LONDON--(BUSINESS WIRE)--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 are directly owned by Misr Insurance Holding Company, and form part of the consolidated Misr Group.
The ratings reflect MLIC’s balance sheet strength, which AM Best categorises as 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, 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 risk-adjusted capitalisation benefits from unrealized 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 high interest rate environment. An additional positive rating factor to the assessment includes MLIC’s prudent reserving approach. Regulatory restrictions limit the company’s investment options, and whilst the company maintains a conservative investment portfolio with approximately 69% of invested assets held in cash and fixed income, 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 1.2 billion for the period 1 July 2017 to 30 June 2018 (FY 2018), equivalent to a return on equity of 13%. The majority of the company’s earnings can be attributed to investment income, indicative of the company’s large asset base and Egypt’s current high base rate of interest. Despite this, there is pressure on the company’s expense base as a result the inflationary environment and high commission rates, which are common in Egypt’s insurance market.
MLIC has an excellent business profile in its domestic market. The company’s gross written premiums increased by 21% during FY 2018 to EGP 4.0 billion, reinforcing its market-leading position in Egypt’s life insurance sector with a market share of approximately 40%. Whilst the company is concentrated in Egypt and focused on individual and group savings products, management remain cognizant of changing market dynamics and consequently, MLIC is currently pursuing a number of strategic initiatives.
The company has clear risk appetite and tolerances in place throughout the key areas of the business. 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, AM Best continues to monitor the impact these external factors may have on the company’s operations.
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