S&P Global Ratings revised, on November 26, 2024, the outlook for the African Reinsurance Corporation (Africa Re) from stable to positive, while confirming its global financial strength rating 'A-' for Africa Re and its South African subsidiary, African Reinsurance Corp. (South Africa) Ltd. This subsidiary benefits from an unconditional guarantee

Africa Re is well positioned to maintain its leading position in the African reinsurance market, thanks to a solid and sustainable operational performance over the next two years. This is the opinion of analysts at S&P Global Ratings, who, while maintaining their “A-” rating on the company's long-term debt, give a “positive outlook.” In other words, they could raise their ratings in a few months.

As a supranational institution, Africa Re is not subject to the control or regulation of any regulatory authority or insurance regulatory framework.

The African Reinsurance Corporation, they believe, has succeeded in mitigating currency risks associated with the volatility of the environment in which it operates across the African continent.

In addition, the adequacy of the company's capital corresponds to the maximum criteria of financial analysts, who believe that it should be the same in the next three years.

S&P Global makes the same judgment about the subsidiary African Reinsurance Corp. (South Africa), “which benefits from an unconditional guarantee”.

The positive outlook therefore reflects the expectation that Africa Re maintains its leading position in its main markets and “its solid underwriting performance” with a combined ratio (losses and expenses) close to 90% and a return on equity (ROE) of over 12%. Experts therefore also believe that Africa Re will maintain the adequacy of its capital to the extreme stress level (99.99%) of our risk-based capital model

At the end of the day, there are only two risks within two years: results below expectations and a deterioration in the credit risk associated with counterparties.

On the other hand, a more favorable scenario is emerging, if Africa Re continues to take advantage of its leading position in the market and the above assets; this, “while avoiding any unexpected loss related to its underwriting policy or asset allocation strategy”.

Africa Re maintains its market leadership position in the region thanks to its geographic and product diversification in African countries, the analysts write. This diversification makes it possible to cushion the effects of the weak economic situation in most of the markets where it operates. Africa Re's competitive position also benefits from the mandatory transfer rates of primary insurers from African countries that are shareholders of Africa Re

S&P expects the group to post profits of around $110 million to $130 million on average over the next three years. Considering that “Africa Re's strategic decision to hold its excess capital primarily in dollar-denominated assets is a logical consequence of exposure to emerging market currencies, which generally depreciate when the dollar rises.” Therefore, any movement of operating currencies against the dollar results in earnings volatility.