LONDON--(BUSINESS WIRE)--A.M. Best has placed under review with negative implications the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of African Reinsurance Corporation (Africa Re) (Nigeria).
These Credit Rating (rating) actions follow further analysis of the corporation’s capital structure, namely the rights of shareholders to sell their shares back to Africa Re. The unique feature of these put options highlights potential concern over the permanence of the capital structure. Africa Re’s management team has initiated a course of action that will likely address A.M. Best’s concern and result in the corporation’s ratings being affirmed. However, if this is unsuccessful, rating downgrades can be expected.
Supporting rating factors include Africa Re’s recent robust financial performance and the strong demand that the corporation has for its shares. Africa Re has a stable shareholder base composed of a diverse range of African (re)insurance companies and nation states, many of which are strategic investors. Furthermore, due to the corporation’s low level of underwriting leverage, its balance sheet strength is able to withstand a number of investors exercising their put options in a short time frame.
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