Maximizing returns, diversifying investment channels and having high credit rating are on our priorities list.
The Central Bank’s activation of bank insurance supports the sector’s growth rates for the upcoming years.
The Egyptian economy is going through a temporary “stumble” and its impact upon insurance does not appear yet.
Enacting laws for private insurance funds and micro-insurance are inevitable to boost the sector
The chairman deputies, of Insurance Holding Company, revealed the company’s strategy during the upcoming period which is based on maximizing the returns of subsidiaries’ business, diversifying investment channels, contributing to well-studied industrial projects that generate high revenue, developing the products in the market, and diversifying those products to achieve distinguished revenue in a way that guarantees the rights of clients and policyholders, as well as working on having good credit rating of Misr Insurance Company to open the door to deal with customers inside Egypt and reinsurers abroad.
Further, they explained that the Egypt’s economic situation is going through a temporary stumble resulting from political and security upheavals that Egypt suffers from during the last period which cast its shadow upon insurance sector. However, these factors had a temporary positive impact upon the sector represented in the raising people’s awareness on the importance of insuring their money and properties amid the increasing risks, riots and unrests.
They pointed out that there are three suspended laws that should be activated and approved in the coming period to boost the market. Those laws are the laws of private insurance funds, law of the supervision on health care companies, law of micro-insurance. They explained that re-launching bank insurance by the central bank will support growth rates in the sector during the coming period.
Basel El Hini, vice chairman of Misr Insurance Holding Company for Investment affairs, said that Egyptian economic status is going through a temporary stumble resulting from not using Egypt’s human and natural potentialities optimally. He stressed that the economic stumble resulted from political and security disturbances that the Egyptian society is witnessing recently which in turn affect the insurance sector.
Increase Awareness:
Dr. Adel Mounir, vice chairman of Misr Insurance Holding Company for operation and insurance affairs, resumed the discussion and affirmed that the political and security unrests and their repressions on economy have led to increasing people’s awareness on the importance of insuring their money and properties because of the increasing risks, riots and upheavals.
He pointed out the rapid increase of demands on riot and unrest insurance policy during the revolution, which was earlier neglected by customers, have enabled insurance companies to achieve good growth rates in group insurance policies and its attachments backed by the growing insurance awareness and raising fears from potential risks.
Moreover, he explained that the flourishing of insurance sector is temporary as it is a result of an emergency condition. The results accomplished during the first nine months of the current fiscal year which reached 10% will decline because many economic activities have stopped.
Strategy:
Regarding the general strategy of Misr Insurance Holding Company in the coming period, Basel El Hini assured that it is difficult to put a strategy with a determined period, amid the constant and rapid changes in the economic conditions and the occurrence of unexpected developments which stresses the need for crystallizing this strategy to cope with the economics fluctuations.
Further, he explained that those factors did not prevent us from setting the key features of the strategy which are maximizing returns on our businesses, diversifying investment channels to achieve high revenue in a way that guarantees the rights of the clients and policyholders, contributing to well-studied industrial projects that achieve high returns, especially that this is the main role for insurance companies but it is currently absent because commercial banks dominated upon it, and achieved high returns which make us need a quantum leap to allow insurance companies to expand in this kind of investments especially these companies have the financial and technical potentialities which make them qualified.
Moreover, he explained that the holding company has managed during the past few years to strengthen its financial and technical positions, thanks to a change in the map of insurance sector after companies were merged, life and non-life insurance portfolios were separated, financial and investment forms were changed, new legislations were issued and new entities to manage financial and real estate assets were formed. The previous factors have contributed to increasing the company’s size of private investments that achieved high investment returns.
Dr. Adel Mounir resumed the talk saying the new strategy is aiming to achieve good growth rates which will reflect positively on the market share of its subsidiaries in the Egyptian market, develop the products that are in the market, to diversify those products so as to achieve qualitative and quantitative change and create a balance in companies’ activities, especially that it is useless to acquire high percentage of the market without accomplishing good results.
He added that the Insurance Holding Company intends during the coming period to work on having good credit rating of Misr Insurance to open the door to deal with customers inside and reinsurers abroad, pointing out that the majority of institutions have consultative bodies for insurance affairs, and they demand information on the reinsurers who are dealing with the company who are demand from us be rated by credit rating agencies to continue dealing with us.
Credit Rating
Mounir explained that A.M. Best Company Ratings neglect the country’s sovereign credit rating when assigning credit ratings to the insurance company. This is probably because the insurance company has local deals only and its foreign deals are only with reinsurers.
