Société Centrale de Réassurance (SCR) has maintained a strong operating performance as is illustrated by a five-year (2019-2023) weighted average return on equity of 11.0%, according to AM Best.
The global credit rating agency says that SCR’s earnings have been driven by solid investment returns, with a five-year (2019-2023) weighted average investment yield (including gains) of 5.8%, and supported by good underwriting performance.
SCR’s weighted average non-life combined ratio of 91.3% over 2019-2023 reflects the profitability of the domestic Moroccan portfolio and the favourable reserve development stemming from SCR’s legacy compulsory cessions business. In recent years, the company has faced major claims, with exposure to earthquakes in Turkiye and Morocco, as well as floods in the United Arab Emirates; however, the impact on SCR on a net basis has been mitigated through an appropriate retrocession programme.
Prospectively, AM Best expects SCR’s underwriting and investment returns to support a strong operating performance.
Ratings affirmed
AM Best has affirmed SCR’s Financial Strength Rating of ‘B++’ (Good) and the Long-Term Issuer Credit Rating of ‘bbb’ (Good). The outlook of these credit ratings is ‘Stable’.
The ratings reflect SCR’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Balance sheet strength
SCR’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). SCR’s BCAR scores benefit from the company’s prudent technical reserve margins. The assessment factors in SCR’s high earnings distributions, in the form of dividends to its main shareholder, Caisse de Dépôt et de Gestion (CDG), a state-owned investment vehicle for the Kingdom of Morocco, and as remuneration of the explicit guarantee provided by the Moroccan state, which partially restricts earnings retention. The balance sheet strength assessment also considers SCR’s significant asset concentration to Morocco, where it holds over 95% of its investments.
Market profile
SCR has a solid market position in Morocco, reflecting its established role as the leading national reinsurer. This strong domestic position partially mitigates the company’s limited presence in the global reinsurance market.
In 2023, SCR reported a gross written premium of MAD3.7bn ($376m), of which two-thirds were generated domestically. SCR continues to develop its international presence, with its expansion supported by a broadening of distribution networks through the opening of strategically located representative offices and new partnerships.