LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of ZEP-RE (PTA Reinsurance Company) (ZEP Re) (Kenya). The outlook for both ratings is stable.
The ratings of ZEP Re continue to reflect its strong risk-adjusted capitalization, solid and stable operating performance and established competitive position within its regional reinsurance market. The ratings also consider ZEP Re’s exposure to Kenya’s socioeconomic difficulties.
Although risk-adjusted capitalization deteriorated in 2013, it remains supportive of the company’s current operations and projected business plan. ZEP Re’s capital requirements increased in 2013, owing to growth in premium volume, higher investment risk appetite and the introduction of a new catastrophe modeling approach. This was partially offset by share capital increases in 2013 and 2014.
ZEP Re’s operating results are expected to remain at a good level at year-end 2014, after improving in 2013 compared with 2012. Return on capital is expected to be 11%, which is below its five-year average of 12%. The company’s results were equally supported by investment returns and underwriting results in 2013, and an increased contribution from the investment portfolio is projected for year-end 2014. Underwriting results were affected by several large claims in the property class of business in 2013, and adverse loss experience is expected to affect results in 2014. However, expense ratios are expected to improve in 2014.
ZEP Re’s competitive position continues to be strong. The company enjoys compulsory legal cessions in local and regional markets.
Negative rating actions could occur if operating performance deteriorates significantly or if ZEP Re fails to maintain risk-adjusted capitalisation at a strong level. Positive rating actions could occur if ZEP Re continues strengthening its business profile while maintaining solid risk-adjusted capitalization and stable operating performance.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilised:
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Country Risk
- Risk Management and the Rating Process for Insurance Companies
- Takaful (Shari’a Compliant) Insurance Companies
- Understanding Universal BCAR
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