NRCP Net Income Up 2,036% in 2015

Makati—(PHStocks)—The National Reinsurance Corporation of the Philippines (PSE: NRCP) posted a net income of PhP179.1 million in 2015, up by  2,036% from PhP8.4 million in 2014.

During the annual stockholders meeting held July 13 at RCBC Plaza in Makati City, the sole national reinsurer also disclosed that it maintained its credit rating of B++ (Good) from A.M. Best issued last April 2016, which indicates the solid financial standing of the company. The US-based A.M. Best rating firm is the oldest and most widely recognized provider of ratings, financial data and news focusing on the insurance industry.

According to NRCP Chief Executive Officer Augusto Hidalgo, the company is well positioned to maintain growth in the face of the current political situation and in light of the possibility of further regulatory policy changes. The past year saw the reinsurance sector facing challenges, among them the continued negative credit conditions in the global reinsurance market with double-digit declines in pricing that persisted in many regions across the globe.

Despite that, NRCP managed to strengthen its underwriting capabilities and streamline its risk portfolio, hiring consultants with more than three decades of work in respected global reinsurers and organizing on-the-job training for its technical teams.

According to Hidalgo, the company continued applying stricter underwriting guidelines in 2015, resulting in the non-renewal of high hazard and/or unprofitable lines of business under facultative arrangements, particularly for property. This was a major contributor to the 20% drop in gross premiums written, from PhP2.747 billion in 2014 to PhP2.182 billion in 2015.

However, reduced retroceded premiums and the significant decrease in the cost of excess of loss cover for fire, engineering, marine and motor led to an increase in premiums retained, which translated to an improved retention ratio of 42.5% in 2015, from 37.2% in 2014.

Total losses incurred (inclusive of incurred but not reported losses) for 2015 reached PhP416.4 million, 32.4% lower than PhP616.3 million in 2014. Consequently, an underwriting loss of PhP71.7 million in 2014 was upturned to an underwriting income of PhP228.9 million in 2015.

This was accompanied by a PhP74.1 million or 17.1% increase in investment and other income, from PhP433.2 million in 2014 to PhP507.3 million in 2015. Interest income dropped to PhP231.3 million in 2015 from PhP250.1 million in 2014, but this was offset by greater gains on the sale of available-for-sale financial assets (PhP215.1 million in 2015 vs. PhP101.3 million in 2014), an increase in dividend income (PhP47.7 million vs. PhP41.8 million), and better foreign exchange gains (PhP19.5 million vs. PhP11.5 million).

All the above translated to an improved net income of PhP179.1 million in 2015 compared to PhP8.4 million in 2014.

Additionally, the company acquired licenses for analytics tools seen to boost NRCP’s technical capacities. These include Risk Management Solutions’ Philippine earthquake module and AIR Worldwide’s typhoon model for assessing total risk exposure in the event of said catastrophes. The acquisition of an Ultimate Risk Solutions (URS) Risk Explorer and URS RES-solver and Anaplan will likewise further aid NRCP in its capital adequacy analyses.

While the global market for reinsurance remains challenging, Hidalgo said the company continues to have a positive outlook for 2016. “We are undertaking several initiatives and we continue to strengthen our core competencies in reinsurance underwriting and catastrophe management,” the NRCP chief executive said.

Hidalgo added that cautious steps will be taken to diversify NRCP portfolio and add lines of business in health and mortgage redemption insurance, among others. He also disclosed plans to expand the company’s presence in other countries in Asia.