The evolution of key economic figures must be considered in the context of the COVID-19 crisis, which has led to a slowdown in economic activity and brought about temporary lockdowns in most of the countries where MAPFRE operates. This is all compounded by an adverse macroeconomic environment, with stock markets declining significantly, interest rates continuing to fall and currencies—chiefly the Brazilian real, the Mexican peso and the US dollar—depreciating greatly against the euro.
During this period, MAPFRE implemented a specific strategy based on three protective principles: guaranteeing the health and well-being of employees and collaborators, strengthening its commitment to the company’s insureds and shareholders and guaranteeing business continuity through solvency and capital strength.
The crisis has had numerous and complex effects on insurance variables, the most significant being:
a) Reduced revenues on the back of a contraction in economic activity, currency depreciation and lack of incentives in Life-Savings products.
b) Improved insurance margin in the Non-Life business, with a drop in Automobile loss experience offsetting an increase in lines affected by COVID-19 claims.
c) Cost neutrality, with savings on operational costs and the postponement of transformation initiatives offsetting expenses arising directly as a result of COVID-19.
d) Lower financial income in terms of both fixed income and equities.
MAPFRE’s revenue between January and September of this year amounted to 19.1 billion euros, an 11.9 percent decrease compared to the same period of the previous year, while premiums dropped by the same proportion (down 11.9 percent) to 15.6 billion euros. At constant exchange rates and discounting the effect of the PEMEX policy in Mexico, which is issued every two years, the reduction in premium volume would have been 3 percent.
Earnings came in at 450 million euros, a 2.7 percent drop compared to the first nine months of 2019. In addition to the impacts mentioned above, there were several extraordinary events of similar magnitude in 2019 and 2020: the earthquakes in Puerto Rico in 2020, the typhoon in Japan and the goodwill write-down in the Asistencia business in 2019.
The Insurance unit—the Group’s main unit—performed positively, with earnings rising by 7.5 percent. The vast majority of countries posted a profit at the close of the period, with Spain still contributing the most to the Group’s results. The positive trend in earnings contribution by the businesses in Brazil, LATAM and the United States is also noteworthy, as is the good performance of the EURASIA Regional Area, especially Turkey.
The Group’s combined ratio at the close of September stood at 95.2 percent, 1.1 percentage points better. There was a reduction in loss experience, particularly in the Automobile business, in Spain, the United States and Turkey, although claims rose in other lines such as business multi-risk and burials in Spain.
The Group’s shareholders’ equity amounted to 8.4 billion euros, down 5 percent from December of last year, although this figure has risen by 552 million euros since the end of the first quarter, when the impacts of COVID-19 first emerged. Total assets stand at 68.8 billion euros, down 5 percent from the close of 2019, as a result of stock market falls, currency depreciation and reduced activity.
Similarly, as a result of market developments, the Group’s investments at the close of September this year amounted to 51.6 billion euros, 3.6 percent lower than in December of last year. Of these investments, 56 percent (28.9 billion euros) pertains to sovereign fixed income, while 18.5 percent (9.5 billion euros) is in corporate fixed income and 5 percent (2.5 billion euros) is in equities.
The Solvency II ratio stood at 184 percent in June 2020, with 86 percent Tier 1 (highest quality) capital, highlighting the Group’s stability and resilience, as well as its continued management capacity. This is an improvement of 6.6 percentage points compared to March, resulting from a prudent balance sheet approach and active investment management in a more favorable environment.
1. Business performance:
Insurance Unit premiums from January to September of this year amounted to 12.7 billion euros, 15 percent lower than the corresponding figure for the previous year. Despite this, attributable earnings from the Insurance Unit were up 7.5 percent to 610 million euros, with a combined ratio of 93 percent.
Ø Premiums in the Iberia Regional Area (Spain and Portugal) from January to September of this year totaled 5.3 billion euros, 11 percent lower than in the same period of the previous year. The profit from this regional area amounted to 334 million euros (down 4 percent), making it the business delivering the largest contribution to the Group’s consolidated earnings. It is worth highlighting the improvement in the combined ratio, which stood at 92.5 percent.
The insurance business in Spain produced premiums totaling 5.2 billion euros, 11 percent lower than the first nine months of the previous year. This reduction is mainly due to the Life-Savings business, where premiums fell by close to 700 million euros due to the discontinuation of certain products, but with little impact on the result. In contrast, the Non-Life business grew 1 percent to 4 billion euros, reflecting good performance in the Health, Condominium, Homeowners