A.M. Best Affirms Ratings of The Egyptian Reinsurance Company.OLDWICK, N.J -- A.M. Best Co. has affirmed the financial strength rating of B++ (Very Good) and the issuer credit rating of "bbb" of The Egyptian Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Company (Egypt Re) (Egypt). The outlook for both ratings is stable. The ratings reflect Egypt Re's strong risk-adjusted capitalisation, supported by solid net retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. and lower prospective premium growth. Egypt Re has an excellent track record of producing operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. and will likely continue, although it will remain dependent on investment income to offset underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. losses. The company's investment return is likely to remain high at approximately 10% in 2005, albeit somewhat reduced as a result of the declining trend in Egyptian interest rates. A.M. Best believes that Egypt Re's weak underwriting performance is likely to stabilise, with a high combined ratio of approximately 140% forecast for 2005 and 2006. Performance is anticipated to be driven by the very competitive market and high acquisition costs in Egypt (approximately 33% of net premium written anticipated for Egypt Re in 2005). These factors are likely to be partially counterbalanced coun·ter·bal·ance n. 1. A force or influence equally counteracting another. 2. A weight that acts to balance another; a counterpoise or counterweight. tr.v. by a reduction in insurance premium tax on legal cession The act of relinquishing one's right. A surrender, relinquishment, or assignment of territory by one state or government to another. The territory of a foreign government gained by the transfer of sovereignty. CESSION, contracts. business and the company's reducing exposure as a result of the decision to cease underwriting unprofitable energy and international aviation lines. A.M. Best expects growth in Egypt Re's diversified portfolio of non-compulsory business to outweigh the continuing reduction in premium from legal cessions, resulting in a modest increase in gross premiums of approximately 3.5% in 2005. An offsetting factor is the lack of analysis conducted by Egypt Re into its catastrophe exposure, particularly its earthquake exposure in Egypt. In A.M. Best's opinion, the company's reinsurance protection for catastrophes is limited. For Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings. For current Best's Ratings, independent data and analysis on more than 330 reinsurance companies, please visit http://www.ambest.com/reinsurance/. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com. |
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