AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of bbb of Misr Insurance Company (MIC) (Egypt). The outlook of these Credit Ratings (ratings) is stable. MIC and Misr Life Insurance Company are directly owned by Misr Insurance Holding Company, and form part of the consolidated Misr Group.
The ratings reflect MICs balance sheet strength, which AM Best categorises as very 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 MICs 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, supported by its large capital base of EGP 22 billion (USD 1.2 billion). Whilst the company maintains a conservative investment portfolio with approximately 82% of invested assets held in cash and fixed income, regulatory restrictions in Egypt limit the companys investment options. Offsetting rating factors also include a moderate reliance on reinsurers and historical reserve volatility.
The companys operating performance is assessed as adequate, reflecting a five-year (2014-2018) average return on equity of 12% and a five-year average combined ratio of 92%. Operating profits declined by 5% to EGP 2.3 billion during the financial year ending 30 June 2018, with increases in non-technical earnings offsetting declines in underwriting returns. The majority of the companys operating profits can be attributed to investment income, indicative of the companys large asset base and Egypts high interest rate environment. For the financial year ending 30 June 2018, the company delivered a combined ratio of 103% compared with 81% in the prior year. The poor technical performance was a result of large losses on property and aviation lines of business, as well as higher inflation-linked attritional losses in the motor line of business.
MIC has a market-leading position in its domestic insurance market. The companys gross written premium increased by 21% to EGP 8.6 billion for the financial year ending 30 June 2018, reinforcing its dominant position in Egypts non-life insurance sector with a market share of 51%. Whilst business is concentrated in Egypt, the company benefits from geographical diversification stemming from its regional inwards facultative business, which accounted for approximately 20% of premium revenue.
The company has clear risk appetite and tolerances in place throughout the key areas of the business, which has contributed to the improving risk culture within MIC. Political and financial instability, as well as social unrest, have the potential to disrupt economic conditions in Egypt. Despite MICs 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, in particular the high inflationary environment.
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Thomas Bateman, CFA
Associate Director, Analytics
20 7397 0331
Manager, Public Relations
908 439 2200, ext. 5159
Director, Public Relations
439 2200, ext. 5644