Massachusetts-based Commerce Insurance Company is the lead company for MAPFRE USA
A.M. Best has revised its outlook for the members of MAPFRE U.S.A. from negative to stable. The rating company also affirmed the insurer’s financial strength rating of A (Excellent) and issuer credit ratings of “a” for all the members of MAPFRE U.S.A. Group. The Commerce Insurance Company based in Webster is the lead company for MAPFRE stateside. Other members of MAPFRE U.S.A. include Citation Insurance Company, also based in Webster, MA, Commerce West Insurance Company based in Pleasanton, CA, American Commerce Insurance Company based in Columbus, OH, MAPFRE Insurance Company of New York located in Garden City, NY, MAPFRE Insurance Company of Florida based in Miami and MAPFRE Insurance Company of Florham Park, NJ.
MAPFRE USA is a subsidiary of Spain’s MAPFRE S.A.
In upgrading its outlook, Best noted that the ratings reflect, “…MAPFRE USA’s solid risk-adjusted capitalization, good operating performance and local market expertise.” Adding to its strength is the company’s inter-company pool members who provide the group both geographic diversification and rate flexibility. Overall, Best noted that MAPFRE’s revised outlook underscored the stabilizing economic conditions now occurring within Spain, where the parent company of MAPFRE USA, MAPFRE S.A., is headquartered.
MAPFRE has a strong level of risk-adjusted capitalization and has generated robust overall earnings in recent years, despite extremely challenging economic conditions in its local market. MAPFRE remains heavily exposed to the Spanish economy, with Spanish debt accounting for 40% of the group’s EUR 40 billion of invested assets at December 31, 2013. While economic headwinds such as high unemployment and a continued soft housing market persist, Spain is showing early signs of economic recovery. In addition, while Spain’s government debt remains elevated, Spanish, and more generally European, financial markets have stabilised over the past year easing the debt burden. Although Spain is a core insurance market for MAPFRE, its operations are well diversified geographically, particularly in the Americas. Furthermore, MAPFRE’s Spanish insurance business has been resilient and continues to perform strongly.
Negative rating pressure could occur if there is deterioration in MAPFRE USA’s or MAPFRE’s risk-adjusted capitalization. Additionally, there could be negative rating pressure if there is further deterioration or volatility in the Spanish economy. Upwards rating movement is most likely to be generated from improving economic conditions within Spain over the longer term.
The ratings company did note that the positive rating factors of MAPFRE USA are partially offset by the company’s high concentration of business in Massachusetts, where the company ranks as a Top Ten insurer in the homeowner’s, private passenger auto and commercial auto marketplace and the insurer’s “…susceptibility to weather-related losses, which has been evident in MAPFRE USA’s underwriting results over the last several years” as another factor off-setting the company’s otherwise positive factors. In the end, however, these off-setting factors were not enough to outweigh all the positive rating factors which resulted in the revised outlook.
