International insurance rating agency A.M. Best has affirmed the A (Excellent) financial strength rating of MISR Insurance Company, Egypt. The rating is based on the company's excellent capitalization, strong operating performance and the maintenance of its market leading position in the Egyptian market, stated an A.M. Best press release. Offsetting factors include the challenges the company may face in adjusting to an increasingly competitive market as it liberalizes.
At the end of June 2000, MISR maintained an excellent capital base, fully supporting the current rating level, and at the end of the period, traditional solvency was a conservative 0.5 times, thus highlighting the potential for business expansion at MISR. Capital amounted to 788.5 million Egyptian pounds ($228 million), an increase of 8.2 percent on the prior year. On an adjusted basis, capital was EP1.2 billion ($346 million). Financial flexibility remained restricted, being solely derived from the company's ultimate parent, the Egyptian government.
Competitive and soft market conditions during the financial year to June 2000 resulted in MISR reporting a moderate 1.9 percent reduction in gross premiums. On a net basis, total premiums decreased by 2.2 percent, despite the life business rise of 10.5 percent, which failed to offset the 10.9 percent reduction in non-life premiums.
Notwithstanding this, MISR's underwriting performance remained strong with both the life and non-life technical accounts reporting a positive result. The company's bottom line performance remained similarly profitable, and the return on average adjusted surplus at 14.3 percent was higher than the peer average.
The most recent market statistics show that MISR is the largest company in the domestic Egyptian market as measured by capital and surplus and premium volumes. At the end of 2000, the company had a non-life market share of 33 percent—the leading position—and a life market share of 31.6 percent, ranking it second. MISR also benefited from its long-standing relationships with its clients, high business renewal and retention rates and its position as the insurer with the largest share of government and public sector-related risks.
The government has undertaken to liberalize the Egyptian insurance market by 2003, which should result in a sale of all or part of the state-owned insurers and allow increased foreign ownership of insurance providers. This will undoubtedly intensify what is already a competitive operating environment for MISR. Although the process has and will continue to be gradual, in the longer-term the Egyptian companies will be required to continue to focus on expense reduction, product development and distribution in a bid to maintain market shares and to remain competitive.
A.M. Best expects MISR to maintain a risk-based capital level that remains supportive of the current rating level. The company's financial performance and operating ratios are expected to remain in line with the five-year average and recent trends such that the combined ratio remains competitive and below 100 percent, positive underwriting performances are reported, and the bottom line result continues to improve.
The company is forecasted to retain its position as the leading provider of direct life and non-life insurance in the Egyptian market despite economic pressures and competitive challenges associated with liberalization, according to A.M. Best. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
