AM Best assigns national scale rating of aa.EG to Suez Canal Insurance
AM Best has on Thursday has assigned the Egypt National Scale Rating (NSR) of aa.EG (Superior) to Suez Canal Insurance (SCI).
The agency also affirmed the Financial Strength Rating of B- (Fair) and the Long-Term Issuer Credit Rating of “bb-” (Fair) of Suez Canal Insurance (SCI).
The outlook of these Credit Ratings (ratings) is negative.
“The ratings reflect SCI’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).” an AM Best statement read.
“SCI’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), for the fiscal year-end 30 June 2022 (FY 2022).”
The agency said the company’s BCAR is expected to remain at the very strong level. “Capital consumption is driven primarily by the company’s investment portfolio, which is weighted toward Egyptian fixed income securities and real estate.”
“The company has a relatively high reliance on reinsurance, evident by a premium retention ratio of 47.0% in FY 2022. However, the associated credit risk is mitigated partially by the use of a financially strong reinsurance panel. The balance sheet strength assessment considers SCI’s exposure to the high levels of economic, political, and financial system risks that are associated with operating in Egypt.”
AM Best assesses SCI’s operating performance as adequate, with the company having reported a five-year (FY 2018 – FY 2022) weighted average return on equity of 15.7 percent. Underwriting results have been constrained by Suez Canal Insurance’s very high expense ratio, which remained above 52.0 percent in each of the past five years. Whilst the company’s overall earnings have been resilient, they should be viewed in the context of Egypt’s relatively high interest rate environment.
“The business profile assessment reflects SCI’s position as a mid-tier insurer in Egypt, with a non-life market share of approximately 5% in FY 2022. The company’s profile is limited to operating within Egypt.”
The company has historically operated basic risk management practices; however, in recent years, Suez Canal Insurance has undertaken steps to establish and formalise an enterprise-wide, risk-aware culture. AM Best expects that further improvements in the company’s ERM framework and practices, if implemented successfully, will enable it to manage its risks reliably.
