.M. Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also factor in rating enhancement from AIC-J's parent, ARABIA Insurance Company s.a.l. The negative outlooks reflect pressures on the company's balance sheet strength assessment that stem from its deteriorating risk-adjusted capitalisation, in addition to its declining regulatory solvency position.
Whilst the company's risk-adjusted capitalisation is at the strong level, as measured by Best's Capital Adequacy Ratio (BCAR), it has been trending downward over the past few years, primarily as a result of an onerous dividend policy, with the company distributing on average 79% of its modest profits to shareholders between 2013 and 2017. Moreover, capital adequacy has been impacted by the company's growing underwriting operations, with net written premium (NWP) increasing at an annual compound rate of 8.5% over the past five years. A.M. Best expects prospective capital adequacy to be driven by the company's ability to generate and retain sufficient earnings to support its strategic initiatives.
