A.M. Best Comments on Ratings of MAPFRE PRAICO Insurance Company and Its Affiliates

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has commented that the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a” of MAPFRE PRAICO Insurance Company (PRAICO), its wholly owned subsidiary, MAPFRE Preferred Risk Insurance Company (PRICO), and an affiliate, MAPFRE Pan American Insurance Company (PAICO) collectively known as the MAPFRE PRAICO Group (MPG), remain unchanged following the recent market volatility surrounding Spain’s economic conditions, derived from the uncertainty that underpins the country’s banking sector. All the above companies are domiciled in San Juan, Puerto Rico.

This comment corresponds with A.M. Best Europe – Rating Services Limited’s comment that the FSR of A (Excellent) and ICR of “a” of MPG’s affiliate company, MAPFRE Re, Compania de Reaseguros, S.A. (MAPFRE RE) are unchanged. MAPFRE RE, isa key subsidiary of MAPFRE S.A. (both domiciled in Spain),the ultimate holding company of the MAPFRE Group.

A.M. Best’s comment follows the announcement that Spain will borrow up to EUR 100 billion from the European Financial Stability Facility or the European Stability Mechanism, to recapitalize its banks. In A.M. Best’s opinion, the perceived reduction in financial flexibility of the Spanish sovereign does not have an immediate and direct impact on the rating fundamentals of MAPFRE RE. This view is supported by stress tests undertaken on the company’s risk-adjusted capitalization, with the results remaining within A.M. Best’s tolerance level. However, the high level of investments in Spanish sovereign and financial institutions debt remains a concern, together representing 153% of MAPFRE S.A. shareholders’ funds as of the first quarter of 2012. A.M. Best acknowledges that there are outstanding uncertainties relating to the terms of the EUR 100 billion loan and the external audits of Spain’s banking sector; and as such, A.M. Best may take negative actions on the ratings of MAPFRE RE in the event of further erosion to Spain’s sovereign creditworthiness.

On June 6, 2012, A.M. Best downgraded the ICRs to “a” from “a+” and affirmed the FSR of A (Excellent) of MAPFRE PRAICO and its affiliates. At that time, the ratings were removed from under review with negative implications and assigned a negative outlook.

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. Key criteria utilized include: “Rating Members of Insurance Groups”; “Risk Management and the Rating Process for Insurance Companies”; “Catastrophe Analysis in A.M. Best’s Ratings”; and “Understanding BCAR for Property/Casualty Insurers.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best Co.Gordon McLean, (908) 439-2200, ext. 5304
Senior Financial Analyst
gordon.mclean@ambest.com
orGerard Altonji, (908) 439-2200, ext. 5626
Assistant Vice President
gerard.altonji@ambest.com
orRachelle Morrow, (908) 439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
orJim Peavy, (908) 439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Source: A.M. Best Co.