A.M. Best Affirms Rating of MISR Insurance Co.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--April 9, 2002

A.M. Best Co. has affirmed the A (Excellent) financial strength rating of MISR Insurance Company, Egypt.

The rating is based on the company's excellent capitalisation, strong operating performance and the maintenance of its market leading position in the Egyptian market. Offsetting factors include the challenges the company may face in adjusting to an increasingly competitive market as it liberalises.

Excellent capital strength maintained. At the end of June 2000, MISR maintained an excellent capital base as demonstrated through Best's Capital Adequacy Ratio and on a traditional solvency basis. Both of these measures fully supported the current rating level, and at the end of the period, traditional solvency was a conservative 0.5 times, thus highlighting the potential for business expansion at MISR. Capital amounted to EGP 788.5 million (USD 228 million), an increase of 8.2% on the prior year. On an adjusted basis, capital was EGP 1.2 billion (USD 346 million). Financial flexibility remained restricted, being solely derived from the company's ultimate parent, the Egyptian government.

Strong financial performance reported. Competitive and soft market conditions during the financial year to June 2000 resulted in MISR reporting a moderate 1.9% reduction in gross premiums. On a net basis, total premiums decreased by 2.2%, despite the life business rise of 10.5%, which failed to offset the 10.9% reduction in non-life premiums. Notwithstanding this, MISR's underwriting performance remained strong with both the life and non-life technical accounts reporting a positive result. The company's bottom line performance remained similarly profitable, and the return on average adjusted surplus at 14.3% was higher than the peer average.

Well-established market position and strong market share. The most recent market statistics show that MISR is the largest company in the domestic Egyptian market as measured by capital and surplus and premium volumes. At the end of 2000, the company had a non-life market share of 33%--the leading position--and a life market share of 31.6%, ranking it second. MISR also benefited from its long-standing relationships with its clients, high business renewal and retention rates and its position as the insurer with the largest share of government and public sector-related risks.

Competitive pressures continue. The government has undertaken to liberalise the Egyptian insurance market by 2003, which should result in a sale of all or part of the state-owned insurers and allow increased foreign ownership of insurance providers. This will undoubtedly intensify what is already a competitive operating environment for MISR. Although the process has and will continue to be gradual, in the longer-term the Egyptian companies will be required to continue to focus on expense reduction, product development and distribution in a bid to maintain market shares and to remain competitive.

Expectations:

-- Maintenance of a risk-based capital level that remains supportive of the
current rating level.

-- The company's financial performance and operating ratios remain in line with
the five-year average and recent trends such that the combined ratio remains
competitive and below 100%, positive underwriting performances are reported,
and the bottom line result continues to improve.

-- The company will retain its position as the leading provider of direct life
and non-life insurance in the Egyptian market despite economic pressures and
competitive challenges associated with liberalisation.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.