March 31, 2014 / 2:51 PM / 3 years ago

Fitch Upgrades Mapfre Subsidiaries' IFS to 'BBB+'; Outlook Stable

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(The following statement was released by the rating agency) LONDON, March 31 (Fitch) Fitch Ratings has upgraded Mapfre SA's (Mapfre) core subsidiaries' Insurer Financial Strength (IFS) ratings to 'BBB+' from 'BBB'. At the same time, the agency has affirmed Mapfre's Issuer Default Rating (IDR) at 'BBB-'. The Outlook on all ratings is Stable. A full list of rating actions is provided at the end of this release. KEY RATING DRIVERS The upgrade reflects the stabilisation of Spain's operating environment. Fitch affirmed Spain's Long-Term Issuer Default Rating at 'BBB' on 1 November 2013 and revised the Outlook to Stable from Negative. Consequently, Fitch considers Mapfre's operating environment as lower risk than in the previous year. The IFS ratings are now one notch higher than the implied Long-term IDRs of the core operating subsidiaries, reflecting Fitch's standard notching to allow for the priority of policyholder claims and the strong capital regime for insurers in Spain. Previously the IFS ratings were capped at the level of their implied Long-term IDRs. Mapfre's credit fundamentals are underpinned by its solid capital adequacy (Solvency I ratio of 246% at end-2013), increasing consolidated shareholders' funds (EUR7.8bn at end-2013 excluding minorities) and strong underwriting performance. In 2013, Mapfre's non-life technical performance continued to perform strongly, reflected in a 95.2% Fitch-calculated combined ratio (2012: 93.9%) and a net return on assets of 1.4% (2012: 1.2%), which compares favourably with peers. The sovereign rating of Spain (BBB/Stable) continues to weigh on the group's ratings. With 56% of the group's financial assets invested in Spain, Mapfre remains substantially exposed to the Spanish economy. The ratings also reflect Mapfre's strong franchise and access to distribution in Spain and Latin America. Mapfre remains a market leader in Spain, with a 13% market share, and a strong player in Latin America, with a 9.5% share. The Stable Outlook reflects Fitch's expectation that Mapfre will continue to maintain strong underwriting performance in the next 12-18 months and robust capital adequacy. Fitch considers Mapfre's level of financial leverage as low and supportive of the current ratings, and expects it to remain stable in 2014. Mapfre's Fitch-calculated financial leverage declined to 21% at end-2013 from 24% at end-2012, compared with its peak of 33% at end-9M12. RATING SENSITIVITIES Mapfre's ratings could be downgraded if its exposure to the Spanish insurance market or sovereign debt results in investment losses with a material impact on capital. Mapfre's ratings could also be downgraded if the Spanish sovereign rating is downgraded. Factors that could trigger an upgrade include an upgrade of the rating of Spain, alongside strong group capitalisation (as measured by, for example, the regulatory Solvency I ratio remaining above 200%), or exposure to Spanish debt falling below 100% of group shareholders' funds (currently 115%). The rating actions are as follows: Mapfre Familiar; Mapfre Global Risks Cia De Seguros Y Reaseguos; Mapfre Vida SA De Seguros Y Reaseguros; and Mapfre Re Compania De Reaseguros S.A - IFS ratings upgraded to 'BBB+' from 'BBB'; Outlook Stable Mapfre SA -Long-term IDR affirmed at 'BBB-'; Outlook Stable -EUR1bn 5.125% senior unsecured debt due 2015 affirmed at 'BB+' -EUR700m 5.91% subordinated debt due 2037 with step-up in 2017 affirmed at 'BB-' Contact: Primary Analyst Anna Bender Associate Director +44 20 3530 1671 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Federico Faccio Senior Director +44 20 3530 1394 Committee Chairperson Harish Gohil Managing Director +44 20 3530 1257 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Insurance Rating Methodology' dated 13 November 2013 are available at www.fitchratings.com. THE ISSUER DID NOT PARTICIPATE IN THE RATING PROCESS OTHER THAN THROUGH THE MEDIUM OF ITS PUBLIC DISCLOSURE Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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