A.M. Best Affirms Ratings of Ghana Reinsurance Company Limited

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B (Fair) and issuer credit rating of “bb” of Ghana Reinsurance Company Limited (Ghana Re) (Ghana). The outlook for both ratings remains stable.

The ratings of Ghana Re reflect its excellent level of risk-adjusted capitalisation and good operating performance. These strengths are offset by Ghana Re’s weakened, albeit stabilizing business profile and high amount of premium debtors. The ratings also consider Ghana Re’s exposure to the high political, economic and financial system risks associated with its operation in sub-Saharan Africa.

Ghana Re’s level of risk-adjusted capitalisation has remained at an excellent level, supported by retained earnings. Going forward, risk-adjusted capitalisation is expected to be maintained at a sufficiently strong level to support Ghana Re’s business plans.

Ghana Re’s operating performance remained at a good level with GHC 8.8 million, despite the significant losses from the floods that occurred in Accra in October 2011. A pre-tax profit of approximately GHC 10 million is anticipated in 2012, which is underpinned by a lower claims environment and decreasing expenses resulting from a number of insurers non renewing business through the special quota share arrangement.

In 2011, Ghana Re’s business volume stabilised. Previously, premiums have been declining since the repeal of the compulsory legal cessions in 2008, despite the company’s efforts to retain business by introducing special quota share arrangements that offered high commissions. In 2012, Ghana Re is expected to return to growth and to report consolidated gross written premiums of approximately GHC 60 million (2011: GHC 49 million). Growth in non-life premiums is driven by the expanding oil and gas industry and related infrastructure projects.

Although the volume of Ghana Re’s outstanding debtors has fallen since the removal of the compulsory cessions, their size relative to the company’s balance sheet and written premiums remains a concern. Premium volume from outstanding debtors represented 56% of gross written premiums at year-end 2011 (2010: 57%). In A.M. Best’s opinion, adequate procedures are not yet in place to improve premium collection.

Positive rating pressures may arise if there are improvements in Ghana Re’s business profile whilst maintaining a strong level of risk-adjusted capitalisation and good underwriting performance. Downward rating pressures may be triggered by a worsening of Ghana Re’s risk-adjusted capitalisation or deterioration in its business profile. In addition, an increase in the country risk profile of Ghana may also have a negative impact on its ratings.

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: “Catastrophe Analysis in A.M. Best Ratings”; “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; and “Evaluating Country Risk”. Best’s Credit Rating Methodology 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.

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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


A.M. Best Company, Inc.
Anna Bender, +(44) 20 7397 0306
Financial Analyst
Carlos Wong-Fupuy, +(44) 20 7626 0287
Senior Director, Analytics
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
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