LONDON–(BUSINESS WIRE)–AM Best revised the outlook from stable to negative and affirmed the financial strength rating of B+ (good) and the long-term issuer credit rating of “bbb-” (good) of WAICA Reinsurance Corporation PLC (WAICA Re) ( Sierra Leone).
The credit ratings (ratings) reflect the strength of WAICA Re’s balance sheet, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and marginal management of business risks.
The revised outlook from negative to stable reflects pressure on WAICA Re’s balance sheet strength, following the deterioration of the company’s risk-adjusted capitalization, driven by significant business growth over the past 24 months.
WAICA Re’s risk-adjusted capitalization, however, remained at the highest level at the end of 2021, as measured by Best’s capital adequacy ratio (BCAR), but with a reduced margin to absorb shock losses. potential. The assessment of balance sheet strength also takes into account the company’s prudent allocation of investments by asset class, with the majority of the portfolio held in cash and deposits, and a low level of reliance on retrocession. Partially offset rating factors include the company’s exposure to significant economic, political and financial risks associated with the countries in which WAICA Re operates, including Nigeria, Ghana and Sierra Leone, as well as a relatively high insurance claims.
WAICA Re has a track record of strong operational performance, demonstrated by a five-year (2017-2021) weighted average combined ratio (as calculated by AM Best) and a return on equity ratio of 88.4% and 12.4 %, respectively. AM Best expects WAICA Re’s earnings potential to remain strong, underpinned by strong technical performance and complemented by positive, albeit modest, investment returns reflecting the lower yielding assets in which the company primarily invests.
AM Best considers WAICA Re’s business profile to be limited due to its relatively small size and the geographic concentration of its business in Nigeria and Ghana. The company reported gross written premiums on a consolidated basis of USD 153.3 million in 2021. While AM Best expects WAICA Re to gradually expand its premium base through diversification into other markets, business is expected to continue to come primarily from Nigeria and Ghana.
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