Africa Re Reports Good Profits in Dollars Amid Sharp Depreciation of its African Trading Currencies

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African Reinsurance Corporation (Africa Re), the leading pan-African reinsurance group, has shown resilience in its core business by achieving a net underwriting profit of US$ 78.7 million in 2015, up by 14.6 per cent from the US$ 68.6 million of the previous year. The combined ratio stood at 86.7 per cent, the lowest of the last decade. This excellent performance is the combined result of the Corporation’s disciplined underwriting approach which started some years back and a clement year in terms of natural catastrophes and pick claims.

However, the sharp depreciation of the Corporation’s trading African currencies coupled with the poor performance of financial markets prevented the Corporation from achieving its
objectives in US dollars both for the top and bottom lines.The Corporation recorded a gross written premium of US$ 689.3 million against US$ 717.5 million the previous year, representing a 4% decrease. Although the premium written in local currencies grew averagely by 13.6 per cent in all the production centres across the African continent, the impact of a stronger US dollar, the presentation currency, against the operating currencies, negatively impacted the gross written premium by US$ 95.2 million.

During the year, the investment income earned by the Corporation dipped by 48.9 per cent from US$49.5 million in 2014 to US$ 25.3 million, the highest decline since the 2009 financial crisis. This unexpected underperformance was due to prevailing weak performance of both equity and bonds markets and the persistent low-interest rates.

The above activities translated into a 12.8 percent drop in net profit, from the highest-ever recorded profit of US$ 118 million in 2014 to US$ 103 million in 2015. This is “a more than decent
performance” according to Mr. Corneille Karekezi, the Group Chief Executive Officer, who pledged to continue to support African insurance markets despite weakening currencies, threatening winds from the global economy and low commodity prices. He noted that Africa Re is well equipped with strong capitalisation and good financial ratings and is therefore expected to fare well in 2016, despite stiff competition and oversupply of capital in the global reinsurance industry.