AM Best affirms credit ratings of gig Insurance Egypt
Global credit rating agency AM Best has affirmed the Financial Strength Rating of B++, Good, and the Long-Term Issuer Credit Rating of “bbb+” of gig Insurance - Egypt S.A.E. The outlook of these Credit Ratings is stable.
The ratings reflect gig-Egypt’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. The ratings also factor in rating enhancement from gig-Egypt’s parent company, Gulf Insurance Group K.S.C.P. (GIG), reflecting the strategic importance of gig-Egypt to the group.
gig-Egypt’s balance sheet strength is underpinned by risk-adjusted capitalization at the strongest level at year-end 2019, as measured by Best’s Capital Adequacy Ratio (BCAR).
The company’s capital requirements are driven by investment risk, with the majority of the company’s investments held in government bonds and real estate. Regulatory restrictions in Egypt limit the investment opportunities available to gig-Egypt; however, the company’s capital position is sufficiently robust to absorb the higher risk charges associated with assets held locally.
Furthermore, the company benefits from low underwriting leverage and has a history of internal capital generation. AM Best expects consolidated risk-adjusted capitalisation to remain at the strongest level over the medium term. The assessment also considers gig-Egypt’s exposure to high levels of economic, political and financial system risk from operating exclusively in Egypt.
gig-Egypt has an excellent track record of generating underwriting and overall profits, reporting a five-year average combined ratio of 80.7 per cent despite its competitive domestic market.
gig-Egypt’s five-year, 2015-2019, average return on equity is healthy at 25.1 per cent, although this should be considered in light of Egypt’s high-inflation environment. Overall earnings are driven by robust investment returns, with the company reporting a five-year average investment return of 9.2 per cent (10.2 per cent including capital gains).
gig-Egypt is a top-five insurer in its domestic Egyptian market, measured by gross written premium, and the second-largest non-life insurance writer, with a non-life market share of approximately 7 per cent at year-end 2019.
However, the company’s profile is limited to its domestic market and, on a net premium basis, its portfolio is concentrated heavily toward the motor business line.
GIG continues to integrate operational aspects with its subsidiaries, providing support in areas such as reinsurance purchasing, risk management, pricing and reserving, and investment management services.
In addition, GIG has demonstrated its commitment to gig-Egypt through the periodic capitalisation of retained earnings, providing funding for capital expenditures and by increasing its ownership stake in gig-Egypt.