AM Best Assigns Ratings to Mohandes Insurance Company
AM Best has assigned a Financial Strength Rating (FSR) of B (Fair) and a Long-Term Issuer Credit Rating (ICR) of “bb” (Fair) to Mohandes Insurance Company (Mohandes), an established insurer in Egypt. Additionally, AM Best has assigned the Egypt National Scale Rating (NSR) of aaa.EG (Exceptional) to the company. The outlook for all these Credit Ratings (ratings) has been assessed as stable.
Evaluation of Mohandes’ Ratings and Financial Position
The assigned ratings are based on AM Best’s comprehensive assessment of Mohandes’ financial standing, which is supported by a combination of factors, including its balance sheet strength, operating performance, business profile, and enterprise risk management (ERM). While the company benefits from a solid capital base and strong internal capital generation, it also faces challenges such as reliance on reinsurance and exposure to Egypt’s economic and political landscape.
Balance Sheet Strength
Mohandes’ balance sheet strength has been rated as strong, primarily due to its risk-adjusted capitalisation at the highest level, as determined by Best’s Capital Adequacy Ratio (BCAR). This strong capitalisation is expected to remain stable over time, given the company’s consistent internal capital generation. However, some factors weigh on the assessment, including Mohandes’ high dependency on reinsurance partners, as well as the significant financial system risk in Egypt, which is characterized by volatility and uncertainty.
Despite these challenges, the company’s solid risk-adjusted capitalisation serves as a key advantage. The financial position is further strengthened by disciplined underwriting and prudent investment strategies, which help mitigate market uncertainties and sustain long-term stability.
Operating Performance and Profitability
Mohandes has demonstrated an adequate operating performance over the past five years (2020-2024). Its weighted average return-on-equity (ROE) stood at 25.5%, while its combined ratio averaged 97.3% over the same period. These figures indicate a generally stable financial performance despite the broader economic challenges affecting Egypt.
Investment income is the primary contributor to the company’s earnings, accounting for nearly 79% of pre-tax profits for the fiscal year ending on June 30, 2024. This is largely driven by Egypt’s high interest rate environment, which has bolstered investment returns. However, AM Best notes that the elevated inflation rates in Egypt must be taken into account when evaluating ROE, as they may influence profitability and asset valuation.
Business Profile and Market Position
Mohandes Insurance Company has a long-standing presence in the Egyptian insurance industry and holds an estimated market share of approximately 3% in the non-life insurance sector. While this market share reflects a meaningful presence, the company’s operations remain confined to Egypt, limiting its business expansion potential on a global scale.
The company’s business portfolio is relatively diversified on a gross premium basis, covering multiple lines of insurance. However, on a net premium basis, the business remains concentrated in the motor insurance segment. This concentration could expose Mohandes to higher underwriting risk and claims volatility associated with the motor insurance sector.
Despite these limitations, the company benefits from a strong brand presence, a loyal customer base, and well-established relationships with local businesses. These factors provide stability and support ongoing efforts to expand its product offerings and improve market positioning.
Enterprise Risk Management (ERM) and Strategic Development
Mohandes’ enterprise risk management (ERM) framework is currently in an evolving stage. In recent years, the company has made notable efforts to enhance its risk management capabilities by introducing new risk assessment models, improving internal controls, and increasing oversight mechanisms. However, further development is necessary to fully integrate and embed a comprehensive risk management strategy within the organization.
AM Best emphasizes the importance of continued investment in risk management practices, particularly in areas such as reinsurance dependency, asset liability management, and regulatory compliance. Strengthening ERM capabilities will be essential for Mohandes to navigate evolving market conditions and sustain long-term financial stability.
Industry Context and Economic Considerations
Egypt’s insurance industry operates within a unique economic and regulatory landscape, characterized by both opportunities and challenges. The country’s financial system carries high levels of risk, primarily due to inflationary pressures, currency fluctuations, and broader political uncertainties. These factors can impact the insurance sector’s profitability and investment performance.
Nonetheless, Egypt’s insurance market continues to show resilience, with increasing demand for insurance products driven by a growing middle class, government-led infrastructure projects, and rising awareness of risk protection. As a key player in this market, Mohandes has the potential to leverage these trends and enhance its business operations.
AM Best’s Ratings and Their Significance
The credit ratings assigned by AM Best provide an independent assessment of Mohandes Insurance Company’s financial strength and ability to meet its policyholder obligations. The stable outlook associated with these ratings indicates that the company is expected to maintain its current financial standing, barring any unforeseen economic disruptions or operational challenges.
For stakeholders, including policyholders, investors, and regulators, these ratings serve as an important benchmark for evaluating Mohandes’ financial health and risk profile. The company’s B (Fair) Financial Strength Rating and “bb” (Fair) Long-Term Issuer Credit Rating reflect a moderate level of stability, while the Egypt National Scale Rating of aaa.EG (Exceptional) underscores its strong position within the local market.
