A.M. Best Assigns Rating to African Reinsurance Corporation.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 21, 2003

A.M. Best Co. has assigned an initial financial strength rating of A- (Excellent) to African Reinsurance Corporation (Africa Re), Nigeria. The rating outlook is stable.

The rating reflects Africa Re's excellent capitalisation, consistent and sustainable underwriting performance and an excellent market position in the African markets. Offsetting factors include limited investment returns, lack of international exposure and its relatively small size.

Excellent capitalisation according to A.M. Best's risk-adjusted capital model--Retained earnings and positive unrealised gains on foreign exchange resulted in a 22% increase in capital and surplus to USD 62.8 million in 2002. A proposed capital raising exercise during 2003 should result in a capital increase of USD 50 million capital by mid 2004. A.M. Best expects this to be sufficient to support Africa Re's business growth strategy.

Consistent and sustainable underwriting performance--Accounting on a three-year funded basis, Africa Re has been consistently profitable over the past five years, a trend that is likely to be maintained through 2004. A slight deterioration over the exceptional performance in 2002 is expected in 2003 as a result of cautious initial reserving due to increased presence in more volatile lines of business.

Excellent market position--Africa Re's reliance upon compulsory cessions from African cedents has diminished substantially over the past five years (20% in 2002). It is expected to maintain a very good market position in continental Africa based on strong, well-established business relationships cemented by high service standards. Market position was strengthened by 50% growth of gross premiums in 2002. Further growth of 30% is anticipated in the combined years of 2003 and 2004 following an increased profile in South Africa (its largest market by gross premiums in 2002), growth of the energy book and expansion into the Middle East and India.

Limited investment return--Management applies a prudent strategy to invested assets, holding the majority (96%) in cash, cash equivalents or high investment grade fixed income securities. Approximately 80% of assets are held offshore. Strong investment returns are sacrificed for consistency, and current negative trends in interest rates have driven investment income down from 7.1% in 2001 to 5.2% in 2002. Prospectively, this will deteriorate further to near 4% in 2003.

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.