Best Sees No Change in MAPFRE USA Group Ratings

June 27, 2012

A.M. Best Co. has commented that the financial strength ratings (FSR) of ‘A’ (Excellent) and issuer credit ratings of “a” of the members of MAPFRE USA Group are unchanged following the recent market volatility surrounding Spain’s economic conditions, derived from uncertainty underpinning the country’s banking sector.

The lead company in MAPFRE USA is Massachusetts-based Commerce Insurance Company and includes its inter-company pool members, Citation Insurance Company (Webster, Mass.) Commerce West Insurance Company (Pleasanton, Calif., American Commerce Insurance Company (Columbus, Ohio), MAPFRE Insurance Company of New York, MAPFRE Insurance Company of Florida and MAPFRE Insurance Company, based in Florham Park, New Jersey.

This comment corresponds with the comment made by A.M. Best Europe – Rating Services Limited in relation to the ratings of MAPFRE RE, Compania de Reaseguros, S.A., a key subsidiary of MAPFRE S.A., the ultimate parent of the members of MAPFRE USA Group, and 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 view “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 results remaining within Best’s tolerance levels.”

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.’s shareholders’ funds as at the first quarter of 2012.”

Best also acknowledged that “there are outstanding uncertainties relating to the terms of the €100 billion loan and the external audits of Spain’s banking sector, and may take negative actions on the ratings in the event of further erosion to Spain’s sovereign creditworthiness.”

Best downgraded the issuer credit rating to “a” from “a+” and affirmed the financial strength rating of ‘A’ (Excellent) of the members of MAPFRE USA Group earlier this month, and removed all of the ratings from under review with negative implications and assigned a negative outlook.

Source: A.M. Best

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