Business Wire
LONDON–(BUSINESS WIRE)–A.M. Best Europe – Rating Services Limited
has affirmed the financial strength rating of B++ (Good) and issuer
credit rating of “bbb” of Société Centrale de Réassurance (SCR)
(Morocco). The outlook for both ratings remains stable.
“Risk Management and the Rating Process for Insurance Companies”
The ratings reflect SCR’s adequate risk-adjusted capitalisation and
good business profile in the North African markets. An offsetting
rating factor is the potential volatility in SCR’s future technical
performance as the company increases the share of business it
underwrites in the open market in Morocco and overseas. The ratings
also factor in the explicit support provided by the Moroccan state
through a comprehensive loss absorption agreement.
A.M. Best views SCR’s current level of risk-adjusted capitalisation as
adequate, although it diminished in 2011 following a decrease of the
market values gains on the company’s investment portfolio. Given the
significance of unrealised gains on investments in SCR’s economic
capital, the company is exposed to fluctuations in its capital
position due to financial market volatility. SCR’s prospective level
of capitalisation is also limited by the high dividend requirements of
its main shareholder, state-ownedCaisse de Depôt et de Gestion.
However, A.M. Best believes these factors are offset by the explicit
support provided by the Moroccan state through a comprehensive loss
absorption agreement covering the integrality of the company’s
activities.
A.M. Best expects SCR’s pre-tax earnings to be around MAD 400 million
(USD 45 million) in 2012 (MAD 581 million [USD 68 million] in 2011),
reflecting a continuing reduction in business written, as the legal
cession is progressively being phased out by 2013, and a slight
deterioration in technical performance as the company increases its
share of non-life business underwritten in the open market in Morocco
and abroad, which should increase its earnings volatility.
SCR maintains a strong competitive position as the leading reinsurer
in the Moroccan market. In A.M. Best’s view, the company’s business
profile should further benefit from its pivotal role in the new
natural catastrophe protection system whose implementation is
currently under project in Morocco. A.M. Best expects the additional
premium income that should be generated from this natural catastrophe
reinsurance scheme to offset over the medium term the decrease in
business volume due to the gradual phasing out of the legal cessions
regime in Morocco. A.M. Best will continue to monitor the impact of
these prospective business changes on SCR’s risk-adjusted
capitalisation.
Upward rating movement could occur if A.M. Best were to positively
revise its current evaluation of Morocco’s country risk tier or if SCR
were to demonstrate a controlled growth of its open market business
combined with a strong technical performance.
Downward rating pressure could occur if SCR’s development of open
market business were to impact negatively its technical fundamentals,
if the country risk of Morocco as assessed by A.M. Best were to
deteriorate, or if the conditions of the current explicit state
guarantee were to become less favorable to the company.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Key criteria utilised include:
“Understanding Universal BCAR”; “Evaluating Country Risk”; “Risk
Management and the Rating Process for Insurance Companies”; and
“Evaluating Non-Insurance Ultimate Parents”. Best’s Credit Rating
Methodology can be found atwww.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a
link to required disclosures: A.M. Best Europe – Rating Services
Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M.
Best Company. Founded in 1899, A.M. Best Company is the world’s oldest
and most authoritative insurance rating and information source. For
more information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Contacts
A.M. Best Company, Inc.
Ghislain Le Cam
Senior Financial Analyst
+(44) 20 7397 0268
ghislain.lecam@ambest.com
or
Mahesh Mistry
Associate Director
+(44) 20 7397 0325
mahesh.mistry@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com
.
