A.M. Best has confirmed that the financial strength rating of Mapfre/Commerce which is an A (Excellent) will remain unchanged even in the wake of the recent volatility in the company’s home country of Spain. In its announcement, AM Best says that its comments follow the Spanish government’s decision to borrow up to EUR 100 billion from the European Financial Stability Facility, also known as the European Stability Mechanism in order to recapitalise its banks. More specifically:
In A.M. Best’s 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 capitalisation, with the results remaining within A.M. Best’s tolerance level. However, the high level of investments in Spanish sovereign and financial institutions debt remains a concern, together representing 153% of MAPFRE S.A. shareholders’ funds as at the first quarter of 2012. A.M. Best acknowledges that there are outstanding uncertainties relating to the terms of the EUR 100 billion loan and the external audits of Spain’s banking sector; and as such, A.M. Best may 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.
