Johannesburg- GCR Ratings (GCR) has assigned FMRe Property & Casualty (Proprietary) Limited (FMRe Botswana) national scale financial strength ratings for Uganda and Ethiopia of AAA(UG) and AAA(ET) respectively. Both ratings are on stable outlooks.

The national scale financial strength ratings assigned to FMRe Botswana for Uganda and Ethiopia in addition to ratings for various markets[1], reflect the strengths and weaknesses of First Mutual Reinsurance Holdings Limited (FMRe Holdings Botswana or the sub-group), its immediate parent, and the nearest consolidated entity. GCR believes the group’s creditworthiness is transferable to policyholders in Uganda and Ethiopia, given Botswana’s strong operating environment and sound credit fundamentals capable of absorbing risks from foreseeable growth into these markets. Accordingly, the GCR Ratings framework, which uses a single analytical approach across markets with a fluid mapping table has been used to derive national scale financial strength ratings for Uganda and Ethiopia.

FMRe Holdings Botswana is a non-operating holding company created from a transaction between Zimbabwean based First Mutual Holdings Limited (FMHL or the group) and Aleyo Growth Partnership I GP (Proprietary) Limited (Aleyo Capital), a private equity firm based in Botswana. Aleyo Capital holds 30% shareholding in FMHL’s reinsurance cluster, which is under the corporate umbrella of FMRe Holdings Botswana, comprised of FMRe Botswana and First Mutual Reinsurance Company Limited (First Mutual Re), the Zimbabwe based reinsurer. Given our view of Aleyo Capital’s strong minority rights as enshrined in the shareholder agreement, combined with regulatory insulation at FMRe Botswana licence level, we have applied insulation on our assessment of the credit profile of FMRe Holdings Botswana as we believe these structures significantly reduce the negative impact of the broader group’s weak operating environment. FMRe Botswana is the core operating entity of FMRe Holdings Botswana contributing c. 70% of assets and gross premiums written in 2023, and is therefore equalised to the sub-group’s credit profile.

The earnings profile was sustained at strong levels over the review period as the Botswana entity sustained strong underwriting performance. The claims experience for FMRe Botswana remained good with the net incurred loss ratio registering at 43.5% in 2023 (2022: 45.1%) while that of the sub-group registered at 54% in 2023 (2022: 63%) given improved performance at FMRe Zimbabwe. The claims ratio for FMRe Botswana is expected to be managed within the 40-45% range. Investment income improved in 2023 with the realised investment yield increasing to 8.9%, from 5.7% in 2022, driven by improved investment strategies in short term assets as well as higher interest rates in the market. Overall, the combined ratio for FMRe Botswana registered at 89.8% in 2023. The sub-group’s combined ratio is expected to range between 90% and 95% over the rating horizon.

The liquidity position remained sound, anchoring on good operational cash generation, and a very conservative asset allocation. In this respect, the stressed liquidity ratio registered at 1.3x as of 31 December 2023 from 1.1x at previous year end. Conservative asset allocation and prospects of continued operational cash (earnings) generation are likely to underpin liquidity at rating sufficient levels over the outlook period.

The sub-group exhibits sound capitalisation. The reinsurer’s risk adjusted capitalisation remained adequate, supported by sound earnings generation and full profit retention. The GCR capital adequacy ratio (CAR) for the sub-group improved to 2.3x as of 31 December 2023 (31 December 2022: 1.6x) following stronger earnings performance in 2023. Consequently, the capital base for the sub-group grew to BWP260.6M as of 31 December 2023 from BWP168.0M at prior year-end. The GCR CAR is expected to remain at strong levels of above 2x over the outlook period.

The business profile remained solid as FMRe Botswana maintained a strong competitive position as the second-largest reinsurer in Botswana, commanding over 30% of primary market cessions. The reinsurer has demonstrated robust growth, achieving a 14% increase in 2023, primarily driven by expanding participation on primary market risks. The Zimbabwean subsidiary holds a more moderate market share of approximately 10% and shows potential to grow current scale. The company’s revenue base is well diversified, with four key business lines contributing significantly to both gross and net premiums. Additionally, FMRe Botswana benefits from strong geographic diversification, with operations across multiple markets in the region. The business profile is expected to remain solid, supported by infrastructure development in Botswana and ongoing forays into the East African market.

Outlook statement

The stable outlook reflects expectations of sustained positive earnings. This has potential to maintain the reinsurer’s capitalization and liquidity metrics within their current ranges. The business profile is expected to remain stable, underpinned by steady premium growth and continued solid performance across core markets.

Rating triggers

Positive rating action is likely over the longer term if earnings improve, and solvency strength is sustained. Conversely, negative action on the ratings may result from a weakening in liquidity levels or lower than expected earnings performance.

Analytical contacts

Primary analyst	Godfrey Chingono	Senior Analyst
Johannesburg, ZA	GodfreyC@GCRratings.com	+27 11 784 1771
Committee chair	Susan Hawthorne	Deputy Sector Head: Insurance
Johannesburg, ZA	SusanH@GCRratings.com	+27 11 784 1771