Buenos Aires, April 13, 2009 -- Moody's Latin America has affirmed the Ba3 global local currency
and the Aa2.ar Argentina national scale insurance financial strength
(IFS) ratings of MAPFRE Argentina Seguros S.A., MAPFRE
Argentina ART S.A. and MAPFRE Argentina Seguros de Vida
S.A. The outlook for all ratings remains stable.
According to Moody's, the affirmation of the ratings reflects
primarily the expectations that MAPFRE S.A. (based in Madrid,
Spain) will continue to support the local operations through both capital
injections and risk-sharing arrangements, as well as the
timely execution of MAPFRE Argentina Seguros' and MAPFRE Argentina
ART's re-capitalization plans.
MAPFRE Argentina's operating companies have sustained very strong
growth in the past few years, and the high growth rate has pressured
overall capitalization and profitability. As of December 31,
2008, MAPFRE Argentina Seguros and MAPFRE Argentina ART were not
compliant with the mandated capital requirements and, whereas the
recapitalization plans will likely be executed, their gross underwriting
leverage will continue to be a major constraint on their credit risk profile.
MAPFRE Argentina Seguros
MAPFRE Argentina Seguros has increasingly become a major player in the
local property and casualty and workers' compensation segments and
is now the second largest insurance company in these business lines.
Moody's notes that whereas the improved market share is viewed positively,
the increasing penetration of the group in softer segments -- such
as auto and commercial property -- has resulted in greater volatility
of earnings and has pressured capitalization.
On December 31, 2008, the company did not meet the minimum
capital requirements because of a limitation on admitted assets.
On January 2, 2009, the company proceeded with the re-allocation
of its investments, likely solving its minimum solvency requirements.
That said, the company's capitalization continues to constrain
its credit profile, along with its weakened and volatile profitability,
which is a result of the company's concentration in price-sensitive
segments, such as automobile and property insurance.
MAPFRE Argentina ART
MAPFRE Argentina ART's improving market presence, currently
the second largest provider of workers' compensation coverage as
of December 2008, compared to being the fifth largest in 2006,
is viewed positively. Moody's notes, however,
that the exceptionally high growth rate has significantly outpaced growth
of its capital base, increasing the company's operating leverage
and, as a result, constraining its credit risk profile.
The rating agency added that the political and regulatory risks associated
with the workers' compensation segment also mitigate the credit
strengths of MAPFRE Argentina ART.
On December 31, 2008, MAPFRE Argentina ART also did not meet
the minimum capital requirements set by the regulator, mostly because
of its rapid premium expansion. MAPFRE Argentina ART will need
a capital contribution from its shareholder to comply with the regulatory
requirements, which is expected to occur by the end of April.
The ratings affirmation of MAPFRE Argentina ART reflects the expectation
that the capital injection will occur as planned, given the historic
support provided by its ultimate parent. That said, the ratings
could be downgraded should the capital infusion not be sufficient and/or
the time constraints are not met.
MAPFRE Argentina Vida
Expanding on the rationale for MAPFRE Argentina Vida's rating affirmation,
Moody's commented that the company has sustained solid profitability
and good capital adequacy, along with very strong premium growth
over the last two years, when the company tripled its gross premiums
-- ARS91 million in 2008 compared to ARS31 million in 2006.
However, these credit strengths are mitigated by the expectations
that its capital adequacy will be pressured going forward-- as dividends
may be taken out of MAPFRE Argentina Vida to provide assistance to its
two local affiliates given their capital needs -- and profitability
deteriorates, as the company continues to aggressively pursue market
The following IFS ratings were affirmed with a stable outlook:
- MAPFRE Argentina Seguros S.A. -- global local
currency Ba3 and Aa2.ar on the Argentine national scale
- MAPFRE Argentina A.R.T. S.A.
-- global local currency Ba3 and Aa2.ar on the Argentine national
- MAPFRE Argentina Seguros de Vida S.A. -- global
local currency Ba3 and Aa2.ar on the Argentine national scale
Based in Buenos Aires, MAPFRE Argentina Seguros, MAPFRE Argentina
ART and MAPFRE Argentina Vida are indirect wholly-owned subsidiaries
of MAPFRE S.A., headquartered in Madrid, Spain.
For the first half of the 2009 fiscal year, ended on December 31,
2008, total gross premiums for MAPFRE Argentina Seguros, MAPFRE
Argentina ART and MAPFRE Argentina Vida amounted to ARS608 million,
ARS305 million and ARS61 million, respectively. As of that
same date, MAPFRE Argentina Seguros posted a net loss of ARS5 million,
whereas MAPFRE Argentina ART and MAPFRE Argentina Vida reported net profits
of ARS3 million and ARS7 million, respectively. On December
31, 2008, total shareholders' equity was ARS173 million
for MAPFRE Argentina Seguros, ARS93 million for MAPFRE Argentina
ART, and ARS23 million for MAPFRE Argentina Vida.
NOTE: Moody's national scale insurance financial strength
ratings rank an enterprise's financial strength on a relative basis
in comparison with other firms within the same country. Such ratings
are designed for use at the local (national) level, and they are
not globally comparable. For Argentine companies, national
scale ratings carry the identifier of ".ar".
In contrast, global local currency insurance financial strength
ratings indicate the relative credit risk of an insurance company on a
globally comparable scale. In the case of ratings of insurers domiciled
in a country with a speculative grade sovereign rating, such as
Argentina, these ratings are the result of, among several
factors, the political risk, the risk of a generalized debt
moratorium, the weakness of the legal environment or framework,
and the risk of interference in the functioning of the financial system.
Taken together, the national scale and global local currency ratings
provide a more comprehensive opinion about the credit risk of the company.
Moody's insurance financial strength ratings are opinions about
the ability of insurance companies to punctually repay senior policyholder
claims and obligations.
For more information, please visit our website at www.moodys.com/insurance.
Asst Vice President - Analyst
Financial Institutions Group
Moody's America Latina Ltda.
Moody's affirms MAPFRE Argentina's ratings at Ba3/Aa2.ar
Vice President - Senior Analyst
Financial Institutions Group