A.M. Best Affirms Rating of Al Mohandes Insurance Company.

Business Editors

OLDWICK, NJ, U.S.A.--(BUSINESS WIRE)

Dec. 20, 2002 -A.M. Best Co. has affirmed the B++ (Very Good) financial strength rating of Al Mohandes Insurance Company, Egypt.

The rating is based on the company's very good risk-based capitalisation and robust

Very good risk-based capitalisation'The company maintains very good level of risk-based capital through a conservative balance sheet strategy. In 2002, adjusted capital and surplus increased 5% to EGP 103.3 million (USD 22.3 million) and the quality of the investment portfolio improved following the divestment of several non-performing investment funds. Asset risk is minimised by the conservative weighting of invested assets to fixed deposits and government securities at 82%.

Robust underwriting and financial performance'Mohandes reported a 15% increase in 2002 profits to EGP 19 million (USD 4.1 million), which represented a 5.4% return on assets and 18.8% return on adjusted equity. The company's profit-led underwriting strategy has resulted in a 38.5% five-year average loss ratio, although this deteriorated to 66.5% in 2002 due to an EGP 14 million (USD 3 million) business interruption claim. This claim could lead to reserve releases if successfully contested in 2003.

Challenging business environment-Mohandes is the second largest private sector insurance company in Egypt; however its market share of approximately 5% has continued to come under pressure in 2002 due to ongoing liberalisation in the sector. Strong, although receding, growth in the life portfolio of 13.6% CAGR since 1997 has enabled the company to resist persistent price competition in the non-life market, which has led to a 10% reduction in Mohandes' non-life premium since 1999.

Expectations:

- Risk-based capital will be maintained at the current rating level, supported by growth in adjusted surplus from retained earnings.

- Tight underwriting controls will return the non-life portfolio to profit in 2003. Mohandes will focus on reducing expenses through the strict control of management expenses and staff benefits.

- The company will protect its domestic share by underwriting more business with its existing clients, targeting the personal lines sector with new products and distribution channels and gradually increasing its retention levels. 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.