Best Affirms Rating for Al Mohandes Insurance Co.

January 26, 2005

A.M. Best Co. has affirmed the financial strength rating of B++ (Very Good) of Al Mohandes Insurance Company (Mohandes) (Egypt). The outlook remains stable.

Mohandes’ prospective risk-adjusted capitalization is likely to remain solid. The company’s recently announced share issue (one for four bonus issue) is likely to be funded by its 2004 profits (EGP 21.1 million (USD 3.4 million)) and a release from general reserves.

Nevertheless, A.M. Best anticipates an increase in capital and surplus to approximately EGP 154 million (USD 24.9 million) by year-end 2005, gross of shareholder dividends, which are payable in arrears. A good profit of approximately EGP 22 million (USD 3.6 million) is forecast at year-end June 2005, resulting from improved investment income, maintenance of a disciplined approach to underwriting and a modest increase in net premiums written (3%).

A partially offsetting factor is the pressure being placed on Mohandes’ non-life underwriting profile by new entrants to the market in Egypt, which already has excess capacity. The company is likely to focus on niche areas such as new takaful (Islamic) products to counter the growing threat to its market position.

It is anticipated the company’s life portfolio will grow by approximately 5% in 2005, as the company increases its underwriting on group schemes in the expanding Egyptian life market.

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