AM Best has affirmed the Financial Strength Rating (FSR) of B+ (Good) and the Long-Term Issuer Credit Rating of ‘bbb-’ (Good) for WAICA Reinsurance Corporation PLC (WAICA Re) (Sierra Leone). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect WAICA Re’s balance sheet strength – which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management.
WAICA Re’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Risk-adjusted capitalisation decreased in 2020, primarily as a result of significant growth. However, BCAR scores are expected to remain comfortably above the minimum required for the strongest assessment, supported by good organic capital generation and measured growth. The assessment considers the company’s conservative investment allocation by asset class, with the majority of the portfolio held as cash and deposits, and low level of retrocession dependence. A partially offsetting factor is the company’s exposure to the significant economic, political and financial system risks associated with the countries where WAICA Re operates, which include Nigeria, Ghana and Sierra Leone.
WAICA Re has a track-record of strong operating performance, demonstrated by a five-year (2016-2020) weighted average combined ratio and return-on-equity ratio of 88.0% and 10.6% respectively. AM Best expects WAICA Re’s prospective earnings to remain strong, underpinned by robust technical performance and complemented by positive, albeit modest, investment returns – reflecting the low-yielding assets in which the company primarily invests.
AM Best considers WAICA Re’s business profile to be limited, owing to its relatively small size and geographic concentration of business in Nigeria and Ghana. The company reported gross written premium on consolidated basis of US$102.6million in 2020. Whil AM Best expects WAICA Re to grow its premium base gradually through diversification into other markets, business is expected to continue originating primarily from Nigeria and Ghana.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries – with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.
