AM Best affirmed on Thursday gig Insurance – Egypt‘s (gig-Egypt) financial strength rating of B++ (Good) and the long-term issuer credit rating of “bbb+” (Good).
The rating agency set the outlook of these credit ratings is stable.
“The ratings reflect gig-Egypt’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.” AM Best’s statement read.
“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.”
AM Best further said gig-Egypt’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).
“The company’s capital requirements are driven by investment risk, with the majority of its assets held in Egyptian government bonds and local 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.”
The company benefits from low underwriting leverage and has a history of internal capital generation.
AM Best said it 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, the statement read.
gig-Egypt enjoys an excellent record of underwriting and overall profitability, reporting a five-year (2016-2020) average combined ratio of 81.9 percent. The company’s five-year average return-on-equity ratio is healthy at 26.6 percent, although should be considered in light of Egypt’s historically high-inflation environment, AM Best stated.
Overall earnings are driven by robust investment income, with the company making a five-year average investment return of 10.6 percent (10.9 percent including capital gains).
