The operating performance of Egyptian Takaful Properties and Liabilities Insurance Company (EGTAK) is assessed as adequate, says AM Best. The company reported a five-year (2020-2024) weighted average return-on-equity ratio and combined operating ratio of 24.7% and 98.5%, respectively.
Whilst the company has been profitable on an overall basis, challenging macroeconomic conditions in Egypt, primarily high inflation, persist.
Ratings affirmed
AM Best has affirmed EGTAK’s 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)’. The outlook of these credit ratings is ‘Stable’.
The ratings reflect EGTAK’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).
Balance sheet strength
EGTAK’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 2024 (fiscal-year 2024). AM Best assesses the company’s risk-adjusted capitalisation on a combined basis, including its policyholders’ and shareholders’ funds, due to the stated mandate within its articles of association that requires the shareholders’ fund to support the policyholders’ fund. AM Best expects the company’s BCAR to strengthen through continued capital contributions from its shareholders and solid internal capital generation.
EGTAK’s capital consumption is driven primarily by its investment portfolio, which is composed predominantly of Egyptian sovereign bonds. Despite the company’s relatively conservative investment allocation by asset class, the quality of assets is considered weak given the concentration in Egypt, where there is a high level of economic and political risk and a very high level of financial system risk.
Business profile
The business profile assessment reflects EGTAK’s position as a mid-tier takaful insurer in Egypt, with a non-life market share of approximately 5% in fiscal-year 2024. However, the company’s profile is limited to operating within Egypt, and is moderately concentrated in the oil and gas and credit insurance lines, which accounted for 31.81% and 21.82% of gross written premiums in fiscal-year 2024, respectively.
In recent years, EGTAK has undertaken steps to formalise its ERM function and promote a risk-aware culture across the organisation. AM Best expects that further improvements in EGTAK’s ERM framework and practices will support the company as it executes its strategic business plan.