LONDON: AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Continental Reinsurance Plc (CRe) of Nigeria, the operating holding company of the Continental Re group of companies. The outlook of these Credit Ratings is stable. The ratings reflect CRe’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management. CRe’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital position is underpinned by a conservative investment portfolio and low underwriting leverage. The assessment further considers CRe’s supportive investor base, which has demonstrated a track record of subscribing new capital to fund growth, as well as to meet increasing local regulatory capital requirements. An offsetting factor to the balance sheet strength assessment is the company’s exposure to the high levels of economic, political and financial system risks that are associated with operating in the company’s core markets. CRe’s adequate operating performance reflects its track record of modest underwriting performance, as demonstrated by its five-year (2014-2018) weighted average combined ratio of 103.0% and return on equity of 11.9% over the same period. Underwriting performance has been impacted by the company’s high expense ratio, which has remained above 47% over the past five years. Since 2016, CRe’s profitability has been supported by considerable volatility in the NGN-USD exchange rate, following the Federal Government of Nigeria’s decision to de-peg the Naira from the Dollar in 2016. In 2018, this culminated in a foreign exchange gain of NGN 1.7 billion (USD 4.8 million). CRe is a composite reinsurer with a presence across 53 countries in Africa, although premium volumes are skewed toward West African insurance markets. The company is targeting an ambitious growth strategy to enhance its presence in its core markets and expanding its footprint in territories with attractive profit potential. CRe continues to take positive steps to improve and embed risk management throughout its operations, and AM Best expects that the company will continue to evolve its risk management capabilities.