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A.M. Best Affirms Credit Ratings of Nacional de Reaseguros, S.A.
[September 30, 2016]

A.M. Best Affirms Credit Ratings of Nacional de Reaseguros, S.A.


A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" of Nacional de Reaseguros, S.A. (Nacional) (Spain). The outlook of these Credit Ratings (ratings) remains positive.

The ratings and positive outlook reflect Nacional's excellent risk-adjusted capitalisation, strong operating performance and well-established business profile as a leading reinsurer in Spain. The ratings also factor in the company's successful international expansion, despite ongoing difficult global market conditions for reinsurers.

Nacional's risk-adjusted capitalisation has improved each year between 2011 and 2015, supported by strong earnings generation and a comprehensive retrocession programme. The reinsurer has been de-risking its investment portfolio over the past few years. As a result, exposure to Spanish sovereign and the corporate debt of financial institutions diminished to 11% of total investments at year-end 2015, down from 27% in 2011. Nacional's capital levels are likely to continue benefitting from high earnings retention going forward, underpinned by a relatively prudent dividend policy that supports a payout ratio of approximately 30% of profit after tax.

Nacional's disciplined underwriting approach and limited exposure to natural catastrophes have contributed to solid technical results over the past five years, with a weighted average combined ratio below 94%. The company reported its highest net profit to date of EUR 36 million in 2015, supported by stable results domestically and an improved performance of the foreign portfolio largely owing to the favourable claims development of the marine account. The introduction in January 2016 of he new Baremo indemnification table for Spanish auto insurers, which sets out higher awards for personal injury claims, is expected to negatively impact the profitability in Spain's motor insurance market. However, as domestic motor business represents a limited share of its total business, A.M. Best expects Nacional's overall operating performance to remain resilient.



Nacional maintains a strong competitive position as the leading independent reinsurer in Spain. Gross written premium increased by 6% to EUR 512 million during 2015, driven by the ongoing recovery in Spain's economy and successful growth abroad. To reduce its dependence on domestic demand, Nacional has successfully expanded its international activities in recent years, further increasing its share to 30% of total premiums in 2015. This is despite the ongoing intense competitive conditions of the global reinsurance market. Nacional was able to achieve this level of diversification by targeting small to medium-sized insurers and mutual societies in Portugal, Italy, France and other European countries. Nonetheless, uncertainties exist regarding the profitable expansion outside Spain, owing to the protracted deterioration in global reinsurance conditions. In particular, A.M. Best believes that Nacional's expansion outside of its domestic market represents a potential source of volatility to the company's performance.

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings.


A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.


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