Best Sees No Change in MAPFRE RE’s Ratings despite Spain’s Economic Woes

June 27, 2012

A.M. Best Europe – Rating Services Limited has commented that the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit rating (ICR) of “a” of MAPFRE RE, Compania de Reaseguros, S.A. are unchanged following the recent market volatility surrounding Spain’s economic conditions, derived from the uncertainty that underpins the country’s banking sector. MAPFRE RE, is a key subsidiary of MAPFRE S.A. (both domiciled in Spain), the ultimate holding company of the Mapfre Group.

Best’s comment follows the announcement that Spain will borrow up to €100 billion [$125 billion] from the European Financial Stability Facility or the European Stability Mechanism, to recapitalize its banks.

Best said that in its 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 Best’s tolerance level.”

However, Best also indicated that the “high level of investments in Spanish sovereign and financial institutions debt remains a concern, together representing 153 percent of MAPFRE S.A. shareholders’ funds as at the first quarter of 2012.”

Best added that it “acknowledges that there are outstanding uncertainties relating to the terms of the €100 billion loan and the external audits of Spain’s banking sector;” and as such Best said it could “take negative actions on the ratings of MAPFRE RE in the event of further erosion to Spain’s sovereign creditworthiness.”

On 6 June 2012, A.M. Best Europe – Rating Services Limited downgraded the ICR to “a” from “a+” and affirmed the FSR of A (Excellent) of MAPFRE RE. At that time, both ratings were removed from under review with negative implications and assigned a negative outlook.

Source: A.M. Best Europe

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