AM Best Affirms Credit Ratings of Société Centrale de Réassurance

LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Société Centrale de Réassurance (SCR) (Morocco). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect SCR’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

SCR’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). SCR’s risk-adjusted capitalisation is supported by significant unrealised investment gains and notable identified margins in technical provisions that attract equity credit in BCAR. Capital consumption in the BCAR is weighted toward asset risk, although AM Best expects SCR’s recent initiatives to partially de-risk the investment portfolio to contribute to strengthened risk-adjusted capitalisation prospectively. The balance sheet strength assessment also reflects SCR’s significant asset concentration to Morocco, with over 95% of its assets invested domestically, which reduces the assessment of asset quality. SCR continues to benefit from an explicit guarantee provided by the Moroccan state. However, the terms of this guarantee in part have resulted in high dividend distributions to the company’s main shareholder, Caisse de Dépôt et de Gestion (CDG), a state-owned investment vehicle for the Kingdom of Morocco, partially restricting internal capital generation over time.

Historically, SCR has reported strong results with a five-year (2017-2021) weighted average return on equity of 13.7%. The company’s earnings have been driven by solid investment returns, with a five-year (2017-2021) weighted average investment yield of 5.8%, and supported by good underwriting performance. SCR’s weighted average non-life combined ratio of 91.7% over the past five years reflects the profitability of the domestic Moroccan portfolio and benefits from favourable reserve development stemming from SCR’s legacy compulsory cessions business. AM Best expects SCR’s underwriting and investment returns to support strong operating performance prospectively.

SCR has a solid market position in Morocco, reflecting its established role as the national reinsurer. This strong domestic position partially mitigates the company’s limited presence in the global reinsurance market. In 2021, SCR reported gross written premium of MAD 2.6 billion (USD 286 million), of which 75% was generated domestically. SCR continues to develop its international presence, with this expansion supported by the opening of strategically located representative offices and new partnerships to gain market access.

AM Best considers SCR’s ERM capabilities and framework to be appropriate given the company’s risk profile and the complexity of its operations. AM Best expects SCR’s risk and capital management capabilities will be subject to ongoing developments as the company implements its ERM initiatives.

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