Ratings agency AM Best has given East Africa Reinsurance Company (EA Re) a stable outlook for growth in profit and management of costs.
AM Best assigned EA Re’s financial strength B (Fair) rating while the company’s credit outlook got a bb+ score. Both ratings have a stable outlook which is a vote of confidence in the reinsurer’s ability to pay claims.
“The ratings reflect EA Re’s supportive levels of risk-adjusted capitalisation, continued profitability of its underwriting operations and positive developments in the implementation of its enterprise risk management framework,” said AM Best.
The 2014 annual report shows EA Re reported gross premiums of S.48 billion, a 23 per cent increase from Sh2.82 billion a year before. Its profit after tax stood at S72 million, a 17 per cent increase from S66 million reported over the same period.
The management said the increase in profitability and its low cost of operations are due to careful selection of what to insure and a cautious investment approach.
“If you look at our development in the last couple of years, you will note that our growth in gross premium income and profitability has been very robust and well above the industry average. Our customer-focused and service-oriented approach to business has won us more business.
A disciplined underwriting approach and portfolio selection has enabled us achieve superior technical results,” EA Re chief exective Peter Maina told the Business Daily.
Analysts at AM Best, however, said the EA Re’s rating would drop if the rating agency lowers the rating for Kenya.
“Additionally, negative rating movement may arise due to an increase in Kenya’s perceived country risk.”
KCB suffered a similar fate in late October when SandP lowered the bank’s credit rating to negative from a stable outlook in response to the downgrading of Kenya credit rating due to escalating debt.
AM Best has also rated listed Kenya Re and assigned the reinsurer a strong BBB credit rating in January.
Kenya Re’s rating by AM Best was an upgrade from bbb-. AM Best said at the time the upgrade on Kenya Re was a bet that the majority State-owned reinsurance company would maintain its profitability momentum and market share.
Data from the Insurance Regulatory Authority (IRA) shows that as at the second half of 2015 Kenya Re accounted for 69 per cent of the general reinsurance business while EA Re took up 22 per cent of covers.
Continental Re accounted for the remaining nine per cent.
SOURCE: BUSINESS DAILY