MAPFRE, 1Q2020: Financial flexibility and high liquidity levels have become a hallmark of resilience

5 May 2020 — press.release
For the first quarter of 2020, MAPFRE's net earnings were EUR 127 million, 32% lower than in the same period of the previous year. The result was dragged down by the earthquake suffered by Puerto Rico at the beginning of the fiscal year (EUR 54 million), and the effects of Storm Gloria in Spain (EUR 14 million). Emerging-country currencies have also had a negative impact, cutting more than EUR 6 million from the net result.

Revenues stood at EUR 7.3 billion (-4.5%) and premiums at EUR 6.1 billion (-4.7%). This decrease is mostly explained by the depreciation of the main currencies of Latin America and the Turkish lira. At constant exchange rates, the decreases in revenues and premiums would have been 1.6 and 1.5 percent respectively.

Premiums for the Insurance Unit between January and March amounted to 5.1 billion euros (-5.2 percent), while attributable earnings increased by 10 percent to 197 million euros. EURASIA Regional Area premiums decreased by 10% to EUR 473 million, strongly impacted by the depreciation of the Turkish lira. The improvement in the result in both Italy and Turkey is noteworthy, translating into a profit of EUR 5 million for this regional area, compared with losses to March of the previous year.

Reinsurance Unit premiums at the close of the first quarter of this year were EUR 1.1 billion (-18%), with a negative result of EUR 22 million due to, among other impacts, the Puerto Rico earthquake.

MAPFRE's combined ratio at the close of March was 100%, increasing by 4.1 points. However, the combined ratio of the insurance unit stood at 97.2%, which represents an increase of less than one point, despite the impact of the earthquake in Puerto Rico.

The Solvency II ratio at the close of December 2019 stood at 187%, compared with 195 percent in September. Both the Group's capital position and solvency remain excellent, with limited exposure to interest rate risk. The Group's investments amount to EUR 50.3 billion, of which, in addition to 56% in sovereign debt, 18% are in corporate fixed income and 4% in equity.

The financial flexibility and high liquidity levels have become a hallmark of MAPFRE's resilience in the current situation: most financial assets are liquid and the cash position is significant (over 2.7 billion, 5% of total investments) and, in addition, credit lines are available, as are pre-approved but not yet drawn down bank financing.

Although confinement as a result of the coronavirus crisis has reduced the taking out of new insurance policies, the health and economic crisis in Europe and America has occurred mainly in April, so the effect on the accounts for the first quarter was limited.

However, an increase in the claim experience is expected in the lines directly related to this illness, such as Health, Burials and Life. The economic standstill and confinement will translate in the short-term into a decrease in claims in the Automobile insurance and General P&C lines, and in the medium- to long-term will result in a reduction in premium revenue.


MAPFRE strategy against COVID-19

The emergence of the coronavirus has marked a before and after in business, insurance and social activity, and since the second half of March, it has presented an unprecedented situation. In this context, MAPFRE has developed a series of measures aimed at ensuring the safety of its employees and collaborators and guaranteeing the continuity of operations, maintaining service levels for its clients. The most relevant actions are as follows:

  • Activation of the business continuity plan in all countries and units, adapting it to the uniqueness of the COVID-19 crisis, with about 90 percent of employees worldwide working remotely, and maintaining essential services (tow trucks, repair shops, home repairs, medical centers, funeral homes etc.)
  • Assessment of the risks arising from the crisis and adoption of a strategy to protect the balance sheet, especially investments, and to preserve the Group's capital, ensuring the necessary liquidity and financing to neutralize any monetary stress, especially in operations in emerging countries.
  • Mobilization of resources and transfer of funds to the economy, either through direct donations to society and measures for policyholders, as well as through the granting of additional aid and financing to agents, direct providers and clients, with a particular focus on the self-employed and SMEs. These actions are complemented by the additional social work provided by Fundacion MAPFRE to address this crisis.


More financial information about MAPFRE can be found at mapfre.com/en/financial-information


Source: mapfre.com

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