[Egypt] A.M. Best affirms credit ratings of Arab Misr Insurance
A.M. Best has affirmed the Financial Strength Rating of B++, Good and the Long-Term Issuer Credit Rating of “bbb” of Arab Misr Insurance Group S.A.E., gig-Egypt. The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect gig-Egypt’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. The ratings also factor in the financial strength of gig-Egypt’s parent company, Gulf Insurance Group K.S.C.P. (GIG), due to its strategic importance to the group.
gig-Egypt’s balance sheet strength is underpinned by risk-adjusted capitalisation, which remained at the strongest level as at year-end 2017, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital requirements are driven by investment risks with approximately one-third of the company’s investments held in government treasury bills, with the bulk maturing between three to 12 months.
Despite the concentration risk associated with these investments, the liquidity of these assets allows the company to react to changes in market conditions. 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 within Egypt.
Furthermore, the company benefits from low underwriting leverage and has a history of internal capital generation. A.M. Best expects consolidated risk-adjusted capitalisation to remain at the strongest level over the medium term.
The operating performance assessment of strong considers gig-Egypt’s excellent track record of generating technical and operating profits, reporting a five-year (2013-2017) average combined ratio of 78% despite the challenging economic pressures and intense competition in the company’s domestic market.
gig-Egypt’s five-year (2013-2017) return on equity also is strong at 24.5%, notwithstanding Egypt’s high inflation environment, and is supported by robust investment returns.
The business profile assessment reflects gig-Egypt’s position as the fourth-largest insurer in the Egyptian insurance market, with a consolidated market share of 6% as at year-end 2017. However, the company’s profile is limited to operating within Egypt and, on a net premium basis, its portfolio is heavily concentrated toward the motor business line.