OLDWICK, N.J. - (Business Wire) A.M. Best Co. has assigned a financial strength rating of B (Fair) and issuer credit rating of “bb+” to East Africa Reinsurance Company Limited (EARe) (Kenya). The outlook for both ratings is stable. The ratings of EARe reflect its solid level of risk-adjusted capitalisation and stable overall profitability. Offsetting factors are the company’s vulnerable competitive market position, restricted opportunities for growth and marginal underwriting profitability.
In A.M. Best’s opinion, EARe’s current level of risk-adjusted capitalisation is solid and benefits from a relatively good level of capital and surplus. The company’s capital position has been strengthened over the past three years through the full retention of profits. Although dividend payments are expected in future years, A.M. Best anticipates that risk-adjusted capitalisation will be maintained at a solid level in both 2009 and 2010. Furthermore, EARe’s capital position benefits from adequate outwards reinsurance protection and a conservative investment portfolio.
Although EARe has achieved a relatively stable return on equity within the range of 7.4% and 10% between 2006 and 2008, profits have been reliant on investment income. Small underwriting profits have been achieved in recent years; however, the company’s combined ratio has been above 100% in two of the past three years.
A.M. Best believes that EARe maintains a relatively weak competitive position within both its domestic Kenyan reinsurance market and overseas. Alongside the legal cessions commanded by several of EARe’s rival reinsurers, price-based competition has historically been a challenge and limited growth opportunities exist. Furthermore, A.M. Best considers that the company has a moderately concentrated business profile, with a little over 40% of premium income generated from its top five cedants.
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The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
A.M. Best Company
Analysts
Timothy Prince, +(44) 20 7626 6264
timothy.prince@ambest.com
or
Carlos Wong-Fupuy, +(44) 20 7626 6264
carlos.wong-fupuy@ambest.com
or
Public Relations
Jim Peavy, +(1) 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
