A.M. Best Affirms Credit Ratings of Compagnie Centrale de Réassurance
Charlotte Vigier, +44 20 7397 0270
Senior Financial Analyst
Ghislain Le Cam, CFA, FRM, +44 20 7397 0268
Christopher Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
Jim Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations
A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Compagnie Centrale de Réassurance (CCR) (Algeria). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CCR’s strong domestic business profile, track record of solid operating performance, and good risk-adjusted capitalisation. An offsetting rating factor remains the company’s concentrated exposure to the elevated economic and political risks associated with operating in Algeria.
CCR maintains a strong domestic business profile as Algeria’s national reinsurer. As a state-owned company, it benefits from compulsory cessions on all lines of business and manages various national schemes, including the natural catastrophe programme, for which it benefits from an explicit state guarantee. In 2016, CCR’s gross written premium grew by 7.4% to DZD 27.2 billion, mainly driven by growth in the domestic property, engineering and multi-risks segments. Despite growth in its international segment over recent years, CCR’s business profile remains heavily concentrated in Algeria, where the company derived 89.4% of its business in 2016. This, together with significant exposure to domestic investments, makes CCR dependent on the macro-economic and political conditions prevailing in Algeria.
CCR has experienced gradual improvement in operating performance in recent years, with profit before tax (PBT) having more than doubled since 2010, when the rate of compulsory cessions was increased to 50%. Despite the significant increase in net written premium since this regulatory change, the company has maintained its underwriting discipline, as evidenced by a five-year (2012-2016) average combined ratio of 77.4%. Continued strong technical performance, with an underwriting result of DZD 2.4 billion, and a relatively stable investment income of DZD 1.4 billion resulted in a PBT of DZD 3.8 billion in 2016, comparable to the DZD 3.7 billion reported for 2015.
CCR’s risk-adjusted capitalisation decreased in 2016, following an increase in its holdings of Algerian sovereign debt, which attract an elevated capital charge in A.M. Best’s proprietary capital model, and drive capital consumption. However, risk-adjusted capitalisation remains at a good level, with a capital base sufficient to absorb the company’s increased investment risks. CCR continues to strengthen shareholders’ equity through good earnings retention to support its business plans, which forecast a modest growth, and A.M. Best expects prospective risk-adjusted capitalisation to remain supportive of the current ratings.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper [..].
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