Global credit rating agency AM Best affirmed its B++ (Good) Financial Strength Rating on Egypt's state-owned Misr Life Insurance Company, and kept its stable outlook. The credit agency also affirmed its "bbb" rating on Misr Life Insurance's Long-Term Issuer Credit Rating (Long-Term ICR). The ratings reflect Misr Life's balance sheet strength, which AM Best categorises as very 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 Egyptian company, due to its strategic importance to group Misr Insurance Holding Company. Misr Life's balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR), AM Best said. The company's risk-adjusted capitalisation is supported by considerable amounts of soft capital, including discretionary bonus reserves and unrealised gains on its real estate portfolio, it added. AM Best expects Misr Life's BCAR scores to remain comfortably above the minimum required for the strongest assessment, supported by good internal capital generation. Despite the company's relatively conservative investment allocation by asset class, AM Best said it considers the quality of assets to be weak given the concentration in Egypt. The balance sheet strength assessment also factors in Egypt's high economic risk, and very high financial system and political risks, the credit rating agency noted. Misr Life has a track record of adequate operating performance, as evidenced by a five-year (2016-2020) weighted average return on equity (ROE) of 15.8 percent. Overall performance has been improving in recent years, with the company reporting a ROE of 21.0 percent for the year-ended 30 June 2020 (financial-year 2020). Underwriting performance continues to contribute positively to the company's overall profitability, with life results accounting for approximately half of net income over the past five years. AM Best expects that the successful execution of Misr Life's strategic growth plan will continue to support sustainable operating performance. The company has an excellent business profile in its domestic market. Its gross written premium increased by 12.7 percent during financial-year 2020 to 5.1 billion Egyptian pounds ($313.1 million), supporting its market-leading position in Egypt's life insurance sector with a market share of approximately one-third. Management is proactively pursuing a number of strategic initiatives to enhance Misr Life's business profile. The company recently entered into a new bancassurance agreement with one of Egypt's largest banks and is developing its direct sales force to improve its distribution capabilities across the country.
