MAPFRE has published its latest financials covering 2023 and the performance is impressive.
“The positive results of the first quarter, with an ROE of over 10%, are proof of the strength of our business model and the first results from the new Strategic Plan. Our geographic diversification continues to contribute solid, profitable growth.” says Antonio Huertas, Chairman and CEO of MAPFRE.
Here are some highlights from the opening quarter of 2024;
LATAM, especially BRAZIL, continues to be the growth engine for the Group with a 9.1% increase in premiums and €94 million in earnings.
IBERIA’s result grows 8.6% and technical improvements continue in Auto, which is the line most affected by inflation.
MAPFRE RE, which includes the reinsurance and Global Risks businesses, posts solid business growth and doubles its result, reaching €67 million.
PREMIUMS: Premiums are up 4.6%, with a slight positive impact from exchange rates (3.8% at constant rates). This advance is supported by the strong growth in General P&C and Life Protection, as well as in Reinsurance, business lines with greater contribution to the result. Auto shows lower growth as a result of the technical measures implemented in this line. Life Savings, although it is down 12% from the extraordinary issuance in 2023, reaches €935 million, doubling 2022 premiums.
IE note: The results also note a Solvency ratio of 208% which is a huge amount of capital to hold in reserve. EU policy must surely change on this brake on investment soon, or rival insurance brands from emerging countries like Singapore, China, India and more will simply eat up european insurer business with leaner, more responsive product growth and aggressive marketing.
HOME MARKET
The results also show how strong a brand MAPFRE remains in Spain and Portugal. It also suggests that having physical branches helps keep saving for the future in the minds of consumers, as they visit their local business or retail centres. For example, Premiums in IBERIA reach nearly €3.4 billion (+0.8%), with Spain standing out with over €3.2 billion (-0.8%). Premiums in Portugal reach €127 million (+70.7%) driven by the strong growth in Life Savings.
IE Note: UK insurers could learn a lucrative lesson from MAPFRE on Life. Saving is a habit and if you close all your branches then people see no visible reminder to save something for a rainy day.
LATAM VARIABLES
IE Notes; In some respects there is a new realism as regards the growth of countries south of the USA and Canada, which is better than the old BRIC hype of a deade ago. There has been a pushback against cartels and gangs in El Salvador, which may or may not prove to be a long term shift in society and politics. In Argentina there is also a mood for scaling back the State and rooting out grift in the public sector. In other countries like Brazil the move is towards socialism/globalism, which usually means the government eventually runs out of other people’s money. Time will tell.
In Peru and Chile there is the potential for unrest as long-standing grievances across the political divide remain to be settled, plus the huge economic question of exploiting Chile’s massive lithium deposits might spark a conflict, depending on the share out of the profits. The process of inviting foreign companies to physically extract reserves of lithium, whilst paying a nationalised government entity a percentage of the profits is a model which has been proved to be flawed a 1000 times in the past with oil, iron ore, copper, coal et al.
For now, the results in LATAM are generally favourable for MAPRE. But things can change every quickly in that region.
MAPFRE notes the following LATAM trends;
In Mexico, premiums reach €368 million (+10.5%), also driven by peso appreciation (+8%). Both the Auto line as well as Life have experienced strong business growth. The combined ratio stands at 96.9% and the net result at €12.3 million.
· In Peru, premiums reach €203 million, growing 12.1%, with a net result of €12.3 million.
· Hyperinflation adjustments, primarily from Argentina, had a €17.9 million negative impact on results (€8.6 million in 2023).
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