AM Best has reaffirmed the National Reinsurance Corporation of the Philippines (Nat Re) with a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb” (Good), citing a stable outlook for both.
The Philippines’ only domestic reinsurer has seen its risk-adjusted capitalization remain at the strongest level despite challenges posed by significant premium growth in 2023.
Nat Re’s balance sheet strength, assessed as strong, is underpinned by its risk-adjusted capital, as measured by the Best’s Capital Adequacy Ratio (BCAR). Although premium growth has reduced capitalization levels, the overall financial position remains solid.
The company's investment portfolio is seen as moderate risk, with most assets in fixed-income securities issued by the Philippine government. Despite exposure to natural catastrophes, this risk is partly offset by a retrocession program that helps manage potential losses.
Operating performance continues to be rated as adequate, with a five-year average return-on-equity of 3.6%. In 2023, Nat Re reported a notable increase in net profit due to better underwriting performance and improved investment results. The improvement was driven by lower acquisition and management expenses, but the non-life portfolio faced significant losses and reserve strengthening, which affected the overall loss ratio.
Meanwhile, investment income, primarily from interest and dividends, remained a positive contributor to the company’s earnings.
AM Best also views Nat Re’s business profile as neutral. The company benefits from strong relationships with local insurers and mandatory cessions, while new opportunities through government initiatives and local underwriting facilities have enabled it to expand its business beyond mandatory requirements.
Nat Re’s acquisition of foreign agriculture treaties in 2023 has bolstered diversification efforts, but the company will need to maintain strong underwriting risk management to sustain growth.
