AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of bbb of Misr Life Insurance Company (MLIC) (Egypt). The outlook of these Credit Ratings (ratings) is stable. MLIC and Misr Insurance Company are directly owned by Misr Insurance Holding Company, and form part of the consolidated Misr Group.
The ratings reflect MLICs balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also factor in the financial strength of the Misr Group, and MLICs strategic importance and material contribution to the profile and earnings of the group.
The companys risk-adjusted capitalisation, as measured by Bests Capital Adequacy Ratio (BCAR), is assessed as strongest. The companys risk-adjusted capitalisation benefits from unrealized gains on its real estate portfolio, for which market values are significantly higher than its book values. AM Best believes interest rate risk on the companys savings products is mitigated as a result of the modest level of guarantees and Egypts high interest rate environment. An additional positive rating factor to the assessment includes MLICs prudent reserving approach. Regulatory restrictions limit the companys investment options, and whilst the company maintains a conservative investment portfolio with approximately 69% of invested assets held in cash and fixed income, assets are subject to the high financial system risk in Egypt.
MLICs earnings have improved consistently over recent years, driven by strong investment income and healthy technical margins on new business, reflecting the high interest rate environment and the companys dominant market position. The company reported pre-tax earnings of EGP 1.2 billion for the period 1 July 2017 to 30 June 2018 (FY 2018), equivalent to a return on equity of 13%. The majority of the companys earnings can be attributed to investment income, indicative of the companys large asset base and Egypts current high base rate of interest. Despite this, there is pressure on the companys expense base as a result the inflationary environment and high commission rates, which are common in Egypts insurance market.
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MLIC has an excellent business profile in its domestic market. The companys gross written premiums increased by 21% during FY 2018 to EGP 4.0 billion, reinforcing its market-leading position in Egypts life insurance sector with a market share of approximately 40%. Whilst the company is concentrated in Egypt and focused on individual and group savings products, management remain cognizant of changing market dynamics and consequently, MLIC is currently pursuing a number of strategic initiatives.
The company has clear risk appetite and tolerances in place throughout the key areas of the business. Political and financial instability, as well as social unrest, have the potential to disrupt economic conditions in Egypt. Despite MLICs track record of successfully navigating these challenging market conditions, AM Best continues to monitor the impact these external factors may have on the companys operations.
This press release relates to Credit Ratings that have been published on AM Bests website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
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Thomas Bateman, CFA
Manager, Public Relations
908 439 2200, ext. 5159
Associate Director, Analytics
20 7397 0331
Director, Public Relations
439 2200, ext. 5644