AM Best has affirmed the Financial Strength Rating of B- (Fair), the Long-Term Issuer Credit Rating of “bb-” (Fair) and the Egypt National Scale Rating (NSR) of aa.EG (Superior) of Suez Canal Insurance (SCI) (Egypt). 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).

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 2023 (fiscal-year 2023). 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, equities and real estate. The company has a relatively high reliance on reinsurance, evident by a premium retention ratio of 41.3% in fiscal-year 2023. However, the associated counterparty credit risk is mitigated partially by the use of a financially strong reinsurance panel.

AM Best assesses SCI’s operating performance as adequate, with the company having reported a five-year (2019 - 2023) weighted average return-on-equity ratio of 15.8%. The company’s underwriting results have been constrained by its high expense ratio, which remained above 54.0% in each of the past five years. Whilst the company’s overall earnings have been resilient, challenging macroeconomic conditions in Egypt, primarily high inflation, place negative pressure on the operating performance assessment.

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 fiscal-year 2023. The company’s profile is limited to operating within Egypt.

In recent years, SCI has undertaken steps to formalise its ERM function and promote a risk-aware culture across the organisation. AM Best expects that further improvements in SCI’s ERM framework and practices will support the company as it executes its strategic business plan.

SCI is exposed to the high economic, high political and very high financial system risks associated with operating in Egypt, which AM Best views as a partially offsetting factor to the ratings.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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