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FOR IMMEDIATE RELEASE
LONDON - DECEMBER 10, 2020 09:24 AM (EST)
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of Misr Insurance Company (MIC) (Egypt). The outlook of these Credit Ratings (ratings) is stable. MIC is the non-life insurance subsidiary of Misr Insurance Holding Company (MIHC) (Egypt).
The ratings reflect MIC’s 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 (ERM). The ratings also factor in the financial strength of MIHC, due to MIC’s strategic importance to the group.
MIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects MIC’s BCAR scores to remain comfortably above the minimum required for the strongest assessment, supported by good internal capital generation and low underwriting leverage. Despite the company’s relatively conservative investment allocation by asset class, AM Best considers the quality of assets to be weak given concentration in Egypt, which exposes the balance sheet to potentially material volatility. The balance sheet strength assessment also factors in the company’s high dependence on reinsurance and Egypt’s high economic risk, and very high financial system and political risks.
MIC has a track record of adequate operating performance, demonstrated by a five-year (2016-2020) weighted average return on equity and combined ratio of 12.8% and 95.4% (as calculated by AM Best), respectively. Investment results remain the primary contributor to earnings, supported by the high interest rate environment in Egypt, and accounted for over 90% of pre-tax profits over the past five years. Underwriting profits have been volatile in recent years. However, for the financial year ended 30 June 2020 (fiscal-year 2020), the company delivered an improved combined ratio of 92.3% (as calculated by AM Best), supported by favourable claims experience on the fire and engineering lines of business. AM Best expects prospective operating performance to remain adequate over the cycle, although competitive pressures and declining interest rates in Egypt are expected to exert pressure on margins.
MIC has an excellent business position in its domestic market. The company’s gross written premium increased by 3.9% during fiscal-year 2020 to EGP 9.3 billion (USD 579.3 million), supporting its market-leading position in Egypt’s non-life insurance sector with a market share of approximately 50%. Whilst business is concentrated in Egypt, the company benefits from a modest level of geographical diversification stemming from its regional inwards facultative business, which accounted for approximately 13% of fiscal-year 2020 premium revenue.
MIC has taken steps to implement tools to reliably manage its risk exposures and formalise its risk management framework in recent years. The ERM assessment takes into account AM Best expectation that MIC will continue to develop and integrate its risk management framework to adapt to the evolving risk landscape.
This press release relates to Credit Ratings that have been published on AM Best’s 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 Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data provider specialising in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.