2013-09-06 17:10:03 -
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of MAPFRE RE, Compania de Reaseguros S.A. (MAPFRE Re) (Spain). The outlook for both ratings remains negative.
The ratings reflect MAPFRE RE’s integral role within MAPFRE S.A. (MAPFRE) (Spain), its good operating performance, strong business profile and robust risk-adjusted capitalisation. Along with underwriting a large volume of non-group related reinsurance business, MAPFRE RE also acts as the group’s reinsurer, centralising its reinsurance activities.
In 2012, MAPFRE RE was responsible for approximately 12% of the group’s total gross written premium and a similar proportion of its profit after tax.
Economic conditions throughout the eurozone—and particularly within Spain—add negative pressure to
the ratings of MAPFRE RE and are the drivers of its negative outlook. While MAPFRE RE has taken substantial measures to de-risk its investment portfolio in recent years, the larger MAPFRE group (from which MAPFRE RE receives rating enhancement) maintains significant investments in the peripheral eurozone economies.
Spanish debt accounted for approximately 38% 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 domestic 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.
MAPFRE RE’s combined ratio improved from a five-year-low of 100.2% in 2011 to 96.7% in 2012, which is more in line with A.M. Best’s longer-term expectations. The improvement was largely a result of better loss experience driven by fewer natural catastrophe loss events. In 2013, A.M. Best expects MAPFRE RE’s underwriting performance to be approximately in line with that of 2012. The company’s investment yield is expected to decrease marginally in 2013 as a result of its re-allocation of assets towards investments of a higher credit quality and away from Spanish sovereign debt. However, this re-allocation reduces the risk-adjusted capital requirements of the company’s investment portfolio and increases its level of asset diversification.
MAPFRE RE maintains a robust level of risk-adjusted capitalisation, and in 2012 wrote gross premiums of EUR 2,844 million (USD 3,760 million) against a capital base of EUR 969 million (USD 1,280 million).
Negative rating actions could occur if there is deterioration in MAPFRE RE’s or MAPFRE S.A.'s risk-adjusted capitalisation. Additionally, 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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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