AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bb+” (Fair) of WAICA Reinsurance Corporation PLC (WAICA Re) (Sierra Leone). The outlook assigned to the FSR is stable, whilst the outlook assigned to the Long-Term ICR is negative.
The Credit Ratings (ratings) reflect WAICA Re’s consolidated balance sheet strength, which AM Best assesses as strong, as well as the company’s strong operating performance, limited business profile and marginal enterprise risk management.
The ratings have been removed from under review with negative implications as AM Best has completed its assessment of the impact of deterioration in economic and operating conditions in Ghana on WAICA Re’s balance sheet strength and broader credit fundamentals. However, the negative outlook assigned to the Long-Term ICR reflects pressure on the balance sheet strength assessment emanating from the company’s exposure to elevated investment risk due to its holdings of Ghanaian external debt, which is currently in default and may be subject to restructuring over the near to medium term.
WAICA Re’s risk-adjusted capitalisation was at the strongest level at year-end 2022, as measured by Best’s Capital Adequacy Ratio (BCAR), albeit with a reduced buffer in BCAR scores due to significant premium growth and deterioration in the credit quality of the company’s investments in Ghana. The assessment considers capital injection from shareholders in 2023 to strengthen the company’s balance sheet fundamentals. Partially offsetting rating factors include the company’s exposure to significant economic, political and financial system risks associated with the countries where WAICA Re operates in.
WAICA Re has a track record of strong operating performance, demonstrated by a five-year (2018-2022) weighted average combined ratio (as calculated by AM Best) and return-on-equity ratio of 87.9% and 15.3%, respectively. AM Best expects WAICA Re’s prospective earnings to remain strong, underpinned by robust technical performance, and complemented by positive, albeit modest, investment returns, reflecting the low-yielding assets in which the company primarily invests.
AM Best considers WAICA Re’s business profile to be limited owing to its relatively small size and moderate geographic concentration of premium in West Africa. The company reported gross written premium on a consolidated basis of USD 214.2 million in 2022. AM Best expects WAICA Re to continue to grow its premium base gradually through diversification into other 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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Stanislav Stoev, ACCA, CFA
Senior Financial Analyst
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