PhilNaRe profit dips to P192 M

The National Reinsurance Corp. of the Philippines (PhilNaRe) reported a 40-percent drop in net income in the first six months of 2008 to P192 million as reinsurance premiums declined  20 percent to P1.2 billion.

However, net reinsurance premiums, which represent the portion of gross premiums that PhilNaRe retains for its own account, increased 21 percent to P647 million of end-June this year, from P537 million last year.

This increase in the company’s retention ratio 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, adding that their 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 billion of capital as we were when our capital was P1 billion,”  he said.

Net underwriting income for the first semester totaled P110 million, down eight percent from P120 million in the same period in 2007.

Bantayan attributed this drop to the huge number of typhoon-related claims in the second quarter of the year.

“But our reinsurance operations remain profitable, as evidenced by our combined ratio of 93 percent,” he added.

The combined ratio, commonly used in the insurance industry, measures how much of each peso of premium earned goes to cover underwriting losses, commissions and expenses.

Investments in the second quarter expanded 36 percent to P144.6 million. But the same fell  21 percent in the entire first semester to P231 million due to the overall market environment which continued to weigh on most investment portfolios.

In 2007, PhilNaRe net income reached P609 million, a significant increase from  P275 million the previous year. Retention ratio in 2007 stood at 28 percent which was higher than the 25 percent in 2006 but lower than the 32 percent in 2005

Return on average equity was reported at 11.6 percent in 2007, better than the 9.2 percent in 2006 and the 6.1 percent in 2005.

After a series of megers and consolidation. PhilNaRe became the only domestic reinsurance company in the country for life and non-life insurance companies. It was formed in 1978 and listed at the Philippine Stock Exchange in April 2007. – Ted P Torres