Best Affirms Ratings of ING Comercial, Tugu; Lowers Misr

January 15, 2003

A.M. Best Co. made several ratings announcements yesterday. It confirmed the A (Excellent) financial strength ratings of ING Comercial America (ING-CA) and its wholly owned subsidiary, ING Comercial America Fianzas, and the B+ (Very Good) rating of Tugu Insurance Co. Ltd, Hong Kong. The outlook on both companies is stable.

Best, however, lowered the financial strength rating to A- (Excellent) from A (Excellent) of Egypt’s Misr Insurance Company. The change “reflects the company’s weakened risk-adjusted capitalisation given its sizeable equity position and the effect of A.M. Best’s evaluation of country risk,” said the bulletin.

ING-CA’s rating reflects its “dominant market position, experienced management team, improved underwriting and operating results and the strong parental support from its immediate parent, ING Americas,” said Best.

The report noted that “Its Amsterdam-based ultimate parent, ING Group (ING), is one of the largest integrated financial services organizations in the world.” Its subsidiary is currently “the largest Mexican insurer and the largest in Latin America in terms of gross premiums written.”

Tugu’s rating reflects its “prudent capitalization, strengthened loss reserves and conservative investment portfolio. The rating also considers the increased diversification in its underwriting portfolio, which has reduced its reliance on group business emanating from Indonesia,” said Best.

The report did note, however, that, “As a result of adverse developments in the motor and employees’ compensation business, Tugu has had to significantly strengthen its reserve position.” Best indicated that the current level, after two increases in 2001 and 2002, “is considered to be adequate.”

Despite the lowering of its ratings on Misr, Best said that it “continues to recognise the company’s leading position in the Egyptian market and its excellent operating performance.” It assigned the company a “stable” outlook, and stressed its essentially strong capitalization, leading market position of around 30 percent in Egypt, strong growth, up 16.6 percent last year, and excellent operating performance as Misr’s leading strengths.

It described the company’s risk-based capitalization as being subject to “a significant degree of investment risk due to the company’s constructive role in the long-term economic development of Egypt and therefore sizeable position in unlisted (EGP 1.2 billion (USD 262.4 million)) and listed (EGP 955 million (USD 206.4 million)) equities.” Best also expressed concern “about the credit and liquidity risk associated with these investments, which is heightened by the country risk.”

Best concluded by noting that “The company has achieved a five-year average combined ratio of 47.7% through selective underwriting, conservative retention levels (40.8% in 2002) and efficient expense structure, which is reflected by the 20% expense ratio in 2002. Adjusted return on equity increased to 15.4% in 2002, as the company continued to achieve a favourable investment return of 7.7% in 2002 despite falling equity markets and a depressed economy.”

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