AM Best has affirmed the financial strength rating of B+ (Good) and the long-term issuer credit rating of “bbb-” (Good) for Continental Reinsurance Plc (CRe), a Nigeria-based reinsurer. The outlook for both ratings remains stable.
The affirmed ratings reflect CRe’s balance sheet strength, assessed as very strong by AM Best, along with its adequate operating performance, neutral business profile, and marginal enterprise risk management.
Over the past five years (2019–2023), CRe has consistently maintained AM Best scores that exceed the threshold for a strongest assessment. However, volatility in risk-adjusted capitalization has been observed due to rapid business growth and the significant devaluation of the Nigerian naira.
To address these challenges, CRe has enhanced its capital management capabilities and is targeting more moderate growth over the medium term. Despite these measures, external factors such as fluctuating foreign exchange (FX) rates could inflate underwriting risk exposures and negatively impact capitalization.
Another factor affecting the balance sheet is CRe’s high exposure to economic, political, and financial risks in its primary operating markets across Africa. Nevertheless, AM Best acknowledges the company’s efforts to mitigate these risks, particularly through improved geographic diversification of assets.
In 2023, CRe began investing surplus assets offshore, with a focus on US treasuries. As of mid-2024, offshore investments accounted for nearly 20% of total investments, enhancing the credit quality of the company’s portfolio.
AM Best’s assessment of adequate operating performance reflects CRe’s profitability in inflationary environments across its key markets. Over recent years, return-on-equity ratios have trended in the low double digits but increased to 24.6% in 2023.
This growth was driven by improved non-life underwriting performance and material FX gains resulting from the company’s long US dollar position.
CRe also reported an improved combined ratio of 93.4% in 2023, compared to 97.1% in 2022. This improvement reflects the success of portfolio remediation efforts and greater economies of scale. Despite inflationary pressures and volatile currency markets, CRe has maintained overall profitability.
As a composite reinsurer, CRe operates in over 50 countries across Africa. The company has pursued significant growth in recent years, with gross insurance revenue rising 30% in 2023 to NGN 112.5 billion, equivalent to approximately US$126.0 million.
While this growth aligns with CRe’s strategic goals, AM Best notes that currency market volatility may affect reported growth levels in the near term.
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