A.M. Best Affirms Ratings of Continental Reinsurance Plc

OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating of B
(Fair) and issuer credit rating of "bb+" of Continental Reinsurance
Plc (Continental Re) (Nigeria). The outlook for both ratings is
stable.

The ratings reflect Continental Re's inadequate risk management,
lack of security in its retrocession panel and significant execution
risk in the company's post-consolidation business plan. Mitigating
factors remain the company's robust risk-adjusted capitalisation and
strong operating performance.

A.M. Best considers Continental Re's risk management as inadequate
given that the company does not internally employ any formalized
methodology in monitoring or assessing its catastrophe and
accumulation exposures. A.M. Best also has particular concerns about
the reserving methodology adopted by Continental Re since the company
does not specifically reserve for incurred but not reported (IBNR)
losses with limited internal application of recognised actuarial
methods used to establish reserves. A shortfall of approximately NGN
200 million (USD 1.7 million) in its total non-life technical reserves
has also been indicated by independent actuaries. Moreover,
Continental Re's retrocession programme continues to be undermined by
a significant percentage being ceded to non-rated retrocessionaires or
retrocessionaires with unsecure ratings.

Furthermore, A.M. Best has concerns over the significant execution
risk of Continental Re's post-consolidation plan in utilising the
recently injected capital for its business expansions and the
effectiveness of the new management structure in strategically
implementing the plan.

A.M. Best believes that Continental Re's risk-adjusted
capitalisation is likely to remain robust in the near future, mainly
as a consequence of the NGN 10 billion (USD 80 million) capital
injection. In A.M. Best's view, Continental Re's operating performance
remains stable and strong, with post-tax profits increasing from NGN
215 million (USD 1.1 million) in 2006 to NGN 818 million (USD 5.8
million) in 2007. The increase is due to significant growth in
investment income as a result of an increase in investment assets
through the injection of capital.

For Best's Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals
and health care system providers. For more information, visit
www.ambest.com.

A.M. Best Co.
Analysts
Kenneth Yue, +(44) 20 7626 6264
kenneth.yue@ambest.com
or
Mahesh Mistry, +(44) 20 7626 6264
mahesh.mistry@ambest.com
or
Public Relations
Jim Peavy, +(1) 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com

Copyright Business Wire 2008