Nat Re receives strong financial rating

Philippine Rating Services Corporation (Philratings) has assigned National Reinsurance Corporation of the Philippines (Nat Re), the country’s sole professional reinsurer, a financial strength rating of PRS A with a Stable Outlook.

An insurer rated PRS A has strong financial security characteristics but is somewhat more likely to be affected by adverse business conditions compared to higher-rated insurance companies. Philratings said a Stable Outlook indicates that the rating is likely to be maintained or to remain unchanged in the next 12 months.

The assigned financial strength rating and Outlook took into account Nat Re’s solid market franchise, shareholders of good standing, experienced management, sound investment portfolio, and more than ample capitalization.

Philratings said Nat Re enjoys a solid market franchise, given its position as the only domestic professional reinsurance firm.

As provided by law, it has the unique advantage of being entitled to take up at least 10 percent of all the domestic insurance companies’ outward reinsurance business.

This gives Nat Re significant access to the local reinsurance business, as well as a broader view of domestic insurers’ reinsurance requirements.

The Government Service Insurance System (GSIS), a government-owned and controlled corporation mandated to provide and administer social security benefits for government employees, remains as Nat Re’s largest shareholder at 25.8 percent. The Yuchengco Group’s Mico Equities, Inc. (MEI) and Bank of the Philippine Islands (BPI) are Nat Re’s other major shareholders, with ownership interests of 12.9 percent and 13.7 percent, respectively.

As of end-2022, Nat Re’s total investment assets stood at ₱9.2 billion and this further grew to ₱9.7 billion as of end-june 2023.

Low-risk fixed income investments accounted for 92.4 percent of its total investment portfolio as of end-june 2023, while equities made up the remaining 7.6 percent.

Government securities continued to dominate the Company’s fixed income portfolio, accounting for more than half. Corporate bonds came in second, comprising almost a quarter.

For Nat Re’s equity investments, companies listed in the Philippine Stock Exchange (PSE) accounted for 94 percent.

In September 2022, Nat Re adjusted its strategic asset allocation to 90 percent fixed income and 10 percent equities (from 85 percent and 15 percent, respectively). This is in line with the Company’s long-term goal to further de-risk its investment portfolio.

With an equity of P5.8 billion as of end-september 2023, Nat Re was more than compliant with the minimum net worth requirement of P3.0 billion set by the Insurance Commission (IC).

Similarly, the Company’s risk-based capital (RBC) ratio far exceeded the minimum ratio of 100 percent required by the IC. Moving forward, Nat Re expects to remain more than compliant with regulatory capitalization requirements.