A.M. Best Co. has affirmed the A- (Excellent) financial strength rating of Al-Chark Insurance Company, Egypt. The rating is based on the company's excellent capital base, strong operating performance and its position as one of the leading providers of life and non-life business in the Egyptian market. Offsetting factors include the challenges the company may face in adjusting to an increasingly competitive market as it liberalizes.
At the end of 2000, Al-Chark's capitalization increased by 6.9 percent to 520.5 million Egyptian pounds ($152 million). On an adjusted basis, capital amounted to 643.3 million ($187 million), a rise of 1.9 percent. Solvency on both a traditional basis and when measured in relation to Best's Capital Adequacy Ratio was calculated at a conservative level (0.8 times traditional, 0.6 times adjusted), in line with the current rating level. As with other state-owned insurers, the company's financial flexibility remained restricted, being solely derived from the company's ultimate parent, the Egyptian government.
In recent years, Al-Chark has focused on developing a life portfolio to complement its non-life franchise. At the end of 2000, net premium for both portfolios grew (life 2.0 percent, non-life 26.2 percent) such that total net premiums increased by 12.2 percent, well above the overall market increase of 3.8 percent. The company's focus on expenses continued to meet with success, with total expenses at their lowest level in the last five years. In addition, the non-life underwriting performance remained positive, and bottom line results continued to be profitable with the return on average adjusted capital at 13.2 percent.
Al-Chark is the second-largest insurance company in the Egyptian market as measured by capital and surplus and premiums. It has developed a significant presence in both the life and non-life markets, and at the end of 2000, market shares of 37.5 percent and 24 percent had been secured respectively, resulting in the company being the leading life insurer and second in the non-life sector.
The Egyptian government's commitment to liberalize the insurance market by 2003 will intensify what is already a competitive operating environment for Al-Chark. Although the process has and will continue to be gradual, in the longer-term the Egyptian companies will be required to continue to focus on expense reduction, product development and distribution in a bid to maintain market shares and to remain competitive. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
