A.M. Best Affirms Ratings of MAPFRE Global Risks, Compania Internacional De Seguros Y Reaseguros S.A. [Manufacturing Close – Up]

A.M. Best Europe - Rating Services Limited has affirmed the financial strength rating of A (Excellent) and issuer credit rating of "a" of MAPFRE Global Risks, Compania Internacional De Seguros Y Reaseguros S.A. (Spain) (MAPFRE Global Risks).

The outlook for both ratings is negative.

The ratings reflect MAPFRE Global Risks' integral role within MAPFRE S.A. (MAPFRE) (Spain), its excellent operating performance and strong business profile within the Spanish and Latin American markets. MAPFRE Global Risks acts as the commercial insurance company of the MAPFRE group, servicing multinational clients along with small and medium-sized enterprises in Spain via its subsidiary, MAPFRE Empresas. In 2012, MAPFRE Global Risks and its subsidiaries accounted for approximately 8 percent of the MAPFRE group's total gross written premium and approximately 9 percent of its profit after tax.

Economic conditions throughout the eurozone-and particularly within Spain-add negative pressure to the ratings of MAPFRE Global Risks and are the drivers of its negative outlook. While MAPFRE Global Risks has recently made efforts to reduce its exposure to Spanish sovereign debt by investing into higher rated financial instruments, the company remains heavily exposed to domestic debt, equity and real estate markets. Moreover, the MAPFRE group itself, from which MAPFRE Global Risks receives rating enhancement, maintains significant investments in the peripheral eurozone economies. Spanish debt accounted for approximately 38 percent of the consolidated group's EUR 39.8 billion of invested assets at year- end 2012, the majority of which was derived from investments in government-related assets and financial institutions. The MAPFRE group also maintains sizeable commercial property investments in Spain through its investment holdings. Despite difficult economic conditions, the MAPFRE group maintains a strong level of risk- adjusted capitalisation and continues to generate robust underwriting profitability.

In 2012, MAPFRE Global Risks reported an excellent combined ratio of 81.9 percent, materially ahead of its five-year average combined ratio of 86 percent. Pressure on underwriting profitability from growing international operations is being offset by improved performance in its domestic market. Although the volume of commercial business from Spain is reducing as the economy contracts, MAPFRE Global Risks' competitive position is benefitting from a flight to quality. Overall growth in gross written premium is anticipated in 2013, despite the prevailing economic environment in Spain and will be driven by the company's international operations, with a further contraction of domestic business likely.

Negative rating actions could occur if there is deterioration in MAPFRE Global Risks' or MAPFRE's risk-adjusted capitalisation. There will be negative rating pressure in the event of further deterioration in the Spanish economy. Although upwards rating movement is unlikely, a stable outlook could be assigned following the economic recovery and stabilisation of Spain.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe - Rating Services Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.

More Information:

http://www.ambest.com

Best's Credit Rating Methodology:

http://www.ambest.com/ratings/methodology

((Comments on this story may be sent to [email protected]))