LONDON--(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb” of Société Centrale de Réassurance (SCR) (Morocco). The outlook for both ratings remains stable.

The ratings reflect SCR’s adequate risk-adjusted capitalisation and good business profile in the North African markets. An offsetting rating factor is the potential volatility in SCR’s future technical performance as the company increases the share of business it underwrites in the open market in Morocco and overseas. The ratings also factor in the explicit support provided by the Moroccan state through a comprehensive loss absorption agreement.

A.M. Best views SCR’s current level of risk-adjusted capitalisation as adequate, although it diminished in 2011 following a decrease of the market values gains on the company’s investment portfolio. Given the significance of unrealised gains on investments in SCR’s economic capital, the company is exposed to fluctuations in its capital position due to financial market volatility. SCR’s prospective level of capitalisation is also limited by the high dividend requirements of its main shareholder, state-owned Caisse de Depôt et de Gestion. However, A.M. Best believes these factors are offset by the explicit support provided by the Moroccan state through a comprehensive loss absorption agreement covering the integrality of the company’s activities.

A.M. Best expects SCR’s pre-tax earnings to be around MAD 400 million (USD 45 million) in 2012 (MAD 581 million [USD 68 million] in 2011), reflecting a continuing reduction in business written, as the legal cession is progressively being phased out by 2013, and a slight deterioration in technical performance as the company increases its share of non-life business underwritten in the open market in Morocco and abroad, which should increase its earnings volatility.

SCR maintains a strong competitive position as the leading reinsurer in the Moroccan market. In A.M. Best’s view, the company’s business profile should further benefit from its pivotal role in the new natural catastrophe protection system whose implementation is currently under project in Morocco. A.M. Best expects the additional premium income that should be generated from this natural catastrophe reinsurance scheme to offset over the medium term the decrease in business volume due to the gradual phasing out of the legal cessions regime in Morocco. A.M. Best will continue to monitor the impact of these prospective business changes on SCR’s risk-adjusted capitalisation.

Upward rating movement could occur if A.M. Best were to positively revise its current evaluation of Morocco’s country risk tier or if SCR were to demonstrate a controlled growth of its open market business combined with a strong technical performance.

Downward rating pressure could occur if SCR’s development of open market business were to impact negatively its technical fundamentals, if the country risk of Morocco as assessed by A.M. Best were to deteriorate, or if the conditions of the current explicit state guarantee were to become less favorable to the company.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Understanding Universal BCAR”; “Evaluating Country Risk”; “Risk Management and the Rating Process for Insurance Companies”; and “Evaluating Non-Insurance Ultimate Parents”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company.Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best Company, Inc.
Ghislain Le Cam
Senior Financial Analyst
+(44) 20 7397 0268
ghislain.lecam@ambest.com
or
Mahesh Mistry
Associate Director
+(44) 20 7397 0325
mahesh.mistry@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com

Source: A.M. Best Company, Inc.