The state-owned National Insurance Company of Egypt (NICE) was given an A- financial strength rating by the A.M. Best insurance rating agency, which also assigned the company with a negative outlook. The affirmation is based on the company's excellent capital position, financial strength and strong market presence, an A.M. Best statement read. Offsetting factors include the challenges the company may face in adjusting to an increasingly competitive market as it liberalizes and the company's deteriorating operating performance.
Despite a moderate 4.6 percent reduction in adjusted capital at the end of 2000, capital adequacy was regarded as excellent and consistent with the current rating level. Financial flexibility remained restricted, being solely derived from the company's ultimate parent, the Egyptian government.
The smallest of three state-owned direct insurers, as measured by capital and surplus and premiums, NICE is the third largest direct insurer and the leading compulsory motor insurer in the Egyptian market. The firm was established in 1900.
NICE retained its 13 percent share of the Egyptian insurance market in 2000, due to a 9.2 percent increase in gross premiums, and growth in gross life premiums of 11 percent and 15 percent in 1999 and 2000, respectively, has further diversified the overall portfolio. The company's presence is also enhanced through its 120-branch office network and its moderate international presence in the Arab region.
NICE's loss ratio increased to 51.2 percent in 2000 from 37.5 percent in 1999. Although only marginally above the five-year average of 51 percent, the non-life technical account has benefited from successive reserve releases between 1997 and 1999, offsetting substantial claims inflation in third-party compulsory motor business (TPL).
NICE's loss ratio in respect of TPL business increased to 91.2 percent in 2000, and A.M. Best expects further deterioration in this account in 2001 and 2002. Ultimately, this will likely reduce NICE's return on equity, which fell to 9.5% in 2000, compared with the five-year average of 15.6%.
The Egyptian government's commitment to liberalize the insurance market by 2003 will intensify what is already a competitive operating environment for NICE. 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 remain competitive. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
