AM Best has assigned a Financial Strength Rating of B- (Fair) and a Long-Term Issuer Credit Rating of “bb-” (Fair) to Egyptian Takaful Property & Liability Insurance Company [Egyptian Joint Stock Company] (EGTAK) (Egypt). The outlook assigned to these Credit Ratings (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).

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 2023 (fiscal-year 2023). 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 require 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 predominantly composed 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 risks and a very high level of financial system risk.

EGTAK’s operating performance is assessed as adequate, with the company reporting a five-year (2019-2023) weighted average return-on-equity ratio and combined operating ratio of 25.5% and 96.2%, respectively. The company’s recent underwriting results have been affected by adverse loss experience in the credit insurance line of business; however, measures have been implemented to remediate performance. Whilst the company has been profitable on an overall basis, challenging macroeconomic conditions in Egypt, primarily high inflation, persist.

The business profile assessment reflects EGTAK’s position as a mid-tier Takaful insurer in Egypt, with a non-life market share of approximately 4% in fiscal-year 2023. However, the company’s profile is limited to operating within Egypt, and, on a net premium basis, its portfolio is moderately concentrated in credit insurance.

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.

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