2013-12-20 17:55:02 -
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of Kenya Reinsurance Corporation Limited (Kenya Re) (Kenya). The outlook for both ratings remains stable.
The ratings of Kenya Re reflect its strong risk-adjusted capitalisation, solid operating performance and established profile in the regional reinsurance market.
Kenya Re is expected to maintain risk-adjusted capitalisation at a strong level, supported by growth in retained earnings. In 2013, shareholders’ funds are expected to increase by approximately 10% from the KSh 14.6 billion reported in the previous year, enabling the company to adequately support its business plan, which incorporates premium growth of approximately 10% in the near term. Kenya Re’s risk-adjusted capital position
is supported by the improving credit quality of its retrocession panel. In 2013, 83% of the company’s retrocessionaires maintained a secure rating, compared to 58% in 2012.
Kenya Re’s operating performance remains solid, albeit largely dependent on investment earnings. Despite the impact of the Nairobi airport fire loss during the second half of the year, Kenya Re is expected to produce a pre-tax profit similar to the KSh 2.9 billion reported in 2012.
Kenya Re maintains an established profile in the regional reinsurance market. The company continues to benefit from compulsory legal cessions, which account for approximately 35% of gross written premium. Kenya Re’s remaining business is sourced, on a voluntary basis, throughout Africa, Asia and the Middle East.
Positive rating actions are unlikely at this time. A decline in the company’s operating performance, credit quality of its retrocessionaires or risk-adjusted capitalisation to levels outside of A.M. Best’s expectations are likely to result in negative rating actions.
Additionally, erosion in the economic conditions of the countries where Kenya Re operates could also result in downward rating pressure.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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