The lead company for MAPFRE USA is the Commerce Insurance Company based in Webster, MA.
On Friday, May 31st, A.M. Best announced that it has reaffirmed the financial strength rating of Mapfre’s current “A” rating as well its issuer credit rating (ICR) of “a”. In addition to its lead company, the Massachusetts-based Commerce Insurance, the company also includes its inter-company pool members, the Citation Insurance Company also of Massachusetts, the Commerce West Insurance Company based in Pleasanton, CA, the American Commerce Insurance Company of Columbus, Ohio, the MAPFRE Insurance Company of New York the MAPFRE Insurance Company of Florida and the MAPFRE Insurance Company based in Florham Park, New Jersey.
In affirming the ratings, A.M. Best noted the following:
The ratings reflect MAPFRE USA’s solid risk-adjusted capitalization, good operating performance and local market expertise. In addition, MAPFRE USA’s inter-company pool members provide geographic diversification and rate flexibility to the group. The outlook reflects the potential weakening in the consolidated risk-adjusted capitalization of MAPFRE USA’s ultimate parent organization,MAPFRE S.A. (Spain).
These positive rating factors are partially offset by the group’s concentration of business in Massachusetts, which is focused on private passenger automobile insurance, as well as it’s susceptibility to weather-related losses.
MAPFRE, S.A. still is at risk based on the continuing economic problems in Spain
A.M. Best did note that MAPFRE, S.A. continues to face a higher country risk dues to the continued deterioration of the kingdom of Spain’s sovereign creditworthiness. In explaining this, A.M. Best noted that currently Spanish sovereign debt accounts for 25% of the group’s EUR 39 billion of invested assets.
MAPFRE S.A. also maintains sizeable exposure to Spanish financial institutions and commercial property via its Spanish holdings. The Spanish insurance market remains important to MAPFRE S.A., with approximately 33% of its consolidated gross written premiums and 38% of its consolidated insurance result derived from domestic business in its home market. Although the consolidated group enjoys a geographically diversified portfolio, particularly in Latin America and the United States, the majority of its business is derived from countries with sovereign creditworthiness equal to or lower than that of Spain.
Upward rating movement is unlikely over the near term. Negative rating pressure would likely originate from MAPFRE S.A. and would arise if there were a worsening of risk-adjusted capitalization tied to investment losses or a deterioration of the operating environment in Spain.
A.M. Best Also Revises Its Outlook on Travelers
On May 30, 2013, A.M. Best also revised its outlook on another Massachusetts insurer: Travelers. The company says that it has revised its outlook of the insurer from stable to positive in addition to affirming its financial strength rating of A+ (Superior) and its issuer credit ratings of “aa”. Best also affirmed the “A” (Excellent) financial strength rating of The Premier Insurance Company of Massachusetts.
Explaining why it improved its outlook on Travelers, A.M. Best said that,
The rating actions reflect Travelers’ strong risk-adjusted capitalization, favorable operating and underwriting results, dominant market profile in commercial and personal lines (largely distributed through independent agents) and quality management team. The ratings also acknowledge Travelers’ proactive and comprehensive risk management, underwriting and financial discipline, relatively conservative investment portfolio, geographic and product diversification and enhanced technology and internal information systems, which have improved its underwriting effectiveness and ability to service agents and customers in both commercial and personal lines. In addition, Travelers’ superior product breadth, industry leading data and analytics and leading position within its distribution network have enabled it to report a trend of strong earnings that have outperformed the majority of its peers over time, despite a sharp increase in weather-related losses and the current low interest rate environment.
Travelers’ ratings also consider the financial flexibility and liquidity provided by TRV. Despite significant share repurchases since 2006, TRV maintained $1.6 billion of cash and marketable securities, and its adjusted debt-to-capital ratio, excluding accumulated other comprehensive income (AOCI), remained moderate at 19.8% at March 31, 2013. However, TRV does maintain a sizable 12.7% of shareholders’ equity in intangible assets. Adjusting for tangible capital, the adjusted debt-to-tangible capital (excluding AOCI) ratio was 22.7%, well within A.M. Best’s expectations at the current rating level. Interest coverage also remained strong through the first quarter of 2013 at 14.3 times.
Offsetting these positive rating factors is the ongoing competitive environment within the property/casualty markets and Travelers’ exposure to natural and man-made catastrophes. Being among the largest commercial and personal insurers and national property writers, the group has significant exposure to natural catastrophes, which was evident in 2011 and 2012, and potential terrorist-related losses. Travelers has comprehensive reinsurance and risk management programs in place to manage its spread of risk and limit its overall exposure. Despite reporting an increased level of catastrophe loss activity in 2011 and 2012, Travelers managed to report solid returns while maintaining strong liquidity and risk-adjusted capitalization, which is a testament to the group’s conservative operating philosophy, strong business profile and comprehensive risk management program.
In speaking about Premier, A.M. Best said that the reaffirmation of its rating correspond to the company’s strong risk-adjusted capitalization among other factors.
The ratings of Premier acknowledge its strong risk-adjusted capitalization, historically favorable operating profitability and the additional operational support and financial flexibility afforded by Travelers and TRV. These positive rating factors are partly offset by the deterioration in Premier’s underwriting results in recent years, its geographic concentration of business in Massachusetts and limited product scope (focused on private passenger automobile coverage), as well as the increased competitive pressures associated with the recent automobile insurance reform in Massachusetts.
