S&P Affirms Sistema Mapfre Group ‘AA’ ratings

June 4, 2004

Standard & Poor’s Ratings Services announced that it has affirmed the “AA” long-term counterparty credit and insurer financial strength ratings on Mapfre Mutualidad de Seguros y Reaseguros a Prima Fija (Mapfre Mutualidad), the main operating entity of Spanish insurance group Sistema Mapfre (the Mapfre group), following a review. S&P also affirmed its ratings on the group’s downstream listed holding company, Corporacion Mapfre S.A., and on two reinsurance subsidiaries (See following article).

The outlook on both entities is stable.

“The affirmations reflect the Mapfre group’s extremely strong capitalization, very strong operating performance, very strong competitive position in Spain and Latin America, together with the group’s management, which Standard & Poor’s considers as positive for the ratings,” stated S&P credit analyst Peter McClean. S&P noted the Group’s “potential exposure to sovereign risk derived from its presence in Latin America” as an offsetting factor.

“Standard & Poor’s expects the Mapfre group’s operating performance to remain very strong, with the group non-life combined ratio remaining below 95 percent in 2004 and 2005, and ROE maintaining its current high level,” McClean added.

“Earnings are expected to benefit from continued strong contributions from all business units,” the report continued. “The group is expected to maintain its very strong competitive position by consolidating its market-leading positions in Spain and Latin America, and by leveraging its diversified distribution network and the cross-selling opportunities within the group. Gross premiums written are expected to grow by about 10 percent to about 8.3 billion euros [$10.13 billion] in 2004.”

S&P also said it “expects capitalization to remain extremely strong and not to fall below the ‘AAA’ level in 2004. Although the Mapfre group is expected to grow significantly over the next few years, capital is expected to be sustained by continued very strong retained earnings.”

The rating agency “expects fixed-charge coverage to be maintained at a minimum of 15x and leverage to be less than 5 percent.”

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