Best Affirms Egypt’s Misr Insurance ‘A-’ Rating

A.M. Best Co. has affirmed the financial strength rating of “A”- (Excellent) of Egypt’s Misr Insurance Company with a stable outlook.

Best said it “believes Misr’s level of risk-adjusted capitalisation will deteriorate slightly at June year-end 2004 as a result of a 25 percent increase in net premiums written in 2004; however, this is likely to be partially offset by retained earnings of approximately EGP 100 million (USD 16 million).

“Prospectively, at June year-end 2005, Misr could come under pressure if net written premiums continue to grow at this rate.” However, the rating agency said that in its opinion the Egyptian market is “not of a sufficient size to continue to support such rapid growth. Misr is likely to benefit from an improved Egyptian economy in 2004 and 2005 after the devaluation of the Egyptian Pound in 2003, and as tourism recovers after recent disturbances in the region. This is likely to lead to an increase in both gross premiums written and investment returns of less than 10 percent at June year-end 2004.”

Best also noted: “Misr has a large branch network that comprises in excess of 200 offices, which is expected to help it to consolidate its position as leader in the non-life market and second-largest participant in the life market despite ongoing liberalisation, which has opened the market to new entrants.

Partially offsetting factors are Misr’s dependence on the Egyptian market for business and its requirement to distribute 70 percent of profits to the Egyptian government and company employees, which precludes a more robust increase in capitalisation.”