National Re expects record positive underwriting margins

The National Reinsurance Corporation of the Philippines (National Re)), the Philippines’ sole domestic professional reinsurer, expects to record positive underwriting margins and returns in 2017 and 2018.

According to Philippine Rating Services Corporation (PhilRatings), NRCP’s premiums written, gross and net, are projected to grow, driven by its non-life business.

“Continued improvement in combined ratio will buoy overall profitability for the projected period. Operating targets will mainly be supported by continued portfolio diversification and technical capability-building,” PhilRatings said.

NRCP’s profitability is considered weak for the historical period 2011 to 2015, although underwriting profit margin and returns have improved beginning 2014.

While investment yields have been consistently positive, volatile growth across business lines and higher than expected loss and expense ratios negatively impacted operating performance results.

NRCP was assigned a high financial strength rating of PRS A plus by PhilRatings. This means that the insurer has strong financial security characteristics, but is somewhat more likely to be affected by adverse business conditions compared to higherrated insurance companies. The plus sign further qualifies the rating.

The assigned financial strength rating for NRCP takes into consideration NRCP’s solid market franchise, shareholders of good standing, the experienced management which has contributed to the company’s growth, its sound investment portfolio, and its improving, but still volatile, profitability.

NRCP has a solid market franchise, given its status as the Philippines’ leading professional reinsurer. The company directly competes with foreign reinsurance companies with agents licensed by the Insurance Commission (IC), and to a lesser extent with domestic insurance companies, which are also licensed to sell reinsurance.

NRCP, nonetheless, has to its advantage Presidential Decree No. 1270, which mandates “all life and non-life insurance and reinsurance companies doing business in the Philippines to cede to the company (NRCP) at least 10 percent of their outward reinsurance placed with unauthorized foreign reinsurers.”