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A.M. Best Upgrades Credit Ratings of Nacional de Reaseguros, S.A.A.M. Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating to "a" from "a-" of Nacional de Reaseguros, S.A. (Nacional) (Spain). The outlook of these Credit Ratings (ratings) has been revised to stable from positive. The upgraded ratings 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 challenging global market conditions for reinsurers. Nacional's risk-adjusted capitalisation has remained resilient, stemming from strong internal earnings generation, a prudent reserving methodology, and the de-risking of its investment portfolio over the past few years. The de-risking of assets saw a significant shift from Spanish sovereign and corporate bonds to increased holdings in European and U.S.-fixed income securities. A.M. Best expects the company's prospective capital position to benefit from high earnings retention, underpinned by a prudent dividend policy that supports a pay-out ratio of approximately 30% of profit after tax. Nacional's disciplined underwriting approach and limited exposure to natural catastrophes in its domestic market have contributed to consistently solid technical results, as evidenced by its steadily declining combined operating ratio (COR). In 2016, despite the higher frequency of catastrophe events during the year, Nacional still produced a COR of 91.6%, with catastrophe losses contributing a modest 1%. Similarly, for 2017, A.M. Best expects the company's operating performance to remain resilient demonstrating the effectiveness of Nacional's prudent underwriting framework. Nacional maintains a strong compeitive position as a leading independent reinsurer in Spain. Gross written premium increased by 4% to EUR 532 million during 2016, driven by the ongoing recovery in Spain's economy and successful growth abroad. To reduce its dependence on the domestic market, Nacional has successfully expanded its international activities in recent years, with international business accounting for 32% of Nacional's total premiums in 2016. The company achieved 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 long-term profitability of the expansion outside of Spain, owing to the persistent soft market conditions in the global reinsurance market. A.M. Best believes that Nacional's expansion outside of its domestic market represents a source of potential volatility to the company's performance on a gross basis, however; the company has shown the ability to manage this through its comprehensive retrocession programme. 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. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases. A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
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