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 Compagnie Centrale de Réassurance (CCR) (Algeria). The outlook for both ratings is stable.
The ratings reflect CCR’s good local business profile, strong risk-adjusted capitalisation and solid underwriting performance. Offsetting factors include a high degree of geographic concentration in terms of business origination and investments, and an enterprise risk management (ERM) programme that is in the early stage of development.
In A.M. Best’s view, CCR has a strong domestic business position as Algeria’s national reinsurer. A.M. Best believes that this leading position should further be strengthened in the coming years as the volume of business written by the company will benefit from the September 2010 change that increased to 50% (from 5% or 10%, depending on the type of risks) the rate of compulsory cession to CCR. In light of this development, A.M. Best expects CCR’s gross written premiums to increase by about 30% in 2011.
During 2010, new accounting principles were introduced (SCF) that meant that CCR, along with all other Algerian companies, had to restate its 2009 results. This change in local rules resulted in a 2009 restated net profit of DZD 201 million, against DZD 590 million published in 2009, mainly due to a loss on the company’s investment in Med Re.
CCR’s technical profitability improved in 2010 due to a lower frequency and severity of losses, which resulted in a strong 42% loss ratio, down from 53% in 2009.
CCR’s risk-adjusted capitalisation benefited from its 2010 solid results and remained very strong. Going forward, A.M. Best expects the company’s capital levels to remain supportive of the current rating, notably thanks to a contained dividend policy with a pay-out ratio below 10%.
The ratings also factor the country risk of Algeria, which is classified as Tier 5 by A.M. Best, where CCR operates and originated 93% of its gross written premiums in 2010. Furthermore, A.M. Best views CCR’s ERM framework as being at an early stage of development, and expects the company to maintain its efforts to improve it in the next few years.
The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers.” Methodologies can be found at www.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.
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