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 RE, Compañía de Reaseguros, S.A. (MAPFRE RE) (Spain). MAPFRE RE 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 MAPFRE RE’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. The ratings also factor in MAPFRE RE’s strategic importance to the MAPFRE group, as the group’s reinsurance specialist and catastrophe risk manager.
The Long-Term ICR upgrade reflects MAPFRE’s improved 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 also has benefitted the group’s rating fundamentals positively.
MAPFRE RE’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), prudent reserving practices, and a conservative investment portfolio. The company’s capital position has furthermore proven resilient, due to its solid expertise in catastrophe modelling and risk management protecting it from potential volatility introduced by catastrophe events, as demonstrated in 2017. A partially offsetting factor is MAPFRE RE’s moderate dependence on retrocession, with a retention rate relatively lower than peers. Nonetheless, A.M. Best expects the company’s balance sheet to remain very strong, supported by adequate internal capital generation.
MAPFRE RE has a track record of generating strong and stable operating results, as evidenced by a five-year (2013-2017) weighted average return on equity of 12.6% (as calculated by A.M. Best). The company reported excellent technical results in 2017 despite difficult market conditions, including continued pressure on technical rates, and the impact of significant catastrophe events occurring in the second half of the year, which translated in a solid combined ratio of 94.8% (as calculated by A.M. Best). The stability in technical earnings is underpinned by deep technical expertise and the effective use of retrocession protections.
MAPFRE RE is an established player in the reinsurance market having been established initially as the MAPFRE group’s internal reinsurer. The company has good product and geographical diversification with a portfolio well balanced between group and third-party business. The planned internal restructuring of MAPFRE’s global risks business unit, that should see the business of MAPFRE GLOBAL RISKS, Compañía Internacional de Seguros y Reaseguros S.A. be transferred to MAPFRE RE, is anticipated to increase MAPFRE RE’s profile and relevance in the market. A.M. Best will continue to assess the impact of the restructuring on MAPFRE RE’s rating fundamentals.
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