East Africa Reinsurance's B rating affirmed by AM Best

East Africa Reinsurance’s B rating affirmed by AM Best | Insurance Business Asia

Reinsurance

East Africa Reinsurance’s B rating affirmed by AM Best

Stable outlook reflects solid capitalization and improved underwriting

Reinsurance

By
Kenneth Araullo

AM Best has affirmed the financial strength rating of B (Fair) and the long-term issuer credit rating of “bb+” (Fair) for East Africa Reinsurance Company Limited (EARe), based in Kenya. The outlook for both ratings is stable.

The ratings are based on EARe’s balance sheet strength, which AM Best classifies as very strong. The ratings also take into account the company’s adequate operating performance, limited business profile, and marginal enterprise risk management.

The company also benefits from low underwriting leverage. However, the ratings factor in EARe’s exposure to elevated economic, political, and financial risks in Kenya, where most of its assets are concentrated. In response to the recent deterioration in the credit quality of Kenya’s government debt, the company is implementing actions to de-risk its investment portfolio.

EARe has a history of adequate operating performance, with return-on-equity outpacing inflation in Kenya over the past five years. Prudent underwriting has contributed to improved technical performance, with a net/net combined ratio of 94.1% for 2023, representing a 4.5 percentage point improvement from 2022, according to AM Best.

Overall earnings continue to benefit from strong investment income, driven by the high interest rates in Kenya.

With insurance service revenue of $33 million in 2023, EARe is considered a small reinsurer on a global scale. The company operates in more than 30 countries across Africa and Asia, with the bulk of its premium income coming from East African markets.

In other recent ratings developments, AM Best has also affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) for Stonefort Reinsurance SA, a Luxembourg-based subsidiary of HOCHTIEF Aktiengesellschaft.

HOCHTIEF, a major construction firm headquartered in Germany, is majority owned by ACS, Actividades de Construcción y Servicios, SA. The outlook for these credit ratings remains stable.

Stonefort Reinsurance has maintained a strong and stable operating performance over the years, primarily due to solid underwriting results. From 2019 to 2023, the company achieved a five-year weighted average combined ratio of 79.4%, as calculated by AM Best.

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