OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” of MAPFRE PRAICO Insurance Company and its affiliate, MAPFRE Pan American Insurance Company, collectively known as the MAPFRE PRAICO Group (MPG). The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in San Juan, Puerto Rico.
The ratings reflect MPG’s balance sheet strength, which A.M. Best categorizes as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The balance sheet strength is derived from risk-adjusted capitalization at the strong level, which benefits from a high quality investment portfolio, comprehensive reinsurance program and strong liquidity measures, partially offset by a change in the trend of loss reserve development to adverse from favorable in the last two calendar years. Surplus growth in the recent five-year period also was constrained by significant dividend payments to the parent company.
Operating performance is considered strong, as evidenced by the group’s five-year average pre-tax return on revenue and equity measures that significantly outperformed the averages for the private passenger standard automobile and homeowners’ composite. With the exception of 2017, when results were impacted negatively by losses from Hurricanes Maria and Irma, net underwriting income results have been consistently positive and compare favorably with peer averages.
The limited business profile is driven by the geographic exposure to Puerto Rico, which accounted for 98% of direct written premiums, which subjects the group to above average levels of regulatory, event and market risks. This is mitigated partially by the group’s product diversification and solid market position as the third-largest property/casualty insurance group on the island. ERM is considered appropriate for the group’s size and complexity of its underwriting, investment and other risks based on its ERM framework and controls.
The ratings also benefit from the role and strategic importance of MPG as an attractive market to its parent company, MAPFRE S.A. (MAPFRE), one of the largest insurance groups in Spain. MPG is integrated fully into the operations and the management of the group globally and carries the MAPFRE name commercially. MAPFRE also provides support to MPG through reinsurance, staffing of senior leadership positions and ERM guidance. MAPFRE also has demonstrated support to MPG by forgoing any dividend payments in 2017, as well as for 2018, in order to re-establish MPG’s capital position to the level it had prior to the hurricanes.
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