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Rating Action:

Moody's reviews MAPFRE Seguros' and MAPFRE Vida's Ba3/Aa2.ar ratings for possible downgrade

Global Credit Research - 29 Aug 2013

Buenos Aires City, August 29, 2013 -- Moody's Latin America placed the insurance financial strength (IFS) ratings of MAPFRE Argentina Seguros S.A. ("MAPFRE Seguros") and MAPFRE Argentina Seguros de Vida S.A. ("MAPFRE Vida") -- both Ba3 global local-currency and Aa2.ar Argentine national scale -- under review for downgrade.

RATINGS RATIONALE

Moody's said the ratings were placed under review for downgrade because MAPFRE Seguros reported a significant net loss -- equivalent to 50% of the company's statutory capital at the beginning of the fiscal year -- and causing the company's non-compliance with local capital requirements as of June 30, 2013. The large loss was largely driven by weak underwriting margins.

According to Moody's, the review for possible downgrade will focus on the company's ability to restore and maintain both profitability and capital adequacy in the near- and medium-term, as well as on the ability and willingness of MAPFRE Seguros' ultimate parent shareholder -- MAPFRE S.A. in Spain -- to provide further capital contributions, as necessary, to meet and exceed minimum regulatory capital requirements. The review will also consider the strategic importance of the 2 Argentine subsidiaries to their parent company MAPFRE S.A., and whether the current 2 notches of uplift in both companies' ratings from their stand-alone credit profile (due to MAPFRE S.A.'s ownership and implied support) is still appropriate, in the context of the parent company's recent sale of its workers' compensation and health insurance subsidiaries in Argentina.

MAPFRE Seguros' intrinsic credit profile reflects its leading position in the Argentine insurance market as a major player in the local property and casualty segment, although its increasing penetration in softer segments -- such as auto and commercial property -- has resulted in greater volatility of earnings and has pressured capitalization. In the case of MAPFRE Vida, which is a mid-sized player in the Argentine life and annuity segment, Moody's commented that the company has sustained solid profitability and good capital adequacy relative to peers, along with very strong premium growth over the last five years, although its market presence is still modest. Both companies' ratings are uplifted by their ownership, brand sharing, and risk transfer arrangements achieved through intra-group reinsurance agreements.

Among the factors that could lead to a downgrade of the companies' ratings are: 1) reduced ownership and/or support from their ultimate parent company or affiliates outside Argentina, 2) a downgrade of Argentina's sovereign bond rating and/or the country's operating environment, 3) persistent impairment of capital levels, or 4) sustained weak profitability. Conversely, the following could lead to a confirmation of the companies' ratings: 1) a significant capital injection to MAPFRE Seguros from any of MAPFRES.A.'s affiliates outside Argentina, 2) continued implicit and explicit support from parent to both companies, and 3) actions taken by the company leading to restore capital adequacy and profitability on a sustained basis.

The principal methodology used in this rating is Moody's Global Methodology for Property and Casualty Insurers published in May 2010.

Based in Buenos Aires, MAPFRE Seguros and MAPFRE Vida are indirect wholly-owned subsidiaries of MAPFRE S.A., headquartered in Madrid, Spain. For the 2012/13 fiscal year, ended June 30th 2013, total gross premiums for MAPFRE Seguros and MAPFRE Vida amounted to ARS 2 billion and ARS 317 million, respectively. As of that same date, MAPFRE Seguros and MAPFRE Vida reported a net loss of ARS 141 million and a net profit of 25 million, respectively. On June 30, 2013, total shareholders' equity was ARS 165 million for MAPFRE Seguros, and ARS 84 million for for MAPFRE Vida.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations. For more information, visit our website at www.moodys.com/insurance.

Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".mx" for Mexico. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Diego Mariano Nemirovsky
VP - Senior Credit Officer
Financial Institutions Group
Moody's Latin America
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600

Robert Riegel
MD - Insurance
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Latin America
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600

Moody's reviews MAPFRE Seguros' and MAPFRE Vida's Ba3/Aa2.ar ratings for possible downgrade
No Related Data.

 

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