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S&P Raises Nacional de Reaseguros to 'A'; Otlk Stable.

LONDON--(BUSINESS WIRE)--Standard & Poor's--

July 6, 1999-- Standard & Poor's today raised its long-term counterparty credit and insurer financial strength ratings on Nacional de Reaseguros S.A. (Nacrea) to single-'A' from single-'A'-minus. The outlook is stable.

The ratings are based on Nacrea's leading competitive position in the Spanish market, its very strong capitalization, and its strong underlying operating performance. These strengths are partially offset by Nacrea's lack of geographic diversity.

Major rating factors:

-- Strong business position. Nacrea is the leading professional domestic reinsurer in the Spanish market, with an official market share of over 8%. It has an historically strong position among small and midsize mutual and home service insurers, sectors that will continue to need high levels of traditional reinsurance. In addition, Nacrea has been able to increase its standing among the larger insurers and bancassurers, where consolidation is taking place, and has both increased lines and gained new clients as mergers and takeovers have transformed the upper end of the market. The company is expected to continue developing its competitive position in future.

-- Strong operating performance. Nacrea has produced consistently strong results over the past five years, although the strength of these results cannot be ascertained directly from the published results. Nacrea's results are shielded from catastrophe losses through a government agency, and from high severity motor liability losses by statutory limits on levels of compensation.

-- Very strong capitalization. Nacrea's risk-adjusted capital adequacy ratio was 170% at year-end 1998, using Standard & Poor's model. Given the type of risks being underwritten by Nacrea, and its historically good profitability, the business written by Nacrea is considered unlikely to place significant strain on the capital base in future.

-- Nacrea's business is concentrated in Spain, and although this means that management is able to exercise strict control over the business, it also exposes Nacrea to systemic risk in the Spanish primary market. Management has demonstrated its ability to mitigate this risk through selective underwriting in volatile primary lines, but as competition in the primary market remains intense, the exposure remains.

OUTLOOK: STABLE

Nacrea will maintain and grow its market share in Spain, particularly among the larger primary insurers. Underlying earnings will remain strong, and capitalization will remain very strong, Standard & Poor's said.---CreditWire
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Publication:Business Wire
Geographic Code:4EUSP
Date:Jul 6, 1999
Words:371
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