MAPFRE RE and Brazil still shone as expected

Mapfre’s 3Q results were in line with our expectations. The Spanish insurer delivered a robust performance in its P&C business. Nonetheless, the U.S. operations still have a long path to profitability, and we do not see this occurring before the first half of 2025. Brazil remains a key driver of the company’s overall performance. However, the standout performer was MAPFRE RE, which is steadily increasing in importance with each reporting period. We expect this trend to continue in the future.

Some signs of improvement but still a long way to go

Mapfre saw some positive developments in the second quarter, primarily fuelled by the Brazilian region. However, in other areas, we are still waiting for the realisation of strong pricing in premiums to reflect in the profitability. The company continues to face challenges in the Auto segment, with no immediate signs of improvement. Despite the improvement in Brazil, our overall perspective on the company remains unchanged. We acknowledge the positive developments in this region, but we are cau

Not an ideal start to the year

Mapfre experienced a tough quarter, mainly impacted by P&C lines and earthquakes in Turkey. The firm remains under the pressure from high inflation especially on Auto lines. In our view this profitability miss rules out any hope of a higher DPS than the level paid in recent years, thus leading to a deterioration in the risk-adjusted return profile.

Beat on operations but the non-life risk profile has increased

Mapfre reported Q4 22 results ahead of consensus and our expectations. This immediate positive was nonetheless eclipsed as the firm degraded its combined ratio expectations, increasing the risk profile while the expected return was left unchanged (stagnating dividend).

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Half-tone Q3 22 results from Mapfre. Net attributable profit was a miss vs. the consensus however the moving parts of the firm’s operations seem to be seeing positive trading.

Recovery cut short

A tough start into the year for Mapfre, which could potentially be industrial to a certain degree. The firm’s high exposure to motor, coupled with substantial inflation across geographies, proved to be the main killer of the firm’s profitability. The strategic plan’s “aspirational” objectives (defined before the Ukraine war) are so far confirmed, which is reassuring, although potential doubts exist on the Combined ratio objectives.

On the path of its lengthy recovery

Mapfre’s Q4 results are quite mixed. On one hand, the Non-life business has widely underperformed consensus expectations while, on the other, the Life business has satisfactorily outperformed. With the dividend back to its pre-pandemic level, Mapfre can continue its long recovery.

Tough quarter on technical performance, offset by financial result

Mapfre’s technical performance for the quarter recorded low and disappointing levels, in both the Life and Non-life businesses, on the back of normalisation of the combined ratio in Iberia. However, this miss was offset by Life’s strong financial result and, coupled with the strong performance of Mapfre Re, enabled the Spanish insurer to beat consensus.

Function of the recovery, LatAm still a drag

Mapfre posted satisfying results for its H1 release and keeps delivering as expected, with guidance reiterated. The insurer’s upside remains, according to us, locked-in and a function of the pace of recovery in Europe and the US, but also especially in LatAm and Brazil.

Heading the right way

Mapfre’s Q1 21 release was not so surprising. The Spanish insurer can rely upon better-than-expected results in Iberia saving the day, as the company continues suffering in Brazil and North America. However, this was expected and the latter country looks to be recovering substantially better and faster than Europe, pushing our optimism for Mapfre’s investment recommendation.

The hefty bill of Mapfre Re

Mapfre recorded a strong decline in revenues (-11.8% yoy to €13,277m), driven by COVID-19 that has affected the Life Savings’ sales, currency depreciations (BRL and TRY) and the drop in financial income from investments (-24.9% to €1,226m). The decrease in the net result (-27.7% to c. €271m) came from Mapfre Re while the Insurance units performed well. The group has updated its IBNR reserves to cover the delays in reporting claims. The Board will assess future dividends in Q4 20.

Nat cat claims begin the year, now awaiting COVID-19 ones

Mapfre reported declining revenues (-4.5% yoy tp €7.33bn) and weaker net earnings (-32% yoy to €127m). This decline was not caused by COVID-19 but by nat cat events. Excluding these, the net earnings stood at €190m, up 3% yoy. The insurer expects to see the consequence of the pandemic in Q2. The market’s volatility should also impact investment income. The capital position at March 2020 was not revealed, but Mapfre said that it was solid enough.

Positive signs for the future

In FY 19, Mapfre’s revenues increased by 7.1% to €28,472m, driven by the improvement in Non-Life premiums (up 2.9% to €17,559m). Iberia continues to be the key profits generator, with an attributable result of €497m (>81% of the group’s). We appreciate the positive trends in the restructured business units in Brazil and the US. However, Mapfre Re needs additional time to reduce its exposure to global risks. The dividend was stable, as announced by the insurer in late 2019.

A third consecutive year of exceptional events

Our model integrates perfectly the losses announced by Mapfre and relative to the recent nat cat events and disturbances in Chile. We anticipated also a stable dividend for FY 19 and a decreasing Solvency II ratio. The company confirmed the fragility of its profitability and its high dependence on its Spanish business. However, it is still enjoying a solid capital position.

Tough business context

Mapfre reiterated the scenario of H1 19 with better revenues (up 6.5% at current FX to €21,619m) but lower earnings (-12.5% to €463m). The insurer decided to revise the business outlook of MAPFRE ASISTENCIA’s companies in the UK, the US and Canada, leading to goodwill writedowns of €77m. If we take into consideration the impairments of December 2018, the net profut of the group would have been stable relative to 9M 18. The Solvency II ratio remained solid at 198%.

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