Nat Re benefits from robust local insurer ties 

In 2023, Nat Re saw a notable rise in net profit, driven by improved underwriting.

The National Reinsurance Corporation of the Philippines (Nat Re) has shown a strong balance sheet, adequate operating performance, a neutral business profile, and appropriate enterprise risk management, AM Best said. 

The company's balance sheet strength is supported by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which stayed at the strongest level by the end of 2023. 

Despite this, the risk-adjusted capitalisation slightly declined due to significant premium growth during the year. 

AM Best noted that the company's investment portfolio carries moderate risk, with a large portion of assets in fixed-income securities issued by the Philippine government. Nat Re's balance sheet is also exposed to natural catastrophe risks, though these are mitigated by a retrocession program.

Nat Re's operating performance was assessed as adequate, with a five-year average return on equity of 3.6% from 2019 to 2023. 

In 2023, the company saw a notable rise in net profit, driven by improved underwriting performance and higher investment returns. 

The underwriting performance improvement came from a better expense ratio due to reduced acquisition and management costs relative to earned premiums. 

However, the loss ratio for 2023 was negatively affected by significant losses and reserve strengthening related to the non-life portfolio. Investment income, mainly from interest and dividends, continued to contribute positively to overall earnings.

AM Best views Nat Re’s business profile as neutral. As the only domestic reinsurer in the Philippines, Nat Re benefits from strong relationships with local insurers and access to business through mandatory local cessions. 

The company is positioned to capitalise on business opportunities arising from government initiatives and new services, including the design and launch of underwriting facilities. This allows Nat Re to write business volumes beyond the mandated levels. 

The company’s underwriting portfolio is moderately diversified geographically, with growth in non-property lines in 2023, particularly from foreign agriculture treaties, supporting this diversification. However, effective risk management in underwriting remains critical.