A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of "BBB" of Egypt's Arab Misr Insurance Group (GIG-Egypt) for the third year in a row. The outlook for each rating remains stable. The ratings of GIG-Egypt reflect the company's strong risk-adjusted capitalisation, track record of good profitability and strong profile in the insurance market in Egypt, the rating agency added. An offsetting 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. GIG-Egypt's risk-adjusted capitalisation is strong and continues to strengthen through good internal capital generation, A.M. Best said. The company's capital requirements are largely driven by underwriting and investment risks. The majority of investments are held in government treasury bills, with the bulk maturing between three to 12 months. While this creates concentration risk, it also provides liquidity so that the company can react to changes in market conditions. Despite the company's conservative asset portfolio, regulation dictates that all assets are held domestically. AMIG's capital position is sufficiently strong to absorb the higher risk charges associated with assets held within Egypt. GIG-Egypt has an excellent track record of generating technical and operating profits despite the challenging economic pressures and intense competition in the local insurance market. GIG-Egypt's combined ratio has improved for the third consecutive year and at financial year-end June 2015 was 75 percent. 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 has doubled to 432 million Egyptian pounds (US$48.6 million) in 2015. The company has an excellent business profile in Egypt as the fourth-largest insurer with a market share of 5.3 percent in terms of gross written premium, and is one of the leading insurers in the private sector. The company's approach to enterprise risk management improved notably during 2015, benefiting from additional support from the group. GIG-Egypt has strengthened its identification and understanding of key risks and imposed controls in order to mitigate and reduce their potential impact. Political and financial domestic 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.
