A trend of sustained improvement in underwriting performance has seen A.M. Best revise the outlook to stable from negative of National Reinsurance Corporation of the Philippines (Nat Re).
As well as the revised outlook, the ratings agency has also affirmed Nat Re’s Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Nat Re.
The outlook revision to stable reflects a trend of sustained improvement in underwriting performance in recent years, which A.M. Best says has been supported by “tighter cost discipline” and a shift in business mix toward profitable domestic life reinsurance products.
Overall, operating results remain in profitable territory for the firm as strong investment income and realised gains have served to offset underwriting losses over the last five years. Looking forward, the ratings agency expects that the company will return to technical profitability via continued portfolio remediation actions and improved pricing conditions in the markets in which it operates.
The ratings of the reinsurer, says A.M. Best, reflect the company’s strong balance sheet strength, which is underpinned by its risk-adjusted capitalisation that remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Looking forward, A.M. Best does expect Nat Re’s capital adequacy to trend lower in the near to medium term, as the rate of business growth is project to exceed that of its internal capital generation.
“AM Best views Nat Re’s business profile as neutral given its strong relationships with local cedants and access to business through mandatory local cessions. As the only domestic reinsurer in the Philippines, Nat Re is well-placed to benefit from regulatory initiatives and upcoming developments in partnership with government agencies, which are expected to strengthen and further diversify its business profile,” says A.M. Best.
