Press Release - MAY 02, 2019

AM Best Affirms Credit Ratings of National Reinsurance Corporation of the Philippines

 Tran Nhat Trung
Financial Analyst
+65 6303 5019

Myles Gould
Associate Director, Analytics
+65 6303 5020

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


SINGAPORE - MAY 02, 2019
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.

Related Companies

For information about each company, including the Best's Credit Reports, group members (where applicable) and news stories, click on the company name. An additional purchase may be required.

AMB# Company Name
086771 National Reinsurance Corp of Philippines