35th Anniversary - 1978-2013
35th Year Anniversary





The Philippine economy continued to grow in 2015, contributing to the insurance industry’s strong performance for the year. However, at the global level, the reinsurance sector faced several challenges.

Amid this macro environment, NRCP’s sustained efforts to strengthen its underwriting capabilities and streamline its risk portfolio led to a significant increase in your company’s net income, which improved from P8.4 million in 2014 to P179.1 million in 2015. Your company has also maintained its financial strength of “B++ (Good)” from A.M. Best, which reaffirmed its rating in April 2016. Thus, it is well-positioned to maintain its growth amid the current political situation and the possibility of further regulatory or policy changes.

The Macro Environment

The Philippines’ GDP continued to grow at an average rate of 5.8% for the year, accelerating in the second half to reach 6.3% in the last quarter. Unemployment fell from 6.8% to 6.3%, as around 752,000 new jobs were created from January 2015 to January 2016, while remittances for the year improved by 4.4%, and overall inflation slowed to 1.4%. These factors contributed to growth in private consumption from 5.4% to 6.2% in 2015; at nearly 70% of GDP, this made the largest impact on demand-side growth. Meanwhile, government expenditure accelerated from 1.7% in 2014 to 9.4% in 2015. In terms of contribution per sector, services had the biggest share of total GDP at 57%, as the sector grew by 6.7% in 2015; among the main drivers were business process outsourcing, tourism- related services, and trade. Construction revenue also rose by 8.9%.

This growth, along with a benign year for catastrophes, helped the Philippine insurance industry achieve excellent results in 2015. Notably, overall net income increased by 44.3%, with the life insurance sector growing by 45.5%, and the non-life sector, 36.8%.

Globally, however, the reinsurance sector faced several challenges. In Standard and Poor’s report on global reinsurance highlights for 2015, they mentioned that “defense is at the forefront of many management teams’ minds, especially given that competitive pressures are squeezing reinsurers’ business models, credit conditions in the global reinsurance market remain negative as double-digit declines in pricing persist in many lines and regions around the world, investment yields remain anemic in this lower-for-longer reality, and both traditional and alternative capital continues to flood the capacity supply.”

NRCP’s Operational Highlights for 2015

Amid this macro environment, your company built on the groundwork it laid last year by continuing to strengthen its underwriting capabilities and streamline its risk portfolio.

We continued to invest in our underwriting capabilities, for instance, by hiring consultants with 30+ years of experience in working for respected global reinsurers, and by organizing on-the-job training for our technical teams. We also acquired licenses for a number of analytics tools to help us, and our partners, strengthen our technical capacities. These programs include Risk Management Solutions’ Philippine earthquake module and AIR Worldwide’s typhoon model, which have helped us assess our total risk exposure in the event of such catastrophes. In addition, Ultimate Risk Solutions (URS) Risk Explorer has aided in reinsurance optimization and capital adequacy analyses, and is being tested for health insurance pricing. Meanwhile, URS RES-solver and Anaplan have helped with reinsurance analytics.

For the year, contributions per line of business were as follows: 44.5% for fire, 27.9% casualty, 24.1% life, and 3.5% marine. Stricter underwriting guidelines continued to be applied in 2015, resulting in the non-renewal of high hazard and/or unprofitable lines of business under facultative arrangements, particularly for property. This was one of the major reasons for the 20% drop in gross premiums written, from around P2.747 billion in 2014 to P2.182 billion 2015. In spite of this, the reduction in 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 into an improved retention ratio of 42.5% in 2015, from 37.2% in 2014.

As a result of these efforts, total losses incurred (inclusive of incurred but not reported losses) for 2015 amounted to P416.4 million, 32.4% lower than the previous year’s P616.3 million. Consequently, an underwriting loss of P71.7 million in 2014 was upturned to an underwriting income of P228.9 million in 2015.

This was accompanied by a P74.1 million or 17.1% increase in investment and other income, from P433.2 million in 2014 to P507.3 million in 2015. Though interest income dropped to P231.3 million in 2015 from P250.1 million in 2014 on account of declining interest rates, this was more than offset by greater gains on the sale of available-for-sale financial assets (P215.1 million in 2015 vs. P101.3 million), an increase in dividend income (P47.7 million vs. P41.8 million), and better foreign exchange gains (P19.5 million vs. P11.5 million).

In all, net income improved from P8.4 million in 2014 to P179.1 million in 2015.

Outlook for 2016

In the coming years, the global market for reinsurance is expected to remain challenging. In a December 2015 report, AM Best maintained their outlook for the global reinsurance industry at negative, and mentioned that this view is applicable for a term longer than their typical 12- 18 month timeframe. They cited several reasons for this assessment, including “…declining rates, broader terms and conditions, unsustainable flows of net favorable loss reserve development, low investment yields, and continued pressure from convergence capital.”

Accordingly, your company will continue to embark on a number of initiatives. We will carry on our efforts to strengthen our core competencies in reinsurance underwriting and catastrophe management. We will also diversify our portfolio by cautiously taking steps to add lines of business (for example, health insurance and mortgage redemption insurance) and to write more business in other Asian countries. Lastly, we will continue to manage our payables and receivables, especially in light of the adoption of new regulations related to reserving and capital requirements – in particular, the adoption of the Risk Based Capital (RBC) Framework 2. Ahead of these imminent developments, we have maintained our financial strength rating of “B++ (Good)” from A.M. Best, which reaffirmed its rating in April 2016. These initiatives, along with our commitment to strengthening our underwriting capabilities and streamlining our risk portfolio, will help ensure that – amid the current political situation and the possibility of further regulatory or policy changes – your company will maintain the solid growth that it has achieved this year.

In closing, we would like to thank you, our stockholders, for your continued support in our efforts to turn this company into the world’s best small national reinsurer.

Chairperson of the Board

President and CEO

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