LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” of East Africa Reinsurance Company Limited (EARe) (Kenya). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect EARe’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
EARe’s balance sheet strength is underpinned by risk-adjusted capitalisation that was at strongest level at year-end 2018, as measured by Best's Capital Adequacy Ratio (BCAR). AM Best expects risk-adjusted capitalisation to be maintained at the strongest level prospectively, supported by relatively low underwriting leverage and good internal capital generation. Offsetting factors in the balance sheet strength assessment include the company’s modest capital base and its limited financial flexibility. The ratings also consider the company’s significant exposure to the high economic, political and financial system risks in Kenya, as over 95% of EARe’s assets are invested domestically and a significant proportion of underwriting revenue is sourced locally.
With profit after tax ranging from KES 373 million to KES 616 million between 2014 and 2018, the company has generated a good and relatively stable average return on equity of 14.0%. Operating performance is largely driven by investment income, which accounted for approximately 60% of profit before tax over the past five years. In 2018, EARe reported a net profit after tax of KES 616 million (2017: KES 602 million), supported by solid contributions from its life reinsurance business and stable investment results.
EARe’s competitive position is restricted due to its modest size, with gross written premium of KES 4 billion (USD 40 million) in 2018. The company has a limited market position in the regional reinsurance market compared with its peers, several of which benefit from mandatory cessions. Whilst EARe enjoys a good level of diversification by business lines, its profile is concentrated toward a single market, with approximately two thirds of premium emanating from Kenya.
This press release relates to Credit Ratings that have been published on AM 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 AM 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. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.