LONDON. - Friday, June 6th 2014 [ME NewsWire]

(BUSINESS WIRE) A.M. Best has affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb” of Arab Misr Insurance Group S.A.E (GIG-Egypt) (Egypt). The outlook for both ratings remains negative.

The ratings of GIG-Egypt reflect its strong risk-adjusted capitalisation, good track record of profitability and its sound domestic franchise. The negative outlook reflects the heightened level of economic, political and financial system risk associated with Egypt. GIG-Egypt’s rating benefits from the financial strength of its parent company, Gulf Insurance Group K.S.C.P., and its strategic importance to the group.

GIG–Egypt’s risk-adjusted capitalisation is strong and continues to strengthen as profit retention outpaces growth in capital requirements. Despite GIG-Egypt’s material exposure to Egyptian assets, particularly government treasury bills, the company’s risk-adjusted capitalisation is sufficiently strong to absorb the higher risk charges for these concentrated assets.

GIG–Egypt continues to produce robust technical performance despite the challenging economic backdrop and intense competition from domestic market participants. The company has generated strong combined ratios below 90% in each of the last five years. In 2013, the combined ratio rose to 85% resulting from higher acquisition costs and a lower profit margin on motor business. Underwriting performance has been supported by stable returns on investments, yielding approximately 10% over the last two years. GIG-Egypt remains a leading non-life company among the private insurers in Egypt, producing gross revenues of EGP 345 million (USD 49 million) in 2013.

GIG–Egypt’s business is generated locally, and its investment portfolio is highly concentrated in Egyptian government debt. Whilst the latter is of particular concern, A.M. Best notes that the maturity of the fixed income investments is less than 12 months for the vast majority of the portfolio.

The developments of the economic and political environments in Egypt are likely to be the main drivers of any future rating movements, either negative or positive.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

This rating announcement has been issued by A.M. Best Europe – Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best

Salman Siddiqui, ACA

Financial Analyst

+(44) 20 7397 0311

salman.siddiqui@ambest.com

Mahesh Mistry

Director, Analytics

+(44) 20 7397 0325

mahesh.mistry@ambest.com

Jim Peavy

Assistant Vice President, Public Relations

+(1) 908 439 2200, ext. 5644

james.peavy@ambest.com

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