A.M. Best Co. announced that it has affirmed the financial strength rating of “A-” (Excellent) of Nigeria’s African Reinsurance Corporation and assigned a stable outlook.
“The rating reflects Africa Re’s leading market position in Africa, enhanced capitalisation and strong operating performance,” said Best. “Offsetting factors are Africa Re’s relatively small capital base and its restricted investment performance.”
Best noted that the company is primarily focused on the African continent, “where it holds a leading market position. Africa Re’s expansion into the Middle East and India, combined with rate increases in several African markets, resulted in strong growth with consolidated gross premiums increasing by 56 percent in 2003.” Best said it expects continued premium growth to be approximately 15 percent in 2004 as the premium rates stabilize in the African markets.
African Re also increased its equity capital by 50 percent in 2003, Best noted, and further capital injections are planned for 2004. “Africa Re’s absolute capital base remains relatively small compared to international reinsurers but sufficient to support its business strategy,” the bulletin added.
Best said it “expects Africa Re’s underwriting performance to improve in 2004, leading to a non-life combined ratio of approximately 86 percent (89.7 percent in 2003). The 3.1 percentage points deterioration of this ratio in 2003 was caused primarily by two large losses in North Africa (including the Algerian earthquake). Investment returns remained limited given that the majority (91 percent) of invested assets is held in fixed terms cash deposits. However, the company is planning a gradual shift towards higher yielding fixed income securities.”
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