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FOR IMMEDIATE RELEASE
LONDON - JANUARY 31, 2019 11:28 AM (EST)
AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” of Kenya Reinsurance Corporation Limited (Kenya Re) (Kenya). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Kenya Re’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and weak enterprise risk management (ERM).
Kenya Re’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed as strongest. Offsetting balance sheet strength factors include uncertainties related to the company’s natural catastrophe exposure and the very high financial system risk associated with operating in Kenya. AM Best expects Kenya Re’s risk-adjusted capitalisation to remain at the strongest level over the longer term benefitting from robust retained earnings. The company has delivered an average return on capital and surplus of 15% over the past five years (2013-2017), considerably ahead of average inflation, which has been in the region of 7% per annum. Investment income was the primary contributor to profit over this period, whilst the average combined ratio was 96%. AM Best expects investment returns to trend lower compared with recent years over the coming years.
Kenya Re’s business profile benefits from a very strong market position in Kenya where the company enjoys mandatory cessions of 20% and generates in the region of 53% of its gross written premium. However, this is offset by a significantly weaker competitive market position elsewhere.
While AM Best acknowledges management’s efforts to improve risk management, Kenya Re’s ERM is developing from a low base, and AM Best believes that the risk management function’s ability to evaluate measures relevant to financial strength and performance, generate corporate actions, and influence management decisions is only emerging. Furthermore, governance concerns are raised over the dismissal and subsequent reinstatement of the managing director.
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 Understanding 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.
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