AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” (Fair) of East Africa Reinsurance Company Limited (EARe) (Kenya). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect EARe’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.

The company’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and benefits from its low underwriting leverage. The ratings also consider EARe’s exposure to heightened economic, political and financial system risks in Kenya, where the majority of its assets are invested. Nonetheless, following recent deterioration in the credit quality of Kenya’s government debt, the company is executing remedial actions to de-risk its investment portfolio.

EARe has a track record of adequate operating performance, with return-on-equity moderately exceeding the inflation in Kenya over the past five years. Prudent underwriting has supported improved technical performance in recent years. The company’s net/net combined ratio of 94.1% for 2023 represented a 4.5 percentage point improvement compared with 2022, as calculated by AM Best. Overall earnings remained driven by favourable investment income reflecting the high interest rates prevalent in Kenya.

EARe is a small reinsurer by global standards, with insurance service revenue of USD 33 million in 2023. The company has a presence in over 30 countries in Africa and Asia, with premium volumes derived primarily from East African markets.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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