AM Best Affirms Credit Ratings of Misr Insurance Company

LONDON--(BUSINESS WIRE)--
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” (Good) 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 assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also benefit, in form of lift, from MIHC’s financial strength, 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 the scores to remain comfortably above the minimum level required for the strongest BCAR 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 its concentration in Egypt, which exposes MIC’s balance sheet to potential volatility. The balance sheet strength assessment also factors in the company’s high dependence on reinsurance and Egypt’s high economic and political risks, and very high financial system risk.

MIC has a track record of adequate operating performance, demonstrated by a five-year (2017-2021) weighted average return on equity and combined ratio of 12.6% and 93.9% (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 somewhat volatile in recent years. However, for the financial year ended 30 June 2021 (fiscal-year 2021), the company delivered an improved combined ratio of 80.8% (as calculated by AM Best), supported by significant favourable prior-year reserve development and lower claims frequency during the COVID-19 pandemic. 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 position in its domestic market. The company’s gross written premium increased by 2.7% during fiscal-year 2021 to EGP 9.6 billion (USD 613.1 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 17% of fiscal-year 2021 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 use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Stanislav Stoev, ACCA

Financial Analyst

+44 20 7397 0306

stanislav.stoev@ambest.com

Jessica Botelho-Young, CA

Associate Director, Analytics

+44 20 7397 0310

jessica.botelho@ambest.com

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Jim Peavy
Director, Communications

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Source: AM Best