AM Best Affirms Credit Ratings of Société Centrale de Réassurance

AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb" (Good) of Société Centrale de Réassurance (SCR) (Morocco). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect SCR's balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

SCR's balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). SCR's BCAR score benefits from prudent technical reserve margins. Furthermore, the company's risk-adjusted capitalisation has been moderately supported by internal capital generation as high dividend distributions to the company's main shareholder, Caisse de Dépôt et de Gestion (CDG), a state-owned investment vehicle for the Kingdom of Morocco, partially restrict earnings retention. SCR continues to benefit from an explicit guarantee provided by the Moroccan state. The balance sheet strength assessment also reflects SCR's significant asset concentration to Morocco, with over 95% of its assets invested domestically, which weighs on asset quality.

Historically, SCR has reported strong results with a five-year (2018-2022) weighted average return on equity of 12.0%. The company's earnings have been driven by solid investment returns, with a five-year (2018-2022) weighted average investment yield (including gains) of 5.5% and supported by good underwriting performance. SCR's weighted average non-life combined ratio of 91.8% over the past five years reflects the profitability of its domestic Moroccan portfolio and benefits from favourable reserve development stemming from SCR's legacy compulsory cessions business. However, the company has experienced weaker underwriting performance in 2022, with a non-life combined ratio of 101.2%. In 2023, the company's exposure to the earthquakes in Turkiye and Morocco were relatively low on a net basis, with losses mitigated through an appropriate retrocession program. Prospectively, AM Best expects SCR's underwriting and investment returns to support strong operating performance.

SCR has a solid market position in Morocco, reflecting its established role as the national reinsurer. This strong domestic position partially mitigates the company's limited presence in the global reinsurance market. In 2022, SCR reported gross written premium of MAD 3.4 billion (USD 334 million), of which 74% was generated domestically. SCR continues to develop its international presence, with this expansion supported by the opening of strategically located representative offices and new partnerships to gain market access.

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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