Insurer MAPFRE USA, which now writes in 19 states, is narrowing its focus by concentrating on 11 key states, exiting five states including selling its New York subsidiary, and selling its life insurance unit.
MAPFRE USA has identified 11 core states where it will continue to pursue a profitable growth strategy: Massachusetts, Connecticut, Rhode Island, New Hampshire, Maine, Vermont, Ohio, California, Oregon, Washington and Idaho.
MAPFRE USA intends to cease operations in five states: New York, New Jersey, Kentucky, Tennessee and Indiana. In the case of New York, the company said it has has hired an investment bank to pursue the sale of its New York subsidiary, MAPFRE Insurance Co. of New York.
The company said it is planning to conduct an orderly withdrawal from the other four exit states, including finding replacement carriers where viable.
The insurer said it will continue to operate in three additional states — Florida, Pennsylvania, and Arizona – but said in these states it “must first reinforce the company’s underwriting and distribution foundation” before expanding its writings.
“With the changes announced today, we are positioning the company for success through a more focused business strategy,” said Alfredo Castelo, president and CEO of MAPFRE USA. “The strategic realignment focusing on MAPFRE’s core markets and lines of business will reinforce our market leadership position in our home state of Massachusetts and drive our profitable growth strategy in our remaining states of operation going forward.”
Castelo was named president and CEO of both MAPFRE USA and MAPFRE North America region in January of this year.
Castelo replaced Jaime Tamayo, who was promoted to CEO of MAPFRE’s international territorial area in May 2016. Tamayo expanded the insurer’s U.S. presence from small in 2008 to more than $2.3 billion in revenues in 2016. He also helped MAPFRE become the biggest auto, homeowners and commercial auto insurer in Massachusetts, and expand its property/casualty business presence in 19 states.
The insurer also announced a realignment of its structure to reflect its reduced footprint. Effective January 1, 2018, the company will reorganize its regional structure to establish a Northeast center and three additional regional centers. The new regional structure is as follows:
- Massachusetts/Northeast Region: The Northeast Region accounts for 67 percent of MAPFRE’s business in the U.S. and includes Massachusetts, MAPFRE’s home state where the company maintains a strong market position in private passenger auto, homeowners and commercial auto lines of business. The insurer has enjoyed growth in Massachusetts since it acquired The Commerce Group Inc. in 2008. The remaining states in the region, which will remain headquartered in Webster, Massachusetts, are New Hampshire, Rhode Island, Vermont and Maine. The Northeast Region will have its own management structure led by a regional chief executive officer. The Northeast Region CEO will be Patrick McDonald, who has 25 years of experience in the Massachusetts and Northeast market and is currently executive vice president for Business Development at MAPFRE USA. McDonald will report to Castelo.
Outside of the Northeast, there will be three regional centers:
- East Central Region: This region will be composed of Ohio, Pennsylvania, Connecticut, and Florida. These states account for nine percent of MAPFRE’s business in the U.S. It will be led by Greg Clark as regional director and headquartered in Columbus, Ohio.
- Western Region: This region will be composed of California, Arizona, Washington, Oregon and Idaho. These states also account for nine percent of MAPFRE’s business in the U.S. It will be led by Miguel Coello as regional director and headquartered in San Ramon, California.
- Puerto Rico: MAPFRE’s operations in Puerto Rico are included within the North American region and accounts for 15 percent of MAPFRE’s business in the U.S. MAPFRE Puerto Rico will maintain its own management structure under the leadership of Alexis Sanchez who, effective January 1, 2018, will become the CEO of the MAPFRE Puerto Rico group of companies.
The regional directors and Sanchez will report directly to Castelo.
As part of the reorganization of its operations and businesses in the U.S., MAPFRE said it will exit the life insurance line of business in the U.S. and is pursuing the sale of its Delaware based subsidiary, MAPFRE Life Insurance Co.
Antonio Huertas, chairman and CEO of MAPFRE Group, said the company is committed to “achieving the necessary scale and profitability in its operations outside of Massachusetts and strongly believes that the above outlined reorganization will accelerate the achievement of our strategic goals in the U.S. market.”
MAPFRE Insurance is part of the MAPFRE Group, a global insure that is a leader in Spain and Latin America and one of the top 10 insurance companies in Europe in terms of premium volume. MAPFRE employs more than 37,000 professionals and services 37 million clients. In 2016 MAPFRE’s revenue amounted to $30 billion, with net earnings of $861 million.
After Mapfre SA posted a 32 percent drop in quarterly net profit in the fourth quarter of 2016, Huertas said he wanted to improve the insurer’s efficiency and profitability by exiting some businesses, increasing prices and raising provisions in units including its domestic Spanish market. The insurer had been hit by the fall in value of the Brazilian real and its unit there, the company’s second largest, posted a 47 percent decline in net profit in the three months through December from a year earlier.
The insurer is not retrenching everywhere. In June, MAPFRE, which already owned 31 percent of the insurer, bought 51 percent and effective control of Indonesian insurance company PT Asuransi Bina Dana Arta Tbk (ABDA). Through this acquisition, MAPFRE finalized its entry into the Indonesian insurance market, which it began in 2013 with the purchase of a 20 percent shareholding in ABDA.