Kenya Re's has posted poor technical performance in recent years, demonstrated by non-life underwriting results that are materially weaker than its historical average and regional peers in 2018 and 2019, notes AM Best.
This has led the international credit rating agency to revise the outlook of the Long-Term Issuer Credit Rating (Long-Term ICR) to negative from stable and affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term ICR of “bb+” of Kenya Re. The outlook of the FSR has been maintained as stable.
The ratings reflect Kenya Re’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and weak enterprise risk management.
Kenya Re reported an unaudited non-life underwriting loss of KES2.6bn ($24.3m) in 2019, significantly higher than the loss of KES1.1bn reported in 2018. The deterioration in performance was not anticipated by AM Best and was driven primarily by the company’s books of business in the Middle East and Asia.
While the company’s net income improved to KES4.0bn (2018: KES2.3bn), this was primarily driven by a one-off unrealised gain of KES1.9bn from an investment property write-back.
Given the International Monetary Fund’s negative economic growth projection for Sub-Saharan Africa in 2020, AM Best expects operating conditions to be challenging. Failure to improve underwriting performance materially will likely result in a further negative rating action for Kenya Re.