LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of Société Centrale de Réassurance (SCR) (Morocco). The outlook of these Credit Ratings (ratings) remains stable.
The FSR and Long-Term ICR reflect SCR’s solid risk-adjusted capitalisation, track record of strong technical performance and good domestic business profile in Morocco. The ratings also recognise SCR’s exposure to the macroeconomic and political conditions prevailing in Morocco, its core market.
SCR’s risk-adjusted capitalisation has improved in recent years to a solid level, following strong operating performance and reductions in net underwriting risks chiefly stemming from the end of the legally required cession of business written by direct insurers in Morocco. SCR’s principal source of capital consumption remains its investment risks, as a result of an investment base heavily concentrated in Morocco, with significant exposure to domestic equities. A.M. Best expects SCR’s risk-adjusted capitalisation to remain at a solid level, sufficient to absorb the company’s prospective strategic initiatives, despite the cost associated with the explicit guarantee provided by the Moroccan state and the high dividend requirements of its main shareholder, state-owned Caisse de Dépôt et de Gestion.
SCR has a track record of strong technical performance over recent years as evidenced by a five-year average (2011-2015) non-life combined ratio of 88% (as per A.M. Best’s calculation). The company experienced continued strong non-life technical performance in 2015, realising a non-life technical surplus of MAD 207 million (2014: MAD 206 million), driven by an improved loss ratio of 54% (2014: 56%), as calculated by A.M. Best. Despite stable non-life technical results, SCR reported reduced operating profits for 2015, with profit before tax falling to MAD 217 million from MAD 502 million in 2014, following lower net investment income in the year.
SCR has a good domestic business profile as the leading reinsurer in Morocco, built on the company’s original role as the national reinsurer supporting the local market. Whilst the company faces challenges in the coming years in a context of increasing liberalisation of the Moroccan market, A.M. Best expects SCR to take appropriate strategic measures to defend its position and maintain profitable operations. Among other initiatives, SCR’s business profile is expected to be buoyed by the pivotal role the company is anticipated to play in the new natural catastrophe protection scheme in Morocco, which is expected to take effect from the beginning of 2017 as an underwriting pool managed by SCR. A.M. Best will continue to monitor the impact of SCR’s changing operational landscape and any impact this may have on the underlying rating fundamentals of the company.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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