AM Best Affirms Credit Ratings of Continental Reinsurance Plc

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December 15, 2020 1:03 PM EST

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LONDON--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Continental Reinsurance Plc (CRe) (Nigeria), the operating holding company of the Continental Re group of companies. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect CRe’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.

CRe’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). CRe benefits from a supportive investor base, which has subscribed new capital to fund growth and meet increasing regulatory capital requirements over recent years. CRe has significant exposure to the high levels of economic, political and financial system risk that are associated with operating mainly within the African region.

CRe’s adequate operating performance reflects its modest overall profitability combined with volatile underwriting performance, as demonstrated by its five-year (2015-2019) weighted average combined ratio of 103.9%, which ranged between 92.7% and 117.8%. Technical performance has been negatively impacted by the company’s high expense ratio, which has remained above 47% in each of the past five years, as well as by the material devaluation of the Nigerian Naira against the U.S. dollar in 2016 and 2017. Overall operating profitability has been modest when factoring in local inflationary conditions, demonstrated by a five-year weighted average return on equity of 12.0%, supported by investment returns in excess of 7% over the same period. As CRe continues to execute its growth plan, AM Best expects the company’s prospective operating performance to benefit from a reduced expense ratio as a consequence of economies of scale.

CRe is a composite reinsurer with a presence across 53 countries in Africa, although premium volumes are skewed toward West African insurance markets. The company has an ambitious growth strategy to enhance its presence in its core markets and expand its footprint in territories with attractive profit potential.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data provider specialising in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.