Federal Phoenix gets qualified credit rating

MANILA, Philippines - Federal Phoenix Assurance Co., Inc, one of the leading independent non-life insurance companies in the country, was assigned a financial strength rating of PRS A plus by Philippine Rating Services Corp.

A PRS A rating means that an insurer has strong financial security characteristics but is somewhat more likely to be affected by adverse business conditions compared to higher-rated insurance companies. The plus sign further qualifies the rating.

Federal was established by the Zuellig Group of Companies in 1958, and offers a comprehensive range of non-life insurance products and services. As of end-September 2011, Federal had total assets of P3.3 billion.

The financial strength rating assigned to Federal reflects the insurer’s good relationship with brokers and agents, which continue to be traditional channels for non-life insurance sales in the country; its sound investment portfolio; high-quality reinsurers; and positive growth prospects for non-life insurance.

“The strong relationship of Federal with agents and brokers is a competitive advantage, given that a substantial portion of the country’s insurance products continues to be sold through these conventional distribution channels,” PhilRatings said.

Independent brokers and dealers accounted for the largest portion of Federal’s gross premiums written in the first nine months of 2011, indicating continued market confidence in the company.

As of Sept. 30, 2011, about 73 percent of Federal’s portfolio comprised government securities (bills and notes). 

Stock investments, mostly representing listed “blue chips”, likewise provide liquidity, depending on market conditions.

Federal’s major reinsurers are leading reinsurers, with global financial strength ratings ranging from A- to AA-. High-quality reinsurers provide a greater degree of confidence, in terms of support for claims against the company.

Despite its high quality reinsurers, however, PhilRatings deems it more prudent for Federal to further strengthen its capital to provide better cushion for unforeseen and exceptionally large claims that the company may need to service going forward. 

Capital strengthening efforts take on greater significance when viewed against the series of natural disasters, which have struck the country, as well as the Asian region, in recent times.

The Zuellig Group has been committed to the insurance business since 1958. Last year, Singapore based Golden Eight Group Limited, also owned by the Zuellig Group, invested P175M in Federal, raising its capitalization to P350M.

It believes that Federal is in growth mode given its 28 percent year-on-year growth in 2011, and taking into account the various opportunities that may arise from networking with other insurance companies as the regional insurance market is liberalized in 2015.