However, El Hini noted that A.M. Best does not neglect the country’s sovereign credit rating, but it is just one of the factors and not the essential one because insurance activity has different nature from the other economic fields.
El Hini affirmed the importance of improving the financial and technical positions of the insurance companies to be able to boom after recovery of Egypt’s economy.
Investment Portfolio
El Hini revealed that Misr Insurance Holding Company and its subsidiaries achieved investments of about EGP 28.847 billion as of the end of last December, compared to EGP 27.907 billion at the end of June 2012, registering a growth rate of 3.3% (EGP 940 million). The investments generated net profit of EGP 1.144 billion with a return on investment of 3.9% in the first half of the current fiscal year, compared to EGP 1.088 billion in the compared period.
He added that most of the company’s investments are in government debt instruments (treasury bills and bonds) as all other insurance companies. The company also invests in variable-return investments such as contributing directly to projects or purchasing shares on stock exchange. Misr Real Estate Management Company’s investment portfolio is relatively small because it only invests in the real estate sector.
Although the return on the Insurance Holding Company’s investment portfolio is high, it does not reach our aspirations, but we have to invest in the traditional instruments because the investment legislations and shares are determined, he noted. In addition, the Central Bank of Egypt prohibits legal entities from buying banks’ deposit certificates. The only investment alternative for insurance companies is investing in large projects, but they are not so many in the current period.
Foreign Expansions
Mounir explained that the Insurance Holding Company has international businesses in Qatar, Kingdom of Saudi Arabia and Kuwait. Selecting foreign markets was based on political standards not economic ones, which made the results of these branches not good except for the Saudi branch, he noted. Other Arab countries have chosen to expand in Asian markets for economic reasons, so they achieved high and unprecedented growth rates. The Insurance Holding Company will not decline to expand abroad as long as this will have positive impact, he affirmed.
Misr Insurance Company and Misr Life Insurance Company acquire some shares in Africa Reinsurance Corporation “Africa Re” which has a regional office in Egypt. Misr Insurance Company has approved to increase the capital of Africa Re to reach US$ 600 million, he revealed.
Bank Insurance:
Regarding the re-activation of bank insurance, El Hini noted that the Governor of CBE Hisham Ramez has made a proactive step when he announced the re-launch of bank insurance this month as the Insurance Holding Company was planning to ask for the re-activation of this service as it will benefit both the banking and insurance sectors.
The central bank is not to blame in protecting the rights of banks as the Insurance Federation of Egypt protects the rights of insurance companies. CBE is holding intensive meeting with IFE and Egyptian Financial Supervisory Authority in discussing the methods of re-launching bank insurance but it was after setting tough conditions which do not appease insurance companies. However, the cooperation among insurers and banks will have positive impact on Egypt’s economic as long as the bank insurance conditions are approved by both parties.
20 conditions
Mounir affirmed that CBE has set 20 conditions for bank insurance which were all approved except for the condition which obligates banks to have an acquiring a ruling stake in the insurance company, so the re-launch was postponed. Mounir hoped that the law will be re-activated because it will boost the banking and insurance sectors.
Insurance companies are still in need for a time to train its employees on this kind of insurance that will require development of products, raise insurance awareness and foster cooperation with banks, he noted.
Suspended laws:
Mounir revealed that there are three suspended law which are needed to be activated in the upcoming period such as the law of private insurance funds that will allow life insurance companies manage and establish these funds and enable customers to receive group insurance policies with others and shift from one fund to another. The second law of the one supervising health care companies and the third one is the micro-insurance law.
He emphasized on the importance of activating these law for boosting the insurance sector amid the current economic instability. Insurers shall take part in discussing the health care and social insurance laws with the government as these laws will have direct impact on their business volume, he stressed.
Value of premiums:
Misr Life Insurance Company has achieved direct premiums of about EGP 1.306 billion in the first nine months of FY 2012/2013, compared to EGP 1.138 billion in the corresponding period in the last fiscal year, registering an increase of 14.8% and percentage of target achieved of 104.3% and acquiring a market share of 50%.
The company’s direct property insurance premiums reached about EGP 2.688 billion at the end of last March, compared to EGP 2.547 billion in the compared period, registering a growth rate of 5.6% and a percentage of target achieved of 105.3% and acquiring a market share of 40%.
The total value of revenues of Misr Real Estate Management Company reached EGP 109.8 million at the end of last March, compared to EGP 100.8 million in the compared period, registering an increase of 8.9%.
