Philnare reports decline in net income for the first half of 2008
August 13, 2008
National Reinsurance Corporation of the Philippines (PSE: NRCP) reported net income of P192 million for the six months ended June 30, 2008, a 41% decline from net income of P322 million for the corresponding period in 2007.
In a disclosure to the Philippine Stock Exchange (PSE), the Company, or PhilNaRe, said that reinsurance premiums for the first semester of 2008 amounted to P1.2 billion, 20% lower than P2.0 billion in reinsurance premium for the first semester last year. However, net reinsurance premiums, which represent the portion of gross premiums that the Company retains for its own account, increased by 21% to P647 million in the first six months of 2008 from P537 million for the same period in 2007. This increase in the Company’s retention ration was reflective of the Company’s strong financial position and capital base, which allowed it to shoulder more reinsurance risk for its own account.
PhilNaRe President and Chief Executive Officer Wilfrido C. Bantayan said that while the
Company is now in a position to accept larger risks, underwriting policies have remained conservative. “We will not sacrifice the quality of our reinsurance portfolio for simple growth. We are as selective in our acceptance of risk with P6.0 billion of capital as we were when our capital was P1.0 billion,” said Bantayan, referring to PhilNaRe’s shareholders’ equity which as of June 30, 2008 amounted to P5.983 billion.
PhilNaRe’s net underwriting income for the first semester of 2008 totalled P110 million, down 8% compared to P120 million in net underwriting income for the first semester of 2007. Bantayan attributed this to an increase in claims. “We incurred some typhoon-related claims during the second quarter,” he said, “but our reinsurance operations remain profitable, as evidenced by our combined ratio of 93% for the first semester of 2008.” The combined ratio is commonly used in the insurance industry and measures how much of each peso of premium earned goes to cover underwriting losses, commissions and expenses.
On the investment front, PhilNaRe’s net investment income for the second quarter of 2008 amounted to P144.6 million or 36% higher than net investment income for the second quarter of 2007. However, for the first semester of 2008 the Company’s net investment income amounted to P231 million, 21% lower than investment income for the first semester of 2007 of P293 million, as the overall market environment continued to weigh on the Company’s investment portfolio.