LONDON: AM Best has reaffirmed the Financial Strength Rating of B- (Fair) and the Long-Term Issuer Credit Rating of “bb-” (Fair) for Suez Canal Insurance (SCI), with an Egypt National Scale Rating (NSR) of aa.EG (Superior).
Despite the negative outlook due to the volatile economic and political climate in Egypt, SCI’s strong balance sheet and risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), provide a counterbalance to these challenges.
For the fiscal year ending June 30, 2023, SCI’s BCAR remained at a very strong level, supported by an investment portfolio heavily weighted towards Egyptian fixed-income securities, equities, and real estate. The company’s reliance on reinsurance is reflected in a premium retention ratio of 41.3%, with the associated counterparty credit risk partially mitigated by a robust reinsurance panel.
Suez Canal Insurance’s operating performance is deemed adequate, with a five-year weighted average return-on-equity ratio of 15.8%. However, the company’s high expense ratio, consistently over 54.0%, coupled with Egypt’s high inflation rates, exert downward pressure on performance metrics.
The insurer’s market position as a mid-tier entity in Egypt’s non-life insurance sector, with a market share of about 5%, is indicative of its limited business profile. Suez Canal Insurance’s recent initiatives to enhance its enterprise risk management (ERM) framework and instill a risk-aware culture are expected to bolster its strategic business execution moving forward.