November 30, 2016 / 3:41 PM / in a year

Fitch Affirms Mapfre at IFS 'A-'; Outlook Stable

(The following statement was released by the rating agency) LONDON, November 30 (Fitch) Fitch Ratings has affirmed Spanish insurer Mapfre SA's (Mapfre) core operating subsidiaries' Insurer Financial Strength (IFS) Ratings at 'A-' and Mapfre SA's Issuer Default Rating (IDR) at 'BBB+'. The Outlooks are Stable. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS The affirmation reflects Mapfre's sustained robust operating performance and consistently strong capitalisation, despite the difficult economic conditions in the markets in which the group operates. This resilience is also reflected in the group operating companies' IFS ratings being one notch higher than the Spanish sovereign rating (BBB+/Stable). In 3Q16, Mapfre demonstrated resilient underwriting performance despite a number of challenges in its core markets. The group reported a combined ratio of 97.2% in 3Q16 (3Q15: 98.7%). The improvement in the combined ratio reflects improved technical management and cost-saving initiatives in Mapfre's core markets. Fitch expects the group to maintain robust underwriting performance. Fitch considers Mapfre strongly capitalised, based on a 'Strong' score from Fitch's Prism Factor Based Model (FBM). Shareholders' funds increased by 7% to EUR9.2bn in 3Q16, mainly driven by an increase in the value of the group's investment portfolio. The group's Solvency II ratio was also strong at 197% at end-1H16. However, Mapfre has a substantial amount of goodwill on its balance sheet, equivalent to 22% of shareholders' funds at end-3Q16. The ratings also reflect Mapfre's strong franchise and access to distribution in Spain and Latin America, particularly Brazil. Mapfre is the 10th-largest European insurer and the third-largest insurance group in Latin America. Fitch affirmed Spain's Long-Term Issuer Default Rating at 'BBB+' with a Stable Outlook on 29 July 2016. The sovereign rating continues to constrain Mapfre's ratings despite strong signs of recovery and stabilisation in Spain. The ratio of Spanish sovereign debt to shareholders funds remained high at 160% in 3Q16 (2015: 157%), which leaves Mapfre substantially exposed to the Spanish economy. RATING SENSITIVITIES Mapfre's ratings could be downgraded if exposure to the Spanish insurance market or sovereign debt results in investment losses with a material impact on the group's capitalisation. Mapfre's ratings could also be downgraded if the Spanish sovereign is downgraded. Factors that could trigger an upgrade include an upgrade of Spain's sovereign rating, together with strong group capitalisation or exposure to Spanish sovereign debt falling below 100% of group shareholders' funds. FULL LIST OF RATING ACTIONS Mapfre Espana Compania de Seguros y Reaseguros S.A.; Mapfre Global Risks S.A.; Mapfre Vida S.A. de Seguros y Reaseguros; and Mapfre Re Compania de Reaseguros S.A. IFS affirmed at 'A-'; Outlook Stable Mapfre SA Long-Term IDR affirmed at 'BBB+''; Outlook Stable EUR1000m senior debt affirmed at 'BBB' EUR700m 5.921% subordinated debt due 2037 with step-up in 2017 affirmed at 'BBB-' Contact: Primary Analyst Ekaterina Ishchenko Associate Director +44 20 3530 1532 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Harish Gohil Managing Director +44 20 3530 1257 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1015559 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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