Global credit rating agency AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Continental Reinsurance Plc Nigeria, the operating holding company of the Continental Re group of companies.

The outlook of these Credit 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.