Misr Insurance, the largest non-life insurer in Egypt, has posted a five-year (2014-2018) average return on equity of 12% and a five-year average combined ratio of 92%, an operating performance assessed as adequate, according to A.M.Best.
The company's operating profits declined by 5% to EGP2.3bn ($128m) during the financial year ended 30 June 2018 (FY2018), with increases in non-technical earnings offsetting declines in underwriting returns. The majority of the company’s operating profits can be attributed to investment income, indicative of the company’s large asset base and Egypt’s high interest rate environment.
For FY2018, the company delivered a combined ratio of 103% compared with 81% in the prior year. The poor technical performance was a result of large losses on property and aviation lines of business, as well as higher inflation-linked attritional losses in the motor line of business.
Misr Insurance has a market leading position in its domestic insurance market. The company’s gross written premium increased by 21% to EGP8.6bn for FY2018, reinforcing its dominant position in Egypt’s non-life insurance sector with a market share of 51%.
Whilst business is concentrated in Egypt, the company benefits from geographical diversification stemming from its regional inwards facultative business, which accounted for approximately 20% of premium revenue.
A.M. Best says that the company has clear risk appetite and tolerances in place throughout the key areas of the business, which has contributed to the improving risk culture within Misr Insurance. However, political and financial instability, as well as social unrest, have the potential to disrupt economic conditions in Egypt.
A.M. Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Misr Insurance. The outlook of these credit ratings is stable. Misr Insurance and Misr Life Insurance are directly held by state-owned Misr Insurance Holding. A.M. Best categorises Misr Insurance’s balance sheet strength as very strong.
Whilst the company maintains a conservative investment portfolio with approximately 82% of invested assets held in cash and fixed income, regulatory restrictions in Egypt limit the company’s investment options. Offsetting rating factors also include a moderate reliance on reinsurers and historical reserve volatility.