Best’s News & Research Service - December 09, 2020 11:14 AM (EST)
AM Best Affirms Credit Ratings of Société Centrale de Réassurance
- December 09, 2020 11:14 AM (EST)
London //BestWire// - AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Société Centrale de Réassurance (SCR) (Morocco). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect SCR’s balance sheet strength, which AM Best categorises as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
SCR’s balance sheet strength is underpinned by risk-adjusted capitalisation, which was at the strongest level at year-end 2019, as measured by Best’s Capital Adequacy Ratio (BCAR), and is supported by significant unrealised investment gains. SCR continues to benefit from an explicit guarantee provided by the Moroccan state.
However, the cost associated with this guarantee has resulted in high dividend distributions to the company’s main shareholder, state-owned Caisse de Dépôt et de Gestion, restricting internal capital generation over time. The balance sheet strength assessment also reflects SCR’s significant exposure to the high economic, political and financial system risks in Morocco, with over 95% of its assets invested domestically.
Despite challenging market conditions, SCR has continued to generate strong operating earnings in recent years, reporting solid technical profitability and good investment returns. The company’s five-year (2015-2019) weighted average return on equity stands at 12.9%. Over the same period, SCR’s weighted average non-life combined ratio of 90.3% has benefited from profitable domestic business, as well as from regular reserve releases stemming from its legacy compulsory cession book of business, which has been in run-off since 2014.
SCR retains a good market position in Morocco, with an estimated market share of 50% of ceded premium, reflecting its established role as the national reinsurer. The introduction of new compulsory direct lines of business in the Moroccan market, such as natural catastrophe insurance, and the development of a specialty lines business segment, are expected to support SCR’s domestic growth prospectively. Whilst SCR writes the majority of its business domestically, it has also been developing its international presence, supported by the establishment of representative offices in Egypt, Rwanda and the Ivory Coast. In 2019, SCR’s international portfolio accounted for a quarter of the company’s total premium income.
AM Best considers SCR’s enterprise risk management (ERM) capabilities and framework to be appropriate given the company’s risk profile and the complexity of its operations. Nevertheless, AM Best expects SCR to remain focused on reinforcing its risk and capital management capabilities and embedding its ERM initiatives.
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 analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.