Best Affirms Al Mohandes ‘B++’ Ratings

A.M. Best Co. announced that it has affirmed the financial strength rating of “B++” (Very Good) and the issuer credit rating of “bbb” of Egypt’s Al Mohandes Insurance Company with a stable outlook.

“The ratings reflect Mohandes’ very good risk-adjusted capitalisation and solid operating performance. A partially offsetting factor is the increasing competition that exerts pressure on the company’s market position,” said Best. It expects “Mohandes’ risk-adjusted capitalisation to remain very good at year-end June 2006, factoring the high concentration of investments in Egypt.”

Best forecasts that “an increase in investment income will lead to an improvement in the life technical result to EGP 5 million (USD 0.9 million) at year-end June 2006 (compared to EGP 4 million [USD 0.7 million] in 2005). The company’s strict measures to reduce administration costs, in A.M. Best’s opinion, are likely to lead to a combined ratio of approximately 90 percent-95 percent at year-end June 2006, resulting an overall good profit (before transfers to reserves) of EGP 22 million (USD 3.8 million) at year-end June 2006. Mohandes’ 2005 profits significantly improved to EGP 29 million (USD 5 million) as a result of significant reserve releases.”

Best also noted that in its opinion “increasing competition from existing domestic companies and foreign entrants into the Egyptian market exerts pressure on Mohandes’ market position. As a consequence, the company is likely to continue to focus on small and medium-sized entities where there is less competition and to introduce new life products to defend its market share.”