East Africa Reinsurance Company (EARe) has been recognized for strengthening its balance sheet and improving its operating performance. AM Best, a prominent credit rating agency, has affirmed EARe’s Financial Strength Rating of B (Fair) and its Long-Term Issuer Credit Rating of bb+ (Fair) with a stable outlook.
AM Best’s assessment of EARe’s balance sheet strength is very strong, supported by its risk-adjusted capitalization, which is at the strongest level according to Best’s Capital Adequacy Ratio. The company’s conservative investment allocation by asset class and low underwriting leverage also contribute to its solid balance sheet. However, it is important to note that EARe faces significant economic, political, and financial system risks in Kenya, where the majority of its assets are invested.
In terms of operating performance, EARe has demonstrated adequacy over the past five years, with a weighted average return-on-equity (ROE) ratio of 10%. This performance is notable considering Kenya’s moderate inflation levels of around 6% during the same period. While EARe’s life operations have generally been profitable, its non-life business recorded a breakeven underwriting performance, representing over 70% of total premiums. On a positive note, the company’s investment operations have contributed to earnings, with a five-year weighted average net investment return of 9%, excluding gains.
EARe is relatively small in size compared to global reinsurers, with gross written premiums of USD 37 million in 2022. However, its presence extends across more than 30 countries in Africa and Asia, with a focus on East African markets.
This reaffirmation by AM Best highlights EARe’s continued commitment to enhancing its financial standing and operational efficiency. The company’s focus on strengthening its balance sheet, maintaining adequate operating performance, and expanding its geographic footprint positions it well for future growth and resilience in the reinsurance industry.
As a reputable credit rating agency, AM Best’s assessment lends credibility to EARe’s standing within the market. It provides stakeholders, including clients, investors, and business partners, with valuable insights into the company’s financial strength, risk management practices, and overall creditworthiness.
Moving forward, EARe will likely harness the stability provided by these ratings to further consolidate its position in the East African and Asian markets. With its ongoing commitment to prudent risk management and sustainable growth, EARe is poised to navigate the challenges of the reinsurance landscape and seize opportunities for continued success.
Disclaimer: This article is intended for informational purposes only. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency or organization.
