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Standard&Poor’s Ratings Services has affirmed its long-term ‘BBB+’ counterparty credit and insurer financial strength ratings on Nigeria-based composite reinsurer African Reinsurance Corp (Africa Re). The outlook is stable.

“The ratings reflect Africa Re’s very good competitive position, good operating performance, and strong capitalization,” says Standard&Poor’s credit analyst Mark Coleman. “These positive factors are offset by the risks inherent in the continuing rapid expansion of the business in South Africa and the associated strain on capital and local management.”

Sovereign risk concerns are substantially mitigated by the retention of Africa Re’s assets offshore with securely rated institutions; its diverse presence in more than 50 countries; and its widely subscribed ownership, of which 16% is currently held by ‘AAA’ rated supranationals.

The stable outlook reflects Standard & Poor’s expectation that the continuing growth in South Africa will not undermine Africa Re’s credit profile. Southern Africa currently represents approximately 50% of total premium income and will be one of the main drivers of Africa Re’s competitive position and earnings performance prospectively.

Gross premiums written are expected to increase by 15-20% in 2005, before stabilising as the growth in the South African market recedes. The combined ratio is expected to remain at approximately 96-98% in 2005, equating to an ROR of about 7%.

Capitalisation is expected to remain strong provided that Africa Re is successful in its plans to raise an additional US$12mn of capital in the third quarter of 2005. However, Standard & Poor’s retains concerns that capitalisation could be impaired if the company’s growth continues to exceed expectations.