Pages
Sunday, July 12, 2020
Kenya Re given positive rating
By Wainaina Wambu
South African rating firm Global Credit Ratings (GCR) has given
favourable rating to Kenya Reinsurance’s (Kenya Re) financial strength.
GCR said Kenya Re reflected sound liquidity, solid business profile and
risk-adjusted capitalisation. GCR rated Kenya Re AA+ with a stable
outlook.
“The entity demonstrated a strong financial profile, while business
profile remained at intermediate levels, with small and risky presences
in foreign markets diluting entrenched strong domestic market position,”
said GCR in a statement.
GCR assessed Kenya Re’s capitalisation within strong range, even though
with unrealised property revaluation gains supporting a strong capital
growth of 13 per cent to Sh31 billion ($315 million) in the 2019
financial year up from Sh28 billion ($275 million) in 2018.
The firm said the re-insurer’s liquidity represented a credit strength -
boosted by receivable collections following implementations of cash and
carry regulations in different markets.
However, GCR warned that operating cash requirements - which rose 18 per
cent due to claims pressures - could further restrain liquidity metrics
and assessment over the medium term, amidst economic challenges
hindering cash collections.
GCR added that given the persistence of claims pressures despite prudent
underwriting policies, and likely pressure on investment income, the
re-insurer’s earning potential will represent a key rating consideration
over the medium term. The business profile of the re-insurer was
unchanged within intermediate levels, characterised by a strong presence
in Kenya diluted by limited competitiveness in foreign markets, said
the rating agency.
GCR noted that outside Kenya, the Kenya Re recorded limited activity in
multiple markets, with higher earning risks endorsed along business
growth in select markets, factors that moderated assessment by the
rating firm.
Nevertheless, GCR recognises small presences in other jurisdictions as
potential sources of diversification, given traction gained in some
markets and management endeavours to expand business in Africa,” said
GCR.
However, GCR said a rating upgrade was unlikely “over the medium term”
but said containment of earnings risk by Kenya Re could be “viewed
positively” if stability in liquidity and risk-adjusted capitalisation
were maintained.
It further warned that the Covid-19 might heighten Kenya Re’s earnings pressure.
Subscribe to:
Post Comments
(
Atom
)
No comments :
Post a Comment