LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) 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 are directly owned by Misr Insurance Holding Company (MIHC), and form part of the consolidated Misr Group.
The ratings reflect MLIC’s balance sheet strength, which A.M. Best categorises as strong, its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also factor in the financial strength of the Misr Group, and MLIC’s strategic importance and material contribution to the profile and earnings of the group.
The company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed as strongest. The company’s balance sheet is enhanced by its real estate portfolio for which market values are significantly higher than its net book value, and benefits from the company’s prudent approach to reserving. Interest rate risk on the company’s savings products is mitigated by a modest level of guarantee and Egypt’s high interest rate environment. Furthermore, its balance sheet is sufficient to cover modest guarantees attached to life savings products, along with commitments to future bonus payments. MLIC has benefitted from notable unrealised fair value gains and foreign currency translation gains since the Egyptian pound was freely floated in November 2016. A.M. Best expects strong internal capital generation to support the company’s strategic initiatives in the medium term.
MLIC has generated consistently improving earnings over the past seven years, driven by a combination of strong investment income, new business generation and stable lapse rates. The company reported a pre-tax profit of EGP 820 million for the financial year ending 30 June 2017, equivalent to a return on equity of 15%. Expense management is one of the company’s key initiatives and A.M. Best considers this to be particularly relevant given the inflationary operating environment. MLIC is already beginning to see the effects of these changes, highlighted by its expense ratio falling to 29% for the 2017 financial year, compared with 32% in the prior year.
MLIC has an excellent business profile in its domestic market. The company’s gross written premium increased by 19% in the 2017 financial year to EGP 3.3 billion, reinforcing its market leading position in Egypt’s life insurance sector with a market share of 40%. Whilst the company is concentrated in Egypt and focused on individual and group savings products, management is continually looking to explore new opportunities.
Management has a good understanding of the key risks facing the company; nevertheless, the formal development of its ERM framework has gathered pace over the past year. Political and financial instability, as well as social unrest, have the potential to disrupt economic conditions in Egypt. Despite MLIC’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, in particular the high inflationary environment.
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