2013-12-06 17:31:03 -
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of ZEP-RE (PTA Reinsurance Company) (ZEP-RE) (Kenya). The outlook for both ratings remains stable.
The ratings of ZEP-RE reflect its strong risk-adjusted capitalisation, solid and consistent operating performance and established competitive position within its regional reinsurance market.
Several anticipated capital injections, coupled with a good retention of earnings in 2013, are expected to sustain risk-adjusted capitalisation at a sufficiently strong level to support a projected annual rise in gross written premium of approximately 20% in the near term.
Operating results for 2013 are expected to remain solid, albeit lower than the pre-tax profit of USD 11.7 million reported in 2012. Net
earnings as at the third quarter of 2013 decreased by 33% to USD 8 million due to ZEP-RE’s exposure to a high incidence of large single risk losses. Nonetheless, a more benign claims environment during the fourth quarter of 2013 and higher investment income, driven by an expanded asset base, are expected to support ZEP-RE’s overall performance for the full year.
ZEP-RE’s good competitive standing in the southern and eastern regions of Africa is enhanced by its privileged access to business. Although ZEP-RE is entitled to accept 10% of all treaty business ceded in some of its markets, the company is not unduly reliant on these cessions to support its expansion.
Upward rating pressure could occur if ZEP-RE continues to demonstrate profitable growth over the long term whilst maintaining risk-adjusted capitalisation at a supportive level. A decline in the company’s financial profile, either through a deterioration in operating results, quality of its retrocessionaires and/or weakening risk-adjusted capitalisation could result in negative pressure on ZEP-RE’s ratings.
Additionally, an erosion in the economic conditions and business environment in the countries where ZEP-RE operates could negatively impact the ratings.
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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