AM Best, the global credit ratings agency, has upgraded the Financial Strength Rating to C+ (Marginal) from C (Weak) and the Long-Term Issuer Credit Rating to “b-” (Marginal) from “ccc” (Weak) of Millî Reasürans Türk Anonim Şirketi (Milli Re) (Türkiye), with the outlook of these ratings being stable.
According to AM Best, the ratings reflect Milli Re’s balance sheet strength, which the agency assesses as weak, as well as its operating performance, neutral business profile and marginal enterprise risk management.
The agency also explained that the upgrades reflect an improvement in Milli Re’s consolidated balance sheet strength fundamentals, notably through increased risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR).
From what we understand, the improvement in Milli Re’s BCAR was underpinned by good earnings retention, along with a robust retrocession programme, which protected the firm’s balance sheet following the February 2023 Kahramanmaraş earthquakes.
Readers will be aware that Milli Re has substantial exposure to Türkiye, which is where the company is headquartered and where the majority of its business and assets are located.
In AM Best’s view, economic, political and financial system risks in Türkiye remain high. But, whilst the economic conditions continue to be a challenge, volatility has reduced since the May 2023 elections, and the central bank has taken actions to control the very high inflation and de-valuation of the currency.
What we should also remember, is that Milli Re has a strong market position in Türkiye, being the only locally capitalised, privately owned reinsurer.
As well as this, the firm’s profile also benefits from its ownership of Anadolu, which is among the top three largest companies in the country’s direct insurance market.
