Africa Re net profit up 39% to $118m

Africa Re, a leading African reinsurer, has posted a net profit of $118.50 million for the full year 2014 compared with $84.80 million in 2013, representing an increase of 39.74 percent.

The performance was driven by strong underwriting profit and steady investment results, the company said in a statement accessed by BusinessDay.

This performance was 7.37 percent above the corporation’s five-year projection plan.

Gross written premium grew by 7.02 percent from $670.46 million in 2013 to $ 717.53 million.

The growth trend continues to be impacted by the depreciation of the major transaction currencies of the corporation and a competitive operating environment.

The corporation attributes the performance to increased income from treaties as a result of additional shares secured during treaty renewals.

An improvement of loss experienced in almost all classes of business (Energy, Fire/Engineering, Life, Marine and Motor), which lead to a drop in the net loss ratio for most production centres, also contributed to the positive results.

Income earned from investment and other sources, including interest on reinsurance deposits and fee income, increased by 8.84 percent to stand at $50.50 million compared with $46.40 million in 2013.

Investment performance continues to be driven mainly by the equity and bond markets. Currency translation had a negative impact on the investment income.

On an annualised basis, the return on investment was 4.78 percent compared with 4.53 percent as of same period last year.

Following a recommendation of the African Development Bank (AfDB), the African Reinsurance Corporation (Africa Re) was established on February 24, 1976 in Yaounde, Cameroon.

An international agreement was signed by the Plenipotentiaries of 36 member states of the Organisation of African Unity (OAU) and the AfDB with the aim of reducing the outflow of foreign exchange from the continent by retaining a substantial proportion of the reinsurance premiums generated therein.

That agreement, known and referred to as the Agreement Establishing the African Reinsurance Corporation, confers on Africa Re its current status as well as the legal authority to operate. As of today, Africa Re has 41 member states representing 38.75 percent of the capital (end 2010) in addition to the AfDB, which is among the single largest shareholders with 8 percent of the capital (end 2010).

The agreement also empowers any member state to authorise a national institution, either a bank or an insurance company acting on its behalf, to purchase the shares reserved for the state.

In order to allow its cedants to share the Corporation’s fortune and participate more closely in its affairs, one-third of Africa Re’s capital was opened up in 1992 to insurance companies with a majority indigenous shareholding.

A good number of the companies have already subscribed and paid up for the shares allotted to them. To date, more than 100 insurance and reinsurance companies are shareholders of Africa Re with a 32.25 percent combined stake (end 2010).

Also, in 2001 it was decided that the Corporation’s capital be increased to US$ 100 million and opened to non-African investors so as to have the required strategic partners. As a result, four (4) non-African Development Finance Institutions (DFIs) subscribed and paid for a total of 21 percent of the capital of Africa Re (end 2010), bringing the number of AAA rated shareholders to five and accounting for 29 percent of the corporation’s shareholding.

Modestus Anaesoronye