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Global Credit Research - 14 Oct 2010
Paris, October 14, 2010 -- Moody's Investors Service has today affirmed the Aa3 insurance financial
strength rating (IFSR) of Mapfre Global Risks (previously Mapfre Empresas)
and the A1 IFSR of Mapfre Asistencia with a negative outlook. Mapfre
Global Risks is the commercial unit of the Mapfre Group, the largest
Spanish insurance Group, providing global solutions to international
corporate clients. Mapfre Global Risks also currently owns 100%
of Mapfre Empresas, providing commercial insurance mainly to SMEs
in Spain, and 100% of Mapfre Caución y Crédito,
the credit insurance unit of the Group. Mapfre Asistencia is the
subsidiary of the Group providing assistance products out of Spain.
Mapfre Global Risks and Mapfre Asistencia belong to the Mapfre Group's
International Direct Insurance division.
Moody's said that the affirmation of the ratings primarily reflects the
strong performance reported by the Mapfre Group as a whole in the last
eighteen months, in spite of the challenging environment,
and the reduction in financial leverage from 37% at year-end
2008 to 26% at year-end 2009. Moody's also
believes that the financial strength of the Group is supported by a very
strong franchise in Spain and in Latin America.
Nonetheless, the negative outlook continues to reflect (i) the challenges
raised by the current economic environment, especially in Spain,
which could negatively affect the profitability of the Mapfre Group,
which provides implicit and explicit support to Mapfre Global Risks and
Mapfre Asistencia and (ii) the negative outlook that Moody's maintains
on the Spanish banking system, bearing in mind the exposure to Spanish
financial institutions in the Group's investment portfolio,
and notwithstanding the currently good average rating of the fixed income
portfolio. Moody's also mentioned that whilst the fast growth
experienced by Mapfre internationally, notably in Latin America,
benefits the group's franchise and product diversification,
it could also weigh on the Group's profitability in the medium-term,
as its foreign operations have traditionally been less profitable than
its domestic ones.
Commenting further on profitability, Moody's mentioned that
Mapfre Global Risks has been significantly impacted by the slowdown of
the economy, especially in Spain. Revenues (including Mapfre
Empresas and Mapfre Caución y Crédito) declined by 7%
while the combined ratio went up to 94.8% in 2009 from 88.2%
in 2008. Mapfre Group combined ratio also increased from 93.9%
in 2008 to 95.7% in 2009. The Group profitability
has also been impacted by the Chilean earthquake in the first half of
2010 (estimated loss of EUR97 million). Although Moody's
notes positively that the overall profitability of the Group has thus
far remained at a strong level (with a return on average capital at 11.6%
in 2009, and 11.7% in the first half of 2010),
Mapfre could still experience further deterioration given the uncertainties
on the macroeconomic environment.
Moody's also noted that Mapfre América, representing
26% of the Group's non-life premiums, and experiencing
a rapid growth, still operates with a combined ratio (103.9%
in 2009 and 100.3% in 2010) significantly higher than Mapfre's
domestic operations, which could also contribute to weaken the Group's
overall non-life profitability going forward.
Furthermore, Mapfre's fixed income portfolio remains exposed
to financial institutions and to Spanish banks. As Moody's
outlook on the Spanish banking system remains negative, Moody's
expects Mapfre's corporate fixed income portfolio to continue to
remain under pressure in the short to medium term. Nonetheless,
Moody's notes that the group's exposure to hybrid debt is
limited and the average rating for the fixed income portfolio was Aa at
year-end 2009. Mapfre's fixed income portfolio also
includes around 15% of Spanish government bonds, recently
downgraded by Moody's to Aa1 from Aaa, with a stable outlook.
Commenting on what could change the ratings of Mapfre Global Risks and
Mapfre Asistencia down, Moody's mentioned primarily a deterioration
of the credit quality of the Mapfre Group, given the explicit and
implicit support provided to these entities by the Group. Such
a deterioration could be caused by (i) a weakening of the Group's operating
profitability (for instance with a combined ratio approaching 100%
in non-life), (ii) a deterioration of the business profile
of the Group, as evidenced by a significantly higher weight of industrial
risks or reinsurance, or a significantly higher weight of operations
in countries with a challenging operating environment, (iii) a material
deterioration of the asset quality, or (iv) a reduced capitalisation
and financial flexibility in case of large acquisitions.
Conversely, the main factor which could exert positive pressure
on Mapfre Global Risks and Mapfre Asistencia's ratings would be
an improvement in the credit quality of the Group as a whole. This
could result from a strengthening of the franchise outside Spain and Latin
America, or a further strengthening of capitalisation. In
the medium term, Moody's could change the outlook to stable
from negative if the Group was able to maintain its current level of profitability.
The last rating action on Mapfre Global Risks took place on 15 April 2009,
when Moody's affirmed Mapfre Global Risks and Mapfre Asistencia's
Aa3 and A1 IFSRs and assigned a negative outlook to these ratings.
Based in Madrid, Spain, Mapfre Global Risks is the commercial
unit of the Mapfre Group. In 2009, Mapfre Global Risks reported
Gross Premiums Written of EUR1.5 billion and net income of EUR76.7
million. Also based in Madrid, Mapfre Asistencia is the international
assistance company of the Group. It reported Gross Premiums Written
of EUR483.8 million in 2009 and net income of EUR16.3 million.
The following ratings were affirmed with a negative outlook:
Mapfre Global Risks -- insurance financial strength rating
Mapfre Asistencia -- insurance financial strength rating
The principal methodology used in rating Mapfre Global Risks and Mapfre
Asistencia was "Moody's Global Rating Methodology for Property and Casualty
insurers", which can be found at www.moodys.com in
the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating these issuers can also be found in
the Rating Methodologies sub-directory on Moody's website.
MD - Financial Institutions
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Asst Vice President - Analyst
Financial Institutions Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's France SAS
Moody's affirms Mapfre Global Risks (Aa3 IFSR) and Mapfre Asistencia (A1 IFSR) ratings and maintains negative outlook
96 Boulevard Haussmann
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