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Investing.com -- S&P Global Ratings has revised its outlook on Euro Arab Insurance Group to stable from positive while affirming its ’BB-’ insurer financial strength rating.
The Jordan-based insurer reported robust growth in 2024, with insurance revenue increasing 6.4% to JOD48.6 million ($67.7 million) from JOD45.7 million in 2023. This growth was primarily driven by expansion in the company’s key business lines, including motor and medical insurance.
Euro Arab maintained strong underwriting performance with a net combined ratio of 96.6% in 2024, slightly improved from 96.7% in 2023. S&P expects this performance level to continue over the next two years, with projected combined ratios of 97%-99% annually.
The company’s shareholders’ equity rose to JOD17.1 million in 2024 from JOD13.6 million at the end of 2023, as the firm fully retained its earnings. Capital adequacy based on S&P’s model reached the 99.95% benchmark in 2024, with total adjusted capital standing at approximately $28 million.
S&P now views Euro Arab’s capital and earnings as strong, and notes that shareholders plan to inject additional capital in 2025, which could further improve capital adequacy to the 99.99% level.
Despite these positive developments, S&P caps its ratings on Euro Arab at the level of Jordan’s sovereign rating (BB-/Stable/B) because the company does not pass the hypothetical sovereign stress test. The rating agency cited the concentration of investments in cash and bank deposits with local financial institutions as exposing the company to economic and banking sector risks in Jordan.
S&P indicated it could lower the rating if Euro Arab’s performance weakens significantly, if capital adequacy falls below the 99.95% benchmark, or if liquidity declines to what S&P would consider a weak level. A downgrade of Jordan’s sovereign rating could also trigger a negative rating action.
A rating upgrade could be possible if Euro Arab continues to increase its capital and liquidity buffers enough to pass S&P’s hypothetical sovereign stress test while maintaining business performance in line with expectations.
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