A.M. Best Europe - Rating Services Limited has assigned a financial strength rating of A(Excellent) and issuer credit rating of "a" to MAPFRE Global Risks, Compania Internacional De Seguros Y Reaseguros S.A. (Spain) (MAPFRE Global Risks).
The outlook for all ratings is negative.
The ratings reflect MAPFRE Global Risks' integral role within MAPFRE S.A. (Spain) (the group), the company's excellent operating performance and strong business profile within the Spanish and Latin American markets. Offsetting these positive factors is the company's weak risk-adjusted capitalisation and high exposure to peripheral Eurozone sovereign and financial institutions investments.
MAPFRE Global Risks stand-alone risk adjusted capitalisation remains weak, although it is forecast to improve in 2012 as the company increases retained earnings and also improves the credit quality of its bond portfolio. MAPFRE Global Risks has a large exposure to peripheral Eurozone sovereigns and financial institution investments representing over 200 percent of year-end capital and surplus. In recent months, the company has taken steps to reduce this exposure by investing into highly rated sovereign bonds. The company aims to protect its capital base through a comprehensive reinsurance programme placed with well rated reinsurers.
Established as MAPFRE Global Risks in 2009, the company has expanded rapidly to provide comprehensive international programme insurance to multinational companies with a network spanning 75 countries. The company targets not only large multinationals but businesses that operate in the global sectors of aviation, marine and energy. Through its 99.9 percent owned subsidiary, MAPFRE Empresas, the company insures Spanish commercial risks for companies with a turnover of less than EUR 600 million. Premium growth is expected to remain strong in 2012, driven by the expansion of international business increasingly through Europe. Premium growth will be somewhat muted for MAPFRE Empresas, despite a portfolio transfer from MAPFRE Familiar as a result of the challenging economic conditions in Spain and a soft market.
MAPFRE Global Risks is expected to report an excellent net income after tax of between EUR 105 million and EUR 120 million at year end 2012, with the net combined ratio expected to be less than 90 percent. The company has an excellent five-year net combined ratio of 90 percent, reflecting its disciplined underwriting and strong business profile. In 2011, the company reported a net combined ratio of 88.1 percent, an improvement on the 93 percent reported in 2010, a result heavily affected by the Chile earthquake. Mapfre Empresas remains an extremely profitable part of the business with reduced economic activity in Spain translating into reduced claims activity and therefore improving the 2011 net combined ratio to 83.7 percent (2010: 86.8 percent).
Positive rating actions are unlikely at this point. Negative rating actions could occur if there were a worsening of risk- adjusted capitalisation, either at a consolidated or stand-alone level, tied to investment losses or a deterioration of the operating environment in Spain.
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