AM Best revises Kenya Re outlook to stable
AM Best has revised its Long Term Issuer Credit Rating (Long Term ICR) from Negative to Stable for Kenya Reinsurance Corporation Limited (Kenya Re).
The rating agency explained that the revision of the outlook from the long-term ICR to stable follows corrective actions initiated by management in 2020, which should lead to a more stable underwriting performance.
He noted that the company’s actions include the non-renewal of its highly unprofitable agricultural business from the Indian subcontinent, as well as an increased emphasis on underwriting discipline and a tightening of credit control procedures. .
At the same time, the rating agency affirmed Kenya Re’s financial strength rating (FSR) of B (fair) and long-term ICR of “bb+” (fair), and maintained the outlook of the FSR. as stable.
The rating agency said the credit ratings reflect the strength of Kenya Re’s balance sheet, which it assesses as very strong, as well as its adequate operational performance, neutral business profile and weak management of credit risk. company.
Additionally, analysts noted that Kenya Re’s balance sheet strength assessment is underpinned by risk-adjusted capitalization at the highest level, as measured by Best’s capital adequacy ratio.
Capital consumption is also significantly influenced by the exposure of reinsurers to illiquid investments, such as private equity and real estate, which together account for two-fifths of its investment portfolio.
AM Best also added that the assessment also takes into account Kenya Re’s exposure to the very high levels of economic, political and financial risks associated with its main markets, as well as the company’s recent history of serious shortcomings. reserves related to agricultural activities.
Additionally, the ratings agency said management has now largely exited the agricultural business and as a result it expects reserve volatility to decline.