Best’s News & Research Service - December 18, 2019 11:06 AM (EST)
AM Best Affirms Credit Ratings of Misr Life Insurance Company
- December 18, 2019 11:06 AM (EST)
London //BestWire// - AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Misr Life Insurance Company (MLIC) (Egypt). The outlook of these Credit Ratings (ratings) is stable. MLIC and Misr Insurance Company (Egypt) are directly owned by Misr Insurance Holding Company (Egypt) and form part of the consolidated Misr Group.
The ratings reflect MLIC’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. The ratings also factor in the financial strength of the Misr Group, due to MLIC’s strategic importance to the group.
The company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed at the strongest level. The company’s risk-adjusted capitalisation benefits from unrealised gains on its real estate portfolio, for which market values are significantly higher than its book values. AM Best believes interest rate risk on the company’s savings products is mitigated as a result of the modest level of guarantees and Egypt’s historically high interest rate environment. Regulatory restrictions limit the company’s investment options and whilst the company maintains a conservative investment portfolio, assets are subject to the high financial system risk in Egypt.
MLIC’s earnings have improved consistently over recent years, driven by strong investment income and healthy technical margins on new business, reflecting the high interest rate environment and the company’s dominant market position. The company reported pre-tax earnings of EGP 1.3 billion (USD 78.7 million) for the year-ended 30 June 2019 (FY2019), equivalent to a return-on-equity of 14.2%. The majority of the company’s earnings can be attributed to investment income, indicative of the company’s large asset base and Egypt’s relatively high interest rate. There is pressure on the company’s expense base as a result of high commission rates on its direct sales force, although management has proactively taken measures to manage this.
MLIC has an excellent business profile in its domestic market. The company’s gross written premiums increased by 11.0% during FY2019 to EGP 4.5 billion (USD 267.4 million), reinforcing its market-leading position in Egypt’s life insurance sector with a market share of approximately 34%. Whilst the company is concentrated in Egypt and focused on individual and group savings products, management is proactively navigating the changing market dynamics and, in turn, pursuing a number of strategic initiatives, including the inception of new bancassurance agreements.
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.