AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of "bb+" of Jordan International Insurance Company (newton insurance) (Jordan). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn the ratings as the company has requested to no longer participate in AM Best’s interactive rating process.
The ratings reflect newton insurance’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
The balance sheet strength assessment is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), for financial year-end 31 December 2019. The company’s balance sheet benefits from its good liquidity profile, with cash and equivalents comfortably covering net claims reserves. Offsetting factors include a high investment concentration in a single illiquid equity investment and real estate holdings in Jordan, as well as its dependence on reinsurance (although the associated credit risk is mitigated partly by the good credit quality of its reinsurance panel).
The company’s technical operations have underperformed relative to its peers and compared with AM Best’s expectations in recent years, mainly due to a number of poorly performing accounts. As part of a broader initiative to improve its risk framework and underwriting controls, the company’s management has taken corrective actions on its portfolio, including the cancellation of loss-making contracts. As a result, newton insurance delivered a lower combined ratio of 114% in 2019, down from 122% in 2018 (as calculated by AM Best). AM Best’s assessment of the company’s operating performance reflects an expectation of further recovery in the short term.
newton insurance maintains a mid-tier position in Jordan’s relatively small insurance market. The company’s insurance operations are concentrated in the medical business, which in 2019 accounted for 63% and 83% of its gross and net written premiums, respectively. To improve its geographic diversification, newton insurance established a new platform in Dubai in 2018 to underwrite facultative reinsurance business from the wider Middle East region. However, premium income was not sufficient to offset required costs and these operations shut down in 2020. In an effort to grow its premium base and reduce business line concentration, the company reconsidered its position in the motor insurance market (which it exited in 2011) and started writing this business again in 2020, in response to improved market conditions.
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