Insurance industry credit ratings agency A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a” of MAPFRE PRAICO Insurance Company, its wholly owned subsidiary, MAPFRE Preferred Risk Insurance Company, and an affiliate, MAPFRE Pan American Insurance Company, collectively known as the MAPFRE PRAICO Group.
The outlook for all ratings is negative for the San Juan-based companies.
The ratings reflect the group’s “excellent capitalization, solid operating performance driven by investment income and consistently profitable underwriting results, established market presence within Puerto Rico and strong risk management practices.”
The ratings also reflect the provider’s “strong brand name recognition within the Puerto Rican market and its integral role as a member of MAPFRE S.A. (MAPFRE), the largest insurance group in Spain.”
Partially offsetting these positive rating factors is MAPFRE PRAICO Group’s geographic concentration of risk, which potentially exposes capital to frequent and severe weather-related events, A.M. Best said in its analysis.
“Operating almost exclusively within Puerto Rico, results remain exposed to potential changes within the judicial, regulatory and economic climate. The negative outlook reflects the potential weakening in the consolidated risk-adjusted capitalization of MAPFRE PRAICO Group’s ultimate parent, MAPFRE, regarding the eurozone sovereign debt crisis given its sizeable exposures to peripheral eurozone debt,” the agency noted.
MAPFRE faces higher country risk due to the deterioration in the sovereign creditworthiness of Spain in recent years. At year-end 2012, Spanish sovereign debt accounted for nearly 25 percent of the consolidated group’s $39 billion Euro of invested assets. MAPFRE also maintains sizeable exposure to Spanish financial institutions and commercial property via its Spanish holdings.
“The Spanish insurance market remains important to MAPFRE, with approximately 33 percent of its consolidated gross written premiums and 38 percent of its consolidated insurance result derived from domestic business in its home market,” A.M. Best said.
“Although the consolidated group enjoys a geographically diversified portfolio, particularly in Latin America and the United States, the majority of its business is derived from countries with sovereign creditworthiness equal to or lower than that of Spain,” it noted.