AM Best has assigned a Financial Strength Rating of B (Fair) and a Long-Term Issuer Credit Rating of “bb” (Fair) to Royal Insurance Company (Royal) (Egypt). Additionally, AM Best has assigned the Egypt National Scale Rating of "aaa.EG" (Exceptional) to Royal. The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Royal’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).

Royal’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the company’s BCAR scores to remain at the strongest level, supported by good internal capital generation. Despite Royal’s conservative investment allocation by asset class, given the concentration of its assets in Egypt, in line with regulatory restrictions, the company’s balance sheet is exposed to potential volatility, reflecting Egypt’s high economic, political and financial system risks. An offsetting factor to the balance sheet strength assessment is the company’s dependence on reinsurance, which is mitigated partly by using a good quality reinsurance panel.

Royal has a track record of adequate operating performance, demonstrated by a five-year (2020-2024) weighted average return-on-equity and combined ratio of 28.8% and 95.8%, respectively, within the context of a high inflationary environment in Egypt. The company’s earnings are skewed toward investment income, supported by the high-interest rate environment, contributing 77% of reported pre-tax profit for the fiscal year-ended 30 June 2024.

The business profile assessment reflects Royal’s position as a top six insurer in Egypt, specialising in motor and medical insurance, in which it has a market share of 6% and 4%, respectively, in fiscal-year 2024. The company exhibits some premium diversification on a gross basis, with other lines including property, engineering and marine. Royal’s profile is limited to operating solely within Egypt.

Royal’s ERM framework is considered to be evolving, with the company having taken positive steps over recent years to formalise its ERM processes and function; however, further development is required to embed the framework fully and cultivate a risk-aware culture across the organisation.

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