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Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of African Reinsurance Corporation (Africa Re) (Nigeria). The outlook for both ratings has been revised to stable from negative. The ratings reflect Africa Re's improving risk-adjusted capitalisation, robust operating results and its recognised position in the African reinsurance market. A.M. Best expects further improvement in Africa Re's prospective risk-adjusted capitalisation in tandem with continuing single digit premium growth. The company's risk-adjusted capitalisation improved during 2005 due to an increase in paid-up capital and stable growth in net premiums written during the year. A.M. Best forecasts that Africa Re's operating performance will remain robust with pre-tax profits of approximately USD 21-23 million in each of the next two years (USD 20.6 million in 2005). A.M. Best expects that Africa Re's overall earnings will remain largely reliant upon investment income as underwriting performance is forecasted to remain modest with a combined ratio of approximately 97%-98% in 2006 and 2007 (97.3% in 2005). The deterioration in the loss ratio from 60.4% to 70.1% in 2005 occurred due to the company's prudent reserving methodology associated with its adoption of annual accounting and some adverse large loss experience in 2005. A.M. Best forecasts that net investment returns in 2006 and 2007 (including realised and unrealised gains/losses) will remain in line with the 2005 level of 5.9%. A.M. Best anticipates that Africa Re's consolidated gross premium written is likely to be approximately USD 310 million at year-end 2006, compared to USD 330 million in 2005, which included late reported premium income of USD 20 million. In 2007, A.M. Best forecasts that the company's consolidated gross premium written is likely to increase to approximately USD 330 million, primarily by means of developing existing business lines. For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
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A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.
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