A.M. Best Co. has commented that the financial strength rating of
A (Excellent) and issuer credit ratings (ICR) of “a” of MAPFRE PRAICO
Insurance Company (PRAICO), its wholly owned subsidiary, MAPFRE
Preferred Risk Insurance Company (PRICO), and an affiliate, MAPFRE
Pan American Insurance Company (PAICO) collectively known as the MAPFRE
PRAICO Group (MPG), remain unchanged following the recent market
volatility surrounding Spain’s economic conditions, derived from the
uncertainty that underpins the country’s banking sector. All the above
companies are domiciled in San Juan, Puerto Rico.
This comment corresponds with A.M. Best Europe – Rating Services
Limited’s comment that the FSR of A (Excellent) and ICR of “a” of
MPG’s affiliate company, MAPFRE Re, Compania de Reaseguros, S.A.
(MAPFRE RE) are unchanged. MAPFRE RE, is a key subsidiary of MAPFRE
S.A. (both domiciled in Spain), the ultimate holding company
of the MAPFRE Group.
A.M. Best’s comment follows the announcement that Spain will borrow up
to EUR 100 billion from the European Financial Stability Facility or the
European Stability Mechanism, to recapitalize its banks. In A.M. Best’s
opinion, the perceived reduction in financial flexibility of the Spanish
sovereign does not have an immediate and direct impact on the rating
fundamentals of MAPFRE RE. This view is supported by stress tests
undertaken on the company’s risk-adjusted capitalization, with the
results remaining within A.M. Best’s tolerance level. However, the high
level of investments in Spanish sovereign and financial institutions
debt remains a concern, together representing 153% of MAPFRE S.A.
shareholders’ funds as of the first quarter of 2012. A.M. Best
acknowledges that there are outstanding uncertainties relating to the
terms of the EUR 100 billion loan and the external audits of Spain’s
banking sector; and as such, A.M. Best may take negative actions on the
ratings of MAPFRE RE in the event of further erosion to Spain’s
On June 6, 2012, A.M. Best downgraded the ICRs to “a” from “a+” and
affirmed the FSR of A (Excellent) of MAPFRE PRAICO and its affiliates.
At that time, the ratings were removed from under review with negative
implications and assigned a negative outlook.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Key criteria
utilized include: “Rating Members of Insurance Groups”; “Risk Management
and the Rating Process for Insurance Companies”; “Catastrophe Analysis
in A.M. Best’s Ratings”; and “Understanding BCAR for Property/Casualty
Insurers.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.