A.M. Best affirms Egypt’s Misr Insurance Company credit rating at bbb

A.M. Best has affirmed Thursday the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Egypt’s Misr Insurance Company (MIC).

The outlook of these credit ratings is stable, A.M. Best said in a statement on Thursday.

“The ratings reflect MIC’s excellent business profile in Egypt, strong risk-adjusted capitalisation, and track record of good operating performance. An offsetting rating factor is the high level of political, economic and financial system risks associated with operating in Egypt.”

“The ratings also factor in the financial strength of the parent company, as well as MIC’s strategic importance and material contribution to the profile and earnings of the group.”

MIC has an excellent business profile as a leading non-life insurer in Egypt. The company’s gross written premium increased 7.2 percent in 2016 to 5.2 billion Egyptian pounds ($600 million) reinforcing its market leading position in Egypt’s non-life insurance sector, with a market share of 56 percent, the credit rating added.

Whilst business is concentrated in Egypt, the company benefits from geographical diversification stemming from its regional inwards facultative business, which accounts for approximately 16 percent of premium revenues. MIC has a good reputation in its domestic market and an extensive distribution network that has reach across the country.

The company’s prudent capital management ensures that MIC’s balance sheet remains strong. Despite the company’s conservative asset allocation toward cash and fixed income securities, the company’s investment portfolio is concentrated in Egypt. MIC’s capital and surplus is supported by significant retrograded fluctuation (equalisation) reserves, which are given full credit in Best’s Capital Adequacy Ratio (BCAR) model. Strong internal capital generation is expected to further enhance the company’s capital position in the medium term.

The company has an improving track record of technical and operating profitability. Underwriting returns have improved materially over the past three years following improved risk selection and underwriting discipline. In 2016, MIC generated an impressive combined ratio of 85.2 percent, compared with 96.1 percent during 2015. However, profit after tax of 1.4 billion pounds ($160 million) in 2016 remained dependent on investment income, indicative of the company’s large asset base and high interest rate environment in Egypt.

Political and financial instability, as well as social unrest, has 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.