Zep-Re gets top credit rating on State support

Regional reinsurance company Zep-Re has been given a triple A rating by rating agency Global Credit Ratings (GCR), meaning it is in the best position to repay its long-term debt.

It is the highest rank of creditworthiness, with the reinsurer’s rating rising from the previous second place of AA+ that is assigned to firms with strong balance sheets.

The company which gets up to 40 percent of its business in Kenya gets preferential treatment and tax exemptions in its markets in the Common Market for Eastern and Southern Africa (Comesa) regional bloc.

“Zep-Re’s credit profile derives uplift from a fairly diversified membership base, coupled with continued preferential treatment in the form of mandatory cessions and tax exemptions,” GCR said.

ZEP-Re’s chief executive Hope Murera said the ratings upgrade reflects the firm’s commitment to drive greater insurance penetration across Africa as mandated by its foundation by Comesa.

“We are extremely proud to have received this rating upgrade and of the signal it sends to our stakeholders across the continent,” Ms Murera said in a statement.

The reinsurer has a demonstrated track record of shareholder support through capital injections that helped it to register a five-year compound annual growth rate of 13 percent in capital base.

GCR gave the company a stable outlook on expectations that the reinsurer will maintain very strong capitalisation, strong liquidity and intermediate earnings.

Zep Re’s earnings hit a seven year low of Sh1 billion in 2018 and marked a 57.7 percent drop from Sh2.4 billon posted the previous year.

During the review period, Zep Re registered an underwriting deficit, driven by higher claims experience on the back of increased frequency of medium-sized claims as well as an increase in foreign exchange losses.

GCR expects earnings to remain exposed to market related risks, given weaknesses in target markets.