AM Best has reaffirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) for Continental Reinsurance Plc (CRe), based in Nigeria. The outlook for these ratings remains stable, reflecting the company’s robust balance sheet, adequate operating performance, neutral business profile, and marginal enterprise risk management.
Key Highlights of the Rating
1. Balance Sheet Strength
CRe’s financial position is underpinned by its very strong balance sheet, supported by risk-adjusted capitalisation assessed as the strongest level according to AM Best’s Capital Adequacy Ratio (BCAR).
While CRe’s BCAR scores have remained above the threshold for the strongest assessment since 2019, they have experienced volatility. Factors influencing this include:
- Rapid business growth.
- Significant devaluation of the Nigerian naira.
CRe has implemented measures to improve its capital management and is focusing on moderate growth over the medium term. However, external challenges, such as currency volatility, may continue to impact its risk-adjusted capitalisation.
To mitigate these risks, CRe has diversified its assets geographically. Notably, in 2023, the company began investing surplus assets in offshore investments, such as U.S. treasuries. By mid-2024, offshore investments accounted for nearly 20% of total investments, improving the overall credit quality of its portfolio.
2. Operating Performance
CRe’s adequate operating performance reflects its resilience amid inflationary pressures across African markets. Over recent years, return-on-equity ratios have consistently been in the low double-digits but rose to an impressive 24.6% in 2023.
Key contributors to this performance include:
- Improved non-life underwriting outcomes.
- Material foreign exchange gains driven by CRe’s long U.S. dollar position.
In 2023, the company achieved an improved combined ratio of 93.4% (compared to 97.1% in 2022), reflecting effective portfolio remediation and economies of scale.
3. Business Profile
As a composite reinsurer, CRe operates across more than 50 African countries, making it one of the most geographically diverse reinsurers on the continent. In local currency terms, the company has shown significant growth, with gross insurance revenue increasing by 30% to NGN 112.5 billion (USD 126.0 million) in 2023.
While this growth aligns with the company’s strategy, AM Best expects a more controlled approach to expansion in the future. Currency market volatility may, however, influence reported growth figures in the near term.
Risks and Challenges
CRe’s exposure to the economic, political, and financial risks of its primary African markets remains a notable challenge. However, these risks are partially offset by the company’s efforts to improve asset diversification and credit quality.
About AM Best
AM Best is a globally recognized credit rating agency specializing in the insurance industry. With operations in over 100 countries, the agency provides credit rating opinions, analytics, and news coverage tailored for the global insurance market.
For further details on this rating and related disclosures, visit AM Best’s Recent Rating Activity page.
