Best Affirms Egypt’s Al Chark Insurance ‘A-‘ Rating

January 31, 2005

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 stable outlook.

“Al Chark’s risk-adjusted capitalisation is likely to have improved at year-end June 2004 as a result of the modest increase in overall net premium written (3 percent in 2004) being offset by anticipated retained earnings of approximately EGP 80 million (USD 13 million),” said Best. “Prospectively at June year-end 2005, the company’s risk-adjusted capitalisation is likely to remain stable as it repositions its investment portfolio away from equities.”

Best said it “believes Al Chark’s earnings at June year-end 2004 and 2005 are likely to be driven by enhanced investment income as the Egyptian economy improves, whilst at the same time, technical earnings come under pressure from softening rates and increased competition in the Egyptian insurance market. The company has a strong brand and distribution network, which is likely to enable it to maintain its market position despite a lack of growth in its non-life gross premium (approximately a 10 percent decrease in premium anticipated for year-end June 2004).”

The rating agency also noted that Al Chark’s high staffing levels constitute an offsetting factor, indicating that its “future underwriting profitability is likely to be determined by its success in reducing its management expenses. However, the company’s ability to reduce staffing levels is restricted by government regulation. This is reflected in the negative outlook.”

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