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A.M. Best Affirms Credit Ratings of Continental Reinsurance PlcA.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of "bbb-" of Continental Reinsurance Plc (Continental Re) (Nigeria), the operating holding company of the Continental Re group of companies. The outlook of these Credit Ratings (ratings) is stable. The ratings reflect Continental Re's very strong balance sheet strength, adequate operating performance, neutral business profile and marginal enterprise risk management (ERM). The company's balance sheet strength is supported by a strong level of risk-adjusted capitalisation, which A.M. Best expects to remain at a very strong level over the medium term. Over recent years, capital requirements have been driven by the company's aggressive growth strategy and exposure to unquoted equities. During 2017, the company has received a capital injection of USD 10 million to support the company's strategic initiatives. A.M. Best expects the company to continue to adopt a prudent capital management strategy to ensure the company's balance sheet strength remains at a very strong level. Continental Re has maintained adequate operating performance despite the challenging macro-economic environment in which the company operates. In 2016, the company benefitted from significant exchange gains, owing to the rise in the value of foreign-denominated assets relative to the Naira, and a stable investment yield. Underwriting performance deteriorated materially in 2016, with the company reporting an underwriting loss of NGN 937 million in its non-life portfolio driven primarily by a steep rise in acquisition costs and expenses. However, results for the third quarter of 2017 indicate that the company has returned to underwriting profitability. A.M. Best expects that prospective operating performance will remain adequate, with the company expected to beefit from economies of scale, as it implements its growth strategy. Continental Re maintains an established business profile in Nigeria as the sole private local reinsurer. Continental Re's business profile remains concentrated to Nigeria, with 60% of gross written premiums emanating from the local insurance market. The group continues to develop its profile across Africa through the establishment of regional subsidiaries, which act as hubs to increase its access to various markets within the continent. The company's ERM framework is marginal, given the size and complexity of its operations. The risk management framework is not yet embedded fully within the decision making process. A.M. Best has continued concerns around the company's ability to manage adverse fluctuations in its foreign currency operations. However, A.M. Best also notes that the company has taken positive steps to improve and embed risk management throughout its operations, and it is expected that the company will continue to evolve its risk management process going forward. This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases. A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
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