A.M. 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 (MIHC), and form part of the consolidated Misr Group.
The ratings reflect MIC's balance sheet strength, which A.M. Best categorises as very strong, its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also factor in the financial strength of the Misr Group, and MIC's strategic importance and material contribution to the profile and earnings of the group.
The company's risk-adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR), is assessed as strongest. Capital requirements are primarily driven by investment risk, with most assets held in Egypt. Whilst the company maintains a conservative investment portfolio primarily in cash and fixed income, regulatory restrictions in Egypt limit the company's investment options. Offsetting rating factors also include a moderate reliance on reinsurers and some historical reserve volatility. MIC has benefitted from notable unrealised fair value gains, due to approximately 50% of its investment portfolio being denominated in the U.S. dollar; the company recognised significant foreign currency translation gains since the Egyptian pound was freely floated in November 2016. A.M. Best expects strong internal capital generation to support the company's strategic initiatives in the medium term.
The company's technical and operating profitability has improved considerably in recent years. Underwriting returns in the past have been burdened by historical Motor Act policies; however, for the past four years (2014-2017), MIC has reported stronger combined ratios. For the financial year ending 30 June 2017, the company delivered an excellent combined ratio of 78% compared with 85% in the prior year. Operating profits reached EGP 2.4 billion in 2017, of which approximately 70% can be attributed to investment income, indicative of the company's large asset base and Egypt's high interest rate environment. The company has reported a five-year average return on equity of 13%.
MIC has an excellent business profile in its domestic market. The company's gross written premium increased by 37% to EGP 7.1 billion for the financial year ending 30 June 2017, reinforcing its market-leading position in Egypt's non-life insurance sector with a market share of 52%. 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's ERM capability has improved notably in recent years; there is a defined risk framework with clear risk appetite and tolerances in place. Political and financial instability, as well as social unrest, have the potential to disrupt economic conditions in Egypt. Despite MIC's track record of successfully navigating these challenging market conditions, A.M. Best continues to monitor the impact these external factors may have on the company's operations, in particular the high inflationary environment.
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Thomas Bateman, +44 20 7397 0329
Salman Siddiqui, +44 20 7397 0331
Associate Director, Analytics
Christopher Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
Jim Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations