Nat Re earns P78M in 2016, sustains healthy profitability ratios

Reinsurer also posts a record-low 99.1% combined ratio

National Reinsurance Corporation of the Philippines (Nat Re, stock ticker NRCP) continued delivering income to its shareholders and entered its third consecutive year of net profits, raking in P78M in 2016.

Nat Re also posted a 99.1% combined ratio, the lowest in the last seven years. These figures are comparable with combined ratios of A-minus-rated reinsurers such as Malaysian Re and Labuan Re. Nat Re also recorded a 58.5% loss ratio.

“We say with all confidence that the portfolio is much more balanced,” President and CEO Augusto Hidalgo said in a statement. “We are convinced that 2016 will be written in NRCP’s history books as that milestone year where the company made a turnaround in the course of its growth.”

NRCP’s gross written premiums and net written premiums have also grown by a substantial 55% and 82% year-on-year, respectively. To better manage volatility NRCP cut the share of domestic premiums to total net premiums written from 85% to 58%. The company attributes these to new business from lower volatility foreign retrocession and reinsurance. NRCP supports its expanding overseas presence by continuing development of technical capabilities notably by establishing a complement of in-house data analysts to support its underwriting activities.

Aside from improved profitability ratios NRCP also enjoys a comfortable Risk-Based Capital Ratio of 268% based on a 99.5% level of sufficiency, well-beyond the required 100% minimum set by the Insurance Commission under the new Risk-Based Capital Framework (RBC2). Globally recognized rating firm AM Best cites this strength in capitalization as a factor in affirming its B++ (Good) rating for NRCP.

“We updated our risk tolerance limits to reflect not only this new capital requirement under RBC2 but also AM Best’s minimum Capital Adequacy Ratio level, implying NRCP’s balance sheet strength is comparable with that of an A++-rated company,” Hidalgo added.

In 2016 NRCP’s Life & Health line had its first lead reinsurer role in ten years, for two insurance companies no less, and signed its first treaty agreement with a health maintenance organization. NRCP has also been more active in group facultative cases of three life insurance companies.

The Property & Casualty line cut the share of net premiums written from domestic sources to a more manageable 49% of total net premiums written. The share of fire insurance has improved to 40% of the total property and casualty book, down from almost two-thirds in 2014.

NRCP also posted P284.9 million in investment income amid low interest rates and the weak performance of domestic equity markets.

“These notable achievements in 2016 show that we have overcome that hurdle of bringing NRCP out of the recovery stage,” Hidalgo said in a statement. “The next challenge we face is establishing the momentum for greater and sustained progress.”

The company has crafted a new vision of cementing its status as a champion of emerging markets reinsurance. Hidalgo also envisions to transform the company into a “knowledge hub” that not only provides reinsurance capacity to its clients but also shares effective tools and best practices with them and with independent reinsurers. NRCP plans to revamp its brand to reflect these new company aspirations and in time for its 40th anniversary in 2018.

NRCP will also continue to work on portfolio management and operational excellence to achieve an A-rating from AM Best, a Philippine Quality Award, and a level 3 status on the RIMS Risk Maturity Model for Enterprise Risk Management.

NRCP held its 10th Listing Anniversary Celebration at the Philippine Stock Exchange on 27 June (listing anniversary is on 27 April) to coincide with its Annual Stockholders’ Meeting at the RCBC Plaza on 28 June.