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FOR IMMEDIATE RELEASE
LONDON - JULY 22, 2016 12:10 PM (EDT)
A.M. Best has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Compagnie Centrale de Réassurance (CCR) (Algeria). The outlook for each rating remains stable.
The ratings reflect CCR’s strong domestic business profile, track record of good operating performance and adequate risk-adjusted capitalisation. An offsetting rating factor is the company’s concentrated exposure to the elevated economic and political risks associated with operating in Algeria.
CCR has a strong domestic business profile as Algeria’s national reinsurer. As a state-owned company, it benefits from compulsory cessions on all lines of business and manages various national schemes, including the natural catastrophe programme, for which it benefits from an explicit state guarantee. In 2015, CCR’s gross written premium (GWP) grew by 13.6% to DZD 25.3 billion from DZD 22.3 billion in 2014, mainly driven by growth in the domestic property and aviation segments, alongside good international growth. However, CCR’s business profile remains heavily concentrated in Algeria, where the company derived in excess of 90% of GWP in 2015, and is, as a result, dependent on the macroeconomic conditions prevailing in the country.
CCR has experienced consistent improvement in operating performance in recent years, with profit before tax (PBT) having more than doubled since 2010, when the rate of compulsory cessions was increased to 50%.
Despite the significant increase in net written premium since 2010, the company has maintained its underwriting discipline, as evidenced by a five-year average (2011-2015) combined ratio of 75.8%. Continued strong technical performance, with an underwriting result of DZD 2.3 billion and improved investment income of DZD 1.4 billion, served to increase CCR’s PBT to DZD 3.7 billion in 2015 compared with DZD 3.5 billion in 2014.
CCR’s risk-adjusted capitalisation remains adequate to absorb the company’s underwriting and investment risks, and the company continues to strengthen shareholders’ equity through good earnings retention. A.M. Best expects prospective risk-adjusted capitalisation to remain supportive of the current ratings despite the company’s invested asset base in Algeria, which attracts an elevated risk profile and consequently drives capital consumption.
An offsetting rating factor remains CCR’s concentrated exposure to economic and political risks associated with Algeria, where the company derives the majority of its business and maintains its investment portfolio. CCR’s planned expansion in Asia and the Middle East and North Africa region is expected to bring some diversification, although international business is anticipated to account for less than 15% of total premiums in the medium term. A.M. Best will continue to monitor developments in Algeria and assess any impact on the company.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.
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