NamibRe gets credit rating restored
The credit rating of Namibia National Reinsurance Corporation (NamibRe) that attained a clean audit of their annual financial statements for the year ending December 2013 has been affirmed by a reputable rating agency, Global Credit Rating Co (GCR) at (GCR): AA- (National) and its Rating Outlook has been rated as Stable.
However, its international rating remains at BB (International, appropriate with its sovereign credit rating) while its Rating Outlook in this category has also been rated as Stable. The reinsurer said this week these ratings indicate the national and international repute of NamibRe in terms of financial strength and capacity to honour claims.
The Chairman of the NamibRe Board of Directors, Ismael /Gei-Khoibeb said,“Credit rating is very important to NamibRe as it gives assurance to our stakeholders in our ability to meet our financial obligations and we have been waiting on the outcome of the credit rating decision with great anticipation. Now that our credit rating has been restored, we will now focus on strengthening and refining our operations to achieve our strategic objectives.”
The rating agency justified its decision of affirming the credit rating on the basis that NamibRe is 100% owned by the Namibian Government.
Global Credit Rating Co also looked at the fact that NamibRe attained a clean audit for the annual financial statements for the year ending 2013 and the previous Disclaimer of Opinion had been waived following the challenges experienced with its financial reporting that led to the Disclaimer being issued by its auditors, Ernest &Young on its financial statements of 2012 which resulted in the rating agency reviewing NamibRe’s credit rating.
The rating agency is also of the view that NamibRe is supported by sound capital accumulation and a high degree of profit retention hence the restored and confirmed rating. “Moreover, management remains committed to maintaining a solvency margin (2013: 108%) over the reporting period which is above international trends of 100%,” adding that the open-ended mandatory cession that NamibRe enjoys guarantees a captive premium generation and increased revenue.
The rating agency defended the rating saying that the majority of retro-cession placements by NamibRe pertain to secure rated entities, limiting retro-cession counterparty risk. Despite, the challenges encountered, GCR said, “Taking into account NamibRe’s historical excellent financial performance, GCR opted not to dis-rate NamibRe’s position but to place its Outlook on Rating Watch for the interim, in order to monitor NamibRe’s financial stability. Furthermore, GCR made specific recommendations to NamibRe to address its financial reporting challenges to prevent losing its credit rating.”
“Determined to maintain its credit rating, management implemented a rectification strategy aimed at addressing the accounting concerns. The strategy was successfully completed when NamibRe attained a clean audit on its annual financial statements for the year ending 2013. The Disclaimer of Opinion was subsequently waived by the auditors,” GCR added.
The successful finalisation of the annual financial statements led to Global Credit Rating Co. Restoring NamibRe’s credit rating to its initial rating of (GCR): AA- (National) with a Stable Outlook. A credit rating assesses the companies’ ability to repay creditors and any claims, how the company performs in comparison to other reinsurance companies, the management style, capital and earnings along with other factors. AAA is the best rating and D is the lowest.