Fitch Ratings has affirmed Societe Tunisienne de Reassurance’s (Tunis Re) National Insurer Financial Strength (IFS) Rating at ‘AA(tun)’. The Outlook is Stable, it said in a statement
Tunis Re’s National IFS is driven by its strong creditworthiness. “The recent upgrade of Tunisia’s Long-Term Foreign Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’ does not alter our view of Tunis Re’s credit risk relative to local market peers,” Fitch stressed.
The ratings agency said the company is highly exposed to systemic risk as most of its assets are domestic. The Fitch-calculated risky asset ratio was of 223% at end-2021. Most of Tunis Re’s balance sheet is exposed to currency risk through its business operations that are increasingly skewed towards international markets, active use of international retrocession, and an unhedged currency mismatch between assets and liabilities, explains Fitch.
However, the agency said it believed Tunis Re’s earnings are strong for the rating, supported by a sound technical profitability. “Tunis Re reported a broadly stable 2022 net loss ratio (defined as the ratio of net loss expense to net earned premium) when compared with 2021 despite the impact of inflation and exchange rate effects due to the rise of the dollar,” explained Fitch.
It added that the company’s combined ratio reached 92.5% in 2021 and averaged 96.3% over 2021-2019. “We expect Tunis Re’s solid underwriting expertise, sound risk management and effective retrocession to be supportive of earnings,” Fitch pointed out.