AM Best affirms Continental Re’s B+ rating
Ratings agency AM Best has affirmed the financial strength rating of B+ (good) and the long-term issuer credit rating of bbb- of Continental Reinsurance Plc Nigeria (CRe), the operating holding company of the Continental Re reinsurance group of companies.
It said the outlook of these credit ratings is stable and they reflect CRe’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.
AM Best said CRe benefits from a supportive investor base, which has subscribed new capital to fund growth and meet increasing regulatory capital requirements in recent years. However, CRe has significant exposure to the high levels of economic, political and financial system risk that are associated with operating mainly within the Africa region.
CRe’s adequate operating performance reflects its modest overall profitability combined with volatile underwriting performance, as demonstrated by its five-year (2015-2019) weighted average combined ratio of 103.9%, which ranged between 92.7% and 117.8%.
Technical performance has been negatively impacted by the company’s high expense ratio, which has remained above 47% in each of the past five years, as well as by the material devaluation of the Nigerian naira against the US dollar in 2016 and 2017. Overall operating profitability has been modest when factoring in local inflationary conditions.
As CRe continues to execute its growth plan, AM Best expects the company’s prospective operating performance to benefit from a reduced expense ratio as a consequence of economies of scale.
