The operating performance of Sierra Leone-headquartered WAICA Reinsurance Corporation (WAICA Re) is viewed as strong, considering it has reported robust return-on-equity (ROE) ratios in recent years, which have significantly exceeded the benchmark interest rates in the markets where it operates, says AM Best.
WAICA Re’s earnings are underpinned by a solid and stable technical performance, benefitting from its predominantly facultative portfolio. AM Best expects WAICA Re’s prospective earnings to remain strong, complemented by positive, albeit modest, investment returns, reflecting the low-yielding assets in which the company primarily invests.
Outlook improved
AM Best has revised WAICA RE’s Long-Term Issuer Credit Rating (Long-Term ICR) outlook to ‘Stable’ from ‘Negative’ and affirmed the company’s Financial Strength Rating (FSR) of ‘B’ (Fair) and the Long-Term ICR of ‘bb+’ (Fair). The outlook of the FSR is ‘Stable’.
The credit ratings reflect WAICA Re’s consolidated balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile, and marginal enterprise risk management.
The revision of the Long-Term ICR outlook to ‘Stable’ from ‘Negative’ reflects the improvement in WAICA Re’s balance sheet strength fundamentals.
WAICA Re’s risk-adjusted capitalisation was at the strongest level at year-end 2023, as measured by Best’s Capital Adequacy Ratio (BCAR), with an increased buffer in BCAR scores supported by a capital injection and healthy internal capital generation in 2023.
In addition, the company’s investment risk was reduced in 2023, driven by moderate investments made in bonds of excellent credit quality and significant impairment of its holdings of Ghanaian external debt, which is currently in default and in the process of restructuring, with an agreement in principle reached with Ghana’s external creditors in June 2024. Partially offsetting rating factors include WAICA Re’s exposure to significant economic, political, and financial system risks associated with the countries where it operates.
Business profile
WAICA Re is a composite reinsurer writing business in more than 90 countries. The organisation’s business profile benefits from a relatively diversified underwriting portfolio, albeit with a moderate concentration of insurance revenue in West Africa. The company reported insurance revenue of $255.7m on a consolidated basis in 2023. AM Best expects WAICA Re to continue to grow its insurance revenue gradually through diversification into other markets.
Apart from Sierra Leone, WAICA Re operates mainly in Cote d’Ivoire Gambia, Ghana, Kenya, Liberia, Nigeria, Tunisia, Zimbabwe, and the UAE, with Nigeria its biggest market in 2023 in terms of reinsurance revenue.