SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of B++ (Good)
and the Long-Term Issuer Credit Rating of “bbb” of National Reinsurance
Corporation of the Philippines (Nat Re) (Philippines). The outlook of
these Credit Ratings (ratings) is negative.
The ratings reflect Nat Re’s balance sheet strength, which AM Best
categorizes as strong, as well as its adequate operating performance,
neutral business profile and appropriate enterprise risk management.
Nat Re’s balance sheet strength is underpinned by its risk-adjusted
capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR),
which is expected to remain at the strongest level over the medium term.
Capital adequacy is supported by the company’s low underwriting
leverage. However, this is offset by Nat Re’s sizable holding of local
equity investments, with fair value movements having driven a level of
volatility in capital and surplus over recent years. The company is
expected, however, to reduce its exposure to this higher risk asset
class during 2019, and increase its allocation toward cash, deposits and
fixed income instruments.
During the past five years, Nat Re’s overall earnings have remained
positive, driven by a steady stream of investment income, which has
helped offset unfavorable technical results. Since 2013, Nat Re has
undertaken a series of portfolio remediation exercises aimed at
improving underwriting profitability and reducing volatility. In
particular, the company has reduced its exposure to underperforming
property lines of business and increased its business allocation to life
reinsurance, which is currently profitable. While the company’s combined
ratio has improved over recent years, it remained loss making in 2018.
The negative outlooks for Nat Re’s ratings reflect the continued
pressure and volatility that AM Best expects underwriting performance to
place on overall earnings over the near term.
Nat Re is the only domestic reinsurer in the Philippines, and benefits
from strong relationships with local cedants and access to business
through mandatory local cessions. In addition, the company underwrites a
sizable portfolio of overseas business, which aids with geographic and
line-of-business diversification. Offsetting business profile factors
include the company’s moderate cedant concentration, and the ongoing
challenging market conditions and competition from larger international
reinsurers.
Ratings are communicated to rated entities prior to publication.
Unless stated otherwise, the ratings were not amended subsequent to that
communication.
This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
Contacts
Tran Nhat Trung
Financial Analyst
+65 6303
5019
[email protected]
Myles Gould
Associate Director, Analytics
+65
6303 5020
[email protected]
Christopher Sharkey
Manager, Public Relations
+1
908 439 2200, ext. 5159
[email protected]
Jim Peavy
Director, Public Relations
+1 908
439 2200, ext. 5644
[email protected]
