OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating of B++
(Good) and issuer credit rating of "bbb" of Societe Centrale de
Reassurance (SCR) (Morocco). The outlook for both ratings is stable.
The ratings reflect SCR's excellent business position and adequate
risk-adjusted capitalization. An offsetting factor is its volatile
underwriting results.
A.M. Best believes that SCR's business position as Morocco's
national reinsurer remains excellent. This is despite the progressive
phasing out of SCR's compulsory cession following the signing of a
free trade agreement, which is likely to result in a 10% premiums
decrease to MAD 2.44 billion (USD 338 million) in 2008. SCR is forced
to cease writing compulsory life and health reinsurance in 2008,
whereas in non-life, compulsory business will commence to be phased
out from 2009 onwards. However, A.M. Best believes that the strong
growth in the foreign markets (expected to increase by 25% to MAD 395
million (USD 55 million) in 2008) and the anticipated natural
catastrophe business scheme could partially offset the loss of
compulsory cession business prospectively.
A.M. Best expects SCR's risk-adjusted capitalisation to remain
adequate, factoring higher capital requirements from an increase in
invested equities. However, a significant part of SCR's economic
capital comprises unrealized gains on investment and is thus subject
to volatility of the Moroccan stock markets. A.M. Best will monitor
the efficacy of SCR's risk management in light of higher investments
in equity. In A.M. Best's opinion, the demanding dividend requirements
(approximately 70% of after-tax earnings are distributed to its direct
parent, Caisse de Depots et de Gestion, and to the State) continue to
limit the potential for earning retention. However, the loss
absorption agreement with the Moroccan State protects SCR's balance
sheet in the medium term.
SCR's profit before tax (and before allocation to the equalization
reserve) deteriorated by 10% to MAD 372 (USD 51 million) in 2007 (with
a return on equity decreasing from 24% to 17%) as a result of the
strengthening of life mathematical reserves following a change in
mortality tables in 2006 and late notification of non-life claims by
two large cedants. The company's non-life underwriting results have
been volatile in the last five years, which is further highlighted by
a deterioration in the combined ratio by 15 percentage points to 103%
in 2007. A.M. Best expects SCR's 2008 technical results to improve to
a level similar to that of 2006, with a combined ratio below 100% as a
result of more stable reserving.
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
Charlotte Vigier, +(44) 20 7626 6264
charlotte.vigier@ambest.com
or
Fabien Duprez, +(44) 20 7626 6264
fabien.duprez@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
