A.M. Best Co. announced that it has affirmed the financial strength rating of “A+” (Superior) of Spain’s Mapfre Asistencia Compania Internacional de Seguros y Reaseguros SA with a stable outlook.
“The rating reflects the company’s strategic importance to its ultimate parent, Mapfre Mutualidad de Seguros y Reaseguros, its improving capitalisation, strong financial performance and expanding business profile,” said Best. “Offsetting factors include the risks associated with the growth into new markets and the continued (although reducing) exposure to the Latin American markets.”
Best’s analysis pointed out that capital injections totaling 11 million euros ($13.3 million), together with inter-company loans, were used to fund acquisitions in 2003, and that the company’s “capital position was further strengthened through earnings retention. This strengthening counteracts growth in business volumes, which is not fully reflected in the revenue growth shown in 2003, due to the devaluation of currencies in Latin America (originating 32 percent of total business).”
The rating agency noted: “underwriting performance remains very strong with the combined ratio deteriorating slightly in 2003 but still remaining at better than market average levels. This offset both net investment losses (primarily from currency devaluation) and net losses from the provision of assistance services resulting in the company delivering 4.3 million euros ($ 5 million) in net profits.”
Best also indicated that it “expects total revenues to continue being impacted by the volatility in Latin American currencies, while the company’s underwriting performance is expected to remain robust, upholding prospective profitability levels.”
“Mapfre Asistencia benefits from diversity both in terms of business lines and geographic focus, operating in over 50 countries worldwide,” the report continued. “Acquisitions in 2003 in the United States (Road America Motor Club) and Italy (Nuovi Servici Auto S.p.A) have further enhanced the company’s diversity and are expected to contribute to growth in gross premiums of 20 percent in 2004. A new business venture called Mapfre Asistencia ORO is also being developed to provide services for the elderly in Spain. A.M. Best expects expansion into new markets to be in line with the company’s historically conservative, structured approach.”
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