Global ratings agency AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” (Good) from “bbb” (Good) and affirmed the Financial Strength Rating of B++ (Good) of ZEP-RE (PTA Reinsurance Company) (ZEP-RE) (Kenya).
Best confirmed that the outlook of these ratings is stable.
The agency said that the ratings reflect ZEP-RE’s balance sheet strength, which Best assesses as very strong.
The agency also highlighted the firm’s strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Moreover, the upgrading of the Long-Term ICR reflects the agency’s revision of ZEP-RE’s ERM assessment to appropriate from marginal, following management’s actions to strengthen its risk management capabilities.
Throughout the last few years, the business has taken “robust steps” to improve its underwriting results, whilst also reducing its exposure to investment risk.
Best also noted that it considers ZEP-RE’s risk management framework to be appropriate given the size and complexity of its operations, due to its risk management capabilities remaining closely aligned with its risk profile.
Best also highlighted how ZEP-RE has a strong operating performance assessment.
The company reported a five-year weighted average return-on-equity ratio (ROE) of 7.2% (2018-2022).
The agency also noted that ROE should be viewed in the context of ZEP-RE’s reporting currency (USD), which somewhat limits the impact of high inflation in many African markets on the company’s reported net income, as well as its high levels of capitalization.
ZEP-RE operates as a composite reinsurer across Africa, with a focus on countries of the Common Market for Eastern and Southern Africa (COMESA), as well as the Conférence Interafricaine des Marchés d’Assurances (CIMA) regions.
