LONDON--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating to A (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating to “a” (Excellent) from “bbb+” (Good) of GIG Insurance - Egypt S.A.E. (GIG-Egypt) (Egypt). The outlook of these Credit Ratings (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. The ratings also factor in rating lift from GIG-Egypt’s parent company, Gulf Insurance Group K.S.C.P. (GIG), reflecting the strategic importance of GIG-Egypt to GIG.
The rating upgrades reflect the increased level of explicit support that GIG-Egypt receives from GIG, with the company now benefitting from an affiliate guarantee agreement. GIG-Egypt is a strategically important subsidiary of GIG, representing its interests in Egypt. In April 2023, it was announced that GIG had acquired AIG Egypt Insurance Company S.A.E. (AIG Egypt) and a merger between GIG-Egypt and AIG Egypt is planned to be completed before the end of 2024. GIG-Egypt is expected to benefit from this merger, which will add significant additional capital resources to the company.
GIG-Egypt’s balance sheet strength is underpinned by its 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 net underwriting leverage and has a history of internal capital generation. AM Best expects GIG-Egypt’s consolidated risk-adjusted capitalisation to remain at the strongest level. The assessment also considers GIG-Egypt’s exposure to high levels of economic, political and financial system risks from operating exclusively in Egypt.
GIG-Egypt has a record of generating strong earnings despite the challenging operating conditions and high inflationary environment of Egypt. GIG-Egypt generated a five-year (2019-2023) weighted average return on equity of 27.9% and has an excellent underwriting record, with a five-year (2019-2023) average combined ratio of 85.3%. Results for the year ending June 2024 are expected to be equally robust.
GIG-Egypt is the third-largest non-life insurer in the Egyptian market, as measured by gross written premiums, with a non-life market share of approximately 8%. Nevertheless, the company’s profile is limited to its domestic market and is concentrated heavily toward the motor business line on a net premium basis. GIG-Egypt is operationally integrated within the broader GIG group, which provides support in areas such as reinsurance purchasing, risk management, pricing, reserving and investment management. In addition, GIG has demonstrated its commitment to GIG-Egypt through the periodic capitalisation of retained earnings, by providing funding for capital expenditures and by increasing its ownership stake.
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