The National Reinsurance Corporation of the Philippines (Nat Re), the Philippines’ sole domestic professional reinsurer, was assigned a financial strength rating of PRS A by the Philippine Rating Services Corporation (PhilRatings).
A PRS A rating means that an insurer has strong financial security characteristics, but is somewhat more likely to be affected by adverse business conditions compared to higher-rated insurance companies.
The assigned financial strength rating takes into consideration Nat Re’s solid market franchise, shareholders of good standing, experienced management, sound investment portfolio, and improving
profitability outlook, though improvement may be at a relatively tempered pace.
PhilRatings also took into account the resilience of the insurance industry amid the COVID-19 pandemic, supported by regulatory relief measures.
As the only domestic professional reinsurance firm in the country, Nat Re is considered to have a solid market franchise. Nat Re has a unique advantage granted by the law, which is that of being entitled to take up a minimum 10 percent share of all the outward reinsurance business of domestic insurance companies, otherwise ceded abroad.
This gives Nat Re significant access to domestic reinsurers’ business, and also a broader view of their reinsurance requirements.
The company’s marketing strategy is supported by its technical know-how, industry track record and familiarity with the domestic market.
As of December 31, 2019, low-risk bonds made up 69.9 percent of Nat Re’s total investment portfolio.
Bond investments of the company include government securities and debt issues of Philippine private corporations.
Equity securities, on the other hand, represented 17.5 percent of the total portfolio. Equity securities consist mainly of shares of stocks (common and preferred) in companies listed in the Philippine Stock Exchange (PSE); in particular, blue chip companies belonging to various industries.
Over the projected period, the company foresees positive and improving underwriting results. While both GPW and Net Premiums Written (NPW) are expected to both to taper off in the near-term due to the rebalancing of the company’s foreign treaties, both will grow in double-digit rates in the medium-term.
Net income is similarly expected to expand by double-digit rates over the projected period, to be driven by the launch of the Philippine Catastrophe Insurance facility by Nat Re in the near-term and the continued expansion of the company’s life business.
Based on historical attainment of projected underwriting and net incomes, however, PhilRatings, thinks that future improvement in profitability may be at a tempered pace relative to company forecast.