August 23, 2024 – AM Best Conferred Ethio Re’s Rating as a Financial Strength Rating of B (Fair) and a Long-Term Issuer Credit Rating of “bb” (Fair): Outlooks Stable.
Ethiopian Reinsurance S.C a.k.a. Ethio-Re would like to advise its shareholders and business partners that AM Best has assigned a Financial Strength Rating of B (Fair) and a Long-Term Issuer Credit Rating of “bb” (Fair) to Ethiopian Reinsurance S.C. (Ethio Re) (Ethiopia). The outlook assigned to these Credit Ratings (ratings) is stable, as of 22nd of August, 2024.
The ratings reflect Ethio Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, business profile and marginal enterprise risk management.
Ethio Re’s balance sheet strength is underpinned by its risk-adjusted capitalization that is comfortably at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects Ethio Re to maintain healthy capital buffers in excess of the strongest threshold as it continues to execute its strategic growth plans, benefiting from internal capital generation and capital injections from its shareholders. An offsetting rating factor includes Ethio Re’s exposure to the high levels of economic risk and very high levels of political and financial system risks in Ethiopia, where the vast majority of its business is sourced and all of its invested assets are located. In AM Best’s opinion, these risks are mitigated partially by the company’s conservative investment portfolio by asset class, with 84% of total investments held in cash and deposits at year-end June 2023, therefore limiting Ethio Re’s exposure to market risks and the ongoing re-structuring of Ethiopian sovereign Eurobonds.
Ethio Re has a track record of adequate operating performance, demonstrated by a five-year (2019-2023) weighted average return on equity (ROE) of 16%. AM Best notes that ROE should be viewed in light of Ethiopia’s moderate levels of interest rates, which have averaged approximately 7% over the same period. Underwriting performance has been solid, albeit somewhat volatile, evidenced by a five-year weighted average combined ratio of 97.3%. Investment income remains the primary driver of overall earnings.
Management assures that the rating was one of the “Big Five Pillars” of the newly designed strategic plan “Vision 2030”, and finalized as per its time scale. Ethio-Re would also like to seize this opportunity to thank all its business partners for your understanding and cementing our strong business relationship which contributed for the results achieved.
On behalf of the management, employees and Board of Directors we would like to seize this opportunity to announce the first rating from AM Best and its rating score as milestone in the company’s history to its stakeholders and to thank you for your usual cooperation and support extended to Ethio-Re for its stable performance.