Capital Markets

INVESTMENT PHILOSOPHY

As a reinsurance institution, the Corporation’s financial assets exist primarily to meet current and future claims and claims handling obligations estimated from time to time as technical reserves. The quality and size of these financial assets provide a measure of the ability of the Corporation to cover those primary responsibilities. Adequate coverage therefore requires growing financial assets through a well-crafted investment management program.

INVESTMENT PORTFOLIO

Africa-Re investment assets is comprised of a wide range of securities. The structure and the quality of the portfolio provide a valuable diversification as well as returns. The risk associated to investments assets and those related to the core business are managed closely within a risk management process which identifies major risks and fix adequate limits and exposures.

As at the end of the year 2010 the investment asset amounted to US$756 million made up of fixed income (cash and bonds), equities, and alternative investments. The assets are managed by both external portfolio managers and an in-house investment department. The graph below set forth the breakdown of the investment portfolio by asset classes and currency.




FIXED INCOME

Fixed income portfolio is the main component of the investment asset and amounts to US$85 million as at the end of 2010.These funds are invested in highly rated securities as required by the Corporation's investment policy. A graph set forth the quality of the fixed income portfolio as at end of 2010.

RATING ANALYSIS OF BONDS PIE CHART

The management of this portfolio is done by external managers through specifics mandates and by in-house investment team. The investment team is made-up of three professional staff that runs the corporation funds in the strict respect of the investment guidelines.

The management of this portfolio is done both by external managers through specifics mandates and by the in-house investment team. The investment team is made-up of three professional staff that runs the corporation funds in the strict respect of the investment guidelines.

The allocation of the fixed Income Portfolio is as:
(US$’000)
Cash & Cash equivalents:                                55,838
Bank deposits                                              386,902
Fixed Rate securities at fair value:                    55,571
Fixed rate Securities at amortized cost:            74,445
Floating Rate securities at cost                        12,004
584,760

The corporation also invests in both African sovereign, corporate and supranational bonds. The actual investment in African bonds represents US$67 million as of December 2010, made-up by bonds in Senegal, Cote d’Ivoire, Ghana, South Africa, Morocco, Egypt, Angola, Tunisia and Nigeria.

LISTED EQUITIES

Africa-Re equity portfolio is comprised of listed equities and private equities. The listed equity portfolio is managed through specific mandates by a carefully selected group of external managers in matured markets in Africa; Europe and US. The portfolio is well diversified by geography, profile and currency.

The Corporation invests in equity securities issued by highly-rated companies that are listed on organized stock exchange. The equities provide capital appreciation and income over the long-term.

The listed equity portfolio amounted to US$37 million as at the end of 2010.

The currency exposure on the equity portfolio is set forth in the graph below:

UNLISTED EQUITY

PRIVATE EQUITY

These are direct equity investments acquired through private placements. The private equity portfolio is managed in-house and invested in insurance companies, development financial institutions, pension administrative funds and a hospital project.

Africa-Re as part of its mission is playing a key role in the development of the private sector and the insurance industry in Africa. The objective of this category of investments is to enable the Corporation achieve its developmental goal.