News, ratings

Jordan Insurer Given Ratings Downgrade

SHORT-TERM TROUBLES EXPECTED FOR JORDAN'S ECONOMY

Kingdom’s tough short-term market conditions reflected in company’s latest classification.

A Jordanian insurance company has suffered a ratings blow after being downgraded by credit agency Standard & Poor’s (S&P).

Middle East Insurance Company’s (MEICO) ‘BBB’ classification has been lowered to ‘BBB-’, amid concerns that Jordan’s economy is set for troubled times.

On March 12, S&P downgraded the Kingdom’s long-term local currency sovereign credit rating, basing its reassessment on an uncertain trading environment.

“In our opinion, a microeconomic analysis of MEICO still reveals good and potentially improving business and financial profiles,” said S&P’s credit analyst David Anthony. “However, the current increase in economic and industry risks at the wider, macroeconomic level imply a likely short-to-medium-term deterioration in the overall operating and investment environment for all insurers and banks active in Jordan, including MEICO.”

But S&P added Jordan’s macroeconomic standing would stabilise following a period of uncertainty, while MEICO was expected to maintain its 6.5% insurance industry market share for Jordan this year.

‘In addition to a more stable macroeconomic outlook, we also expect to see reasonable stability and possibly some improvement in MEICO’s already good commercial and financial profiles,” Anthony said.

The insurance company would also reduce its exposure to equities, which may result in some residual investment gains being realised, according to the ratings agency.

However, S&P said it was unlikely MEICO’s rating would rise in the short-term due to the Kingdom’s challenging trading environment.