THE National Reinsurance Corp. of the Philippines (Nat Re), the Philippines’s sole professional reinsurer, announced last Friday it was assigned a financial strength rating of “PRS A,” with a “stable outlook,” by the Philippine Rating Services Corp. (PhilRatings).
A “PRS A” rating means that an insurer has strong financial security characteristics, but is somewhat more likely to be affected by adverse business conditions compared to higher-rated insurance companies, the insurer explained.
A “stable outlook” is defined as “the rating is likely to be maintained or to remain unchanged in the next twelve months.”
Nat Re said the assigned financial strength rating and outlook took into consideration the firm’s solid market franchise, shareholders of good standing, experienced management and sound investment portfolio.
As the only domestic professional reinsurance firm in the country, Nat Re is considered to have a solid market franchise. Nat Re has a unique advantage granted by the law, which is that of being entitled to take up a minimum 10-percent share of all the outward reinsurance business of domestic insurance companies and which would otherwise be ceded abroad. This gives Nat Re significant access to domestic reinsurers’ business and also a broader view of their reinsurance requirements. The company’s marketing strategy is supported by its technical know-how, industry track record and familiarity with the domestic market.
As of end-March 2021, the Government Service Insurance System (GSIS) remained as Nat Re’s largest shareholder, with a 25.7-percent ownership stake in the Company. GSIS is a government-owned and -controlled corporation mandated to provide and administer social security benefits, such as life insurance benefits, separation or retirement benefits and disability benefits, for government employees. The Bank of the Philippine Islands and MICO Equities Inc. were the company’s other major shareholders, with ownership interests of 13.7 percent and 12.9 percent, respectively.
As of end-2020, low-risk fixed income securities made up 84.9 percent of Nat Re’s total investment portfolio. Fixed income investments of the company include corporate bonds, government bonds, treasury bills and short-term investments (i.e. time deposits and Unit Investment Trust Fund). Equity securities, on the other hand, accounted for 14.7 percent of the total portfolio, lower than its share in 2019 (17.7 percent) and 2018 (27.2 percent). Equity securities consisted mainly of shares of stocks (common and preferred) in companies listed in the Philippine Stock Exchange.
Nat Re said its equity investment placements were largely in blue chip companies belonging to various industries, and in unlisted companies that have been approved by the Investment Committee.
“In relation to the foregoing, the strategic allocation of Nat Re’s portfolio has been adjusted from 80 percent fixed income and 20 percent equities in 2019, to 85 percent fixed income and 15 percent equities by end-2020,” the insurer said. “Such is in line with the company’s efforts of de-risking its investment portfolio, with an intention to gradually reduce its equities exposure. The balance was the company’s investment in Asian Reinsurance Corp. (Asian Re, 0.4 percent).
Nat Re said that as of end-2020, it had P8.58 billion in investment assets. This slightly went up by 0.2 percent to P8.6 billion, as of end-March 2021.