A.M. Best Co. announced that it has affirmed the financial strength rating of “A-” (Excellent) of Egypt’s Al Chark Insurance Company with a negative outlook.
“The rating reflects the company’s superior, albeit reduced, risk-adjusted capitalisation, robust operating performance and prominent business position,” said Best. “Offsetting factors are the challenges associated with the company’s restructuring, particularly the need to reduce expenses.”
The rating agency noted that “Al Chark’s risk-adjusted capitalisation benefits from moderate non-life retention levels and off balance sheet strength from its real estate portfolio.” It also said it had taken the recent crash of a Flash Airlines plane on January 3, 2004 into account in making its capital assessment of Al Chark.
Best said it “expects the company to report an excellent net profit at June year-end 2003 in the range of EGP 85 million to 95 million (USD 14.2 million to 15.9 million),” and that the company “benefits from excellent investment income (8.7 percent net investment return in 2002). “
Best’s analysis also indicated that Al Chark has a prominent profile in the Egyptian market as the leading life and second-largest non-life insurer, which Best expects will continue. It noted that “Gross premiums written in 2002 (combined life and non-life) are expected to increase by approximately 9 percent by year-end June 2004. The company has a strong brand and distribution network, which has enabled it to maintain its market position, despite a fall in its non-life premium of 14 percent in the five years to year-end June 2002. The portfolio is well diversified by class of business, but Al Chark is entirely reliant upon the Egyptian market for business.”
In conclusion Best expressed its belief that “Al Chark will continue to operate with a relatively high expense ratio (average 51 percent in the five years to June 2002), despite the company initiating a structural review and early retirement programme. This is reflected in the negative outlook.”
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