LONDON--(BUSINESS WIRE)--A.M. Best has removed from under review with negative implications and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of African Reinsurance Corporation (Africa Re) (Nigeria). The outlook assigned to these Credit Ratings (ratings) is stable.
The rating actions follow a change in the corporation’s capital structure, namely the removal of the rights of Class A shareholders to sell their shares back to Africa Re. The unique feature of these historical put options previously caused A.M. Best concern regarding the permanence of the corporation’s capital structure.
The ratings reflect Africa Re’s balance sheet strength, which A.M. Best categorises as strongest, as well as its favorable business profile, strong operating performance and appropriate enterprise risk management framework.
Africa Re's risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), comfortably exceeds the level required to support A.M. Best’s strongest assessment. Prospectively, A.M. Best expects robust earnings to support increasing capital requirements that result from the corporation’s expansion within its core African markets. Additionally, the corporation is likely to continue to benefit from its strong financial flexibility, which has been demonstrated in recent years through its capital-raising initiatives.
Africa Re's underwriting performance has been consistently strong, as evidenced by its five-year average combined ratio of 90% (2012-2016). Whilst underwriting performance in 2017 is expected to worsen due to a number of large losses, the corporation’s combined ratio is not expected to breach 100%. The corporation’s good underwriting performance is attributable to its geographically well-spread insurance portfolio and evolving risk management, which has resulted in strengthened risk controls and monitoring capabilities to support operations. The underwriting performance of South African and international business remains a partly offsetting rating factor. Underwriting performance further benefits from Africa Re’s robust market position, which is supported by its privileged access to business through its compulsory legal cessions, strong reputation in local markets and long-standing relationships with stakeholders.
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