A.M. Best has affirmed the financial strength rating of B++ (Good) and the long-term issuer credit rating of “bbb” of Egypt’s Arab Misr Insurance Group – GIG. The outlook of these ratings is stable.
“The ratings of GIG-Egypt reflect the company’s track record of excellent operating profitability, solid level of risk-adjusted capitalisation and good business profile in Egypt’s insurance market.” A.M. Best said in a statement in a statement released on June 21.
“An offsetting rating factor is the company’s concentrated exposure to Egypt. GIG-Egypt’s ratings receive enhancement from its parent company, Gulf Insurance Group K.S.C.P. (GIG), due to the company’s strategic importance to the group.”
The rating agency further said that GIG-Egypt had an excellent track record of generating technical and operating profits despite the challenging economic pressures and intense competition in the domestic market.
GIG-Egypt generated a solid combined ratio of 79 percent in 2016.
Technical profitability has been driven by compulsory motor business that has outperformed the market. This was supplemented by strong investment income, as the company benefited from rising interest rates in Egypt.
GIG-Egypt has undergone a period of growth in the past seven years in which gross written premium increased to 537 million Egyptian pounds ($61 million) in 2016. The company has a good business profile in Egypt as the third-largest insurer with a market share of 6 percent of gross written premium.
“GIG-Egypt’s risk-adjusted capitalisation is strong, and continues to strengthen through good internal capital generation, with capital requirements largely driven by investment risks.”
The majority of the company’s investments are held in government treasury bills, with the bulk maturing between three to 12 months. “Although this creates concentration risk, it also provides liquidity allowing the company to react to changes in market conditions. Despite the company’s conservative asset portfolio, regulation dictates that all assets are held domestically.”
GIG-Egypt’s capital position is “sufficiently strong” to absorb the higher risk charges associated with assets held within Egypt, A.M. Best added.
“Political and financial instability has the potential to disrupt the economic conditions in Egypt. Despite GIG-Egypt’s track record of successfully navigating these challenging market conditions, A.M. Best continues to monitor the impact these external factors may have on the company’s operations.”
