Best Sees No Change in Mapfre Ratings from Commerce Acquisition

November 2, 2007

A.M. Best Co has commented that the issuer credit rating (ICR) of “a” of Mapfre S.A. (formerly Corporacion Mapfre S.A., the holding company of Spain’s Mapfre Group) “remains unchanged following the announcement that Mapfre intends to acquire Commerce Group (currently rated with an FSR of ‘A+’ (Superior) and an ICR of
“aa-“), a U.S. motor insurer mainly operating in Massachusetts (See IJ web site Oct. 30).

Best noted that Mapfre plans to raise the $2.2 billion to fund the Commerce purchase through “an equity capital raising of €500 million ($720 million) and the issuance of €800 million ($1.2 billion) subordinated debt with the remainder from internal resources.”

The rating agency indicated that it “believes that the planned acquisition would expand Mapfre’s position in the U.S. market which is a target market for Mapfre.

“Offsetting factors are the increase in financial leverage and the significant amount of goodwill (approximately $970 million), which is in addition goodwill already on the balance sheet of approximately €1.3 billion ($1.9 billion) from previous acquisitions.”

Best also said that Mapfre’s third quarter results are in line with its expectations with “growth in total gross written premiums of 11.8 percent to €9.4 billion ($13.6 billion), mainly driven by the Life segment (36.5 percent) supported by the agreement with Caja Madrid, and its strong distribution network, also from expanding business in Brazil.” Mapfre’s combined ratio is 92.9 percent for the first nine months of 2007. “Overall earnings (after tax and minority interest) stood at €505 million ($730 million) which translates into a strong return of equity of 16.1 percent,” Best concluded.

Source: A.M. Best –

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