LONDON--(BUSINESS WIRE)--A.M. Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a+” from “a” and affirmed the Financial Strength Rating of A (Excellent) of MAPFRE GLOBAL RISKS, Compañía Internacional de Seguros y Reaseguros S.A. (MGR) (Spain). MGR is a subsidiary of MAPFRE S.A. (MAPFRE), the non-operating holding company of the MAPFRE group. The outlooks of these Credit Ratings (ratings) remain stable.
The ratings reflect MGR’s balance sheet strength, which A.M. Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also factor in MGR’s strategic importance to the MAPFRE group, as its key contributor of premium revenue and earnings to the group. MGR is the group’s internal specialist for complex, industrial risks, and is strongly integrated within the MAPFRE group.
The Long-Term ICR upgrade reflects MAPFRE’s improved credit rating fundamentals, characterised by a very strong balance sheet, a strong operating performance, with solid earnings from its Spanish insurance and global reinsurance operations, and a favourable business profile. The sustained improvement in Spain’s macroeconomic conditions over recent years has also influenced the group’s rating fundamentals positively.
MGR’s balance sheet strength is underpinned by its risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), despite significant intragroup holdings, which incur high capital charges within the model. MGR benefits from good organic capital generation, with its shareholder having demonstrated a willingness to support the company by foregoing dividends in recent years. A.M. Best’s assessment also considers the high concentration within the investment portfolio to intercompany investments, as well as the company’s relatively high dependence on reinsurance due to its business model, which incorporates a number of fronting arrangements for captives.
The operating performance assessment factors in MGR’s strong historical performance up to 2016, which is offset partially by a recent increase in the volatility of underwriting results as the company continues to expand internationally. Technical performance in 2017 was impacted adversely by a significant increase in the level of both catastrophe and large losses, generating a combined ratio of 135.2%, as calculated by A.M. Best. An extensive review of the company’s portfolio was performed subsequently to assist management in taking adequate corrective actions. As at half-year 2018, the company’s results have seen a recovery due to a relatively benign loss environment during the period.
MGR’s business profile is supported by a strong brand awareness, a recognised expertise, and long-standing relationships with clients. The restructuring of MGR, which is expected to be complete by January 2019, will see MGR’s insurance and reinsurance business transferred to MAPFRE España, Compañía de Seguros y Reaseguros S.A. and MAPFRE RE, Compañía de Reaseguros, S.A., respectively. MGR will continue managing the relationship with policyholders and be responsible for technical aspects, including underwriting large risk business and claims management on behalf of the group. A.M. Best will continue to monitor the restructuring and its impact on MAPFRE’s rated subsidiaries closely.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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