A.M Best affirms WAICA Re ‘Stable’, says the company remains strong

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By Favour Nnabugwu 
AM Best has assigned WAICA Re’ s Financial Strength Rating, FSR is ‘Stable’ with an outlook assigned to the Long-Term ICR is ‘Negative’.
The agency removed WAICA from under review with negative implications and affirmed WAICA Re’s  (FSR) of ‘B’ (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) of ‘bb+’ (Fair).
A.M. Best says WAICA Reinsurance Corporation’s prospective earnings are expected 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, states AM Best.
The reinsurer 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 percent and 15.3percent respectively.
The credit 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.
AM Best says that the ratings have been removed from under review with negative implications as the global credit rating agency has completed its assessment of the impact of the 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.
AM Best considers WAICA Re’s business profile to be limited owing to its relatively small size and moderate geographic concentration of premiums in West Africa. The company reported gross written premiums on a consolidated basis of $214.2m in 2022. AM Best expects WAICA Re to continue to grow its premium base gradually through diversification into other markets.
WAICA Re is incorporated in Sierra Leone. Its goal is to expand capacity among members of the West African Insurance Companies Association.

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