31 January 2013

Namibia: Namibre Fears Lower Credit Rating

A DOWNGRADE in NamibRe's credit rating is likely to cost the state-owned reinsurer business, eating into its profits and Government's dividends, industry players warned yesterday.

NamibRe chairperson Maria Dax on Tuesday admitted that the company's credit rating might be in jeopardy after its financial statements for 2012 failed to get the blessing of independent auditors.

The company's 2011 rating pinned NamibRe's ability to pay claims in Namibia at "stable", while it rated it ability to settle claims regionally and internationally as "positive".

Dax described the delayed financials as "sad" and said the board and management have "undertook to address [the issue] following this audit as it may influence the excellent credit rating of NamibRe". In a written response to questions from The Namibian, Dax on Thursday said the situation "could (and probably will) influence" the rating.

Global Credit Rating Co (GCR) yesterday refused to say whether it was considering downgrading NamibRe's rating. NamibRe's rating expired last September, when the auditors' report was supposed to have been finalised and presented to the company's board.

However, Ernst & Young (E&Y) issued a disclaimer of opinion on the financial statements. Dax on Tuesday said this was because of "debtors' balances and the recording of foreign-based transactions". In a letter she wrote to NamibRe managing director Anna Nakale-Kawana on January 23, Dax said E&Y was of the opinion that there was a "significant breakdown" of controls at the company due to a lack of "diligence/lack of skills by management".

From Johannesburg, Marc Joffe of Global Credit Rating yesterday told The Namibian that the agency was aware of the "delay" in finalising NamibRe's financials.

Joffe said the "issues raised are largely a result of operational shortfalls, which Global Credit Ratings is aware of and understand are being addressed as we speak (mainly debtor reconciliations relating to the small component of foreign business)".

Industry players, speaking to The Namibian anonymously, yesterday said if NamibRe's credit rating takes a knock, it might hurt the company's ability to attract and keep business in other African countries. NamibRe also sells reinsurance in Zambia, Zimbabwe, Malawi, Kenya, Angola, Mozambique, Ethiopia and Swaziland.

"It will hurt NamibRe's vision to be the preferred reinsurance company in Africa," one industry player said.

Operations in Namibia shouldn't be affected, as all short-term insurance companies locally have to give 20% of their reinsurance business to NamibRe. Although this makes up the bulk of NamibRe's income, the loss of business outside Namibia will dent the company's profits and impact Government's dividends, industry experts said.

In 2011, NamibRe made a profit of N$15 million and paid N$1,25 million in dividends to Government. Dax on Tuesday said NamibRe's profit for 2012 was N$19,8 million.

"The auditors confirmed that our investments, bank and cash and fixed assets are intact and have not been affected by the problems experienced. Most importantly, the auditors confirmed that NamibRe is a going concern and that problems that we are experiencing are temporary and can be rectified," Dax said.

She added: "We have not found evidence of fraud or theft to date."

Joffe yesterday said GCR is busy with its annual review of NamibRe's credit rating and that an announcement in this regard can be expected in the "coming week(s)".

He said GCR's primary focus is on the financial stability of NamibRe. The company has "very strong cash reserves and solvency of over 100%", he said.

"We expect the issues raised to be resolved without any noticeable impact on the financial standing of Namib Re, which we are of the opinion is sound," Joffe said.

Copyright © 2013 The Namibian. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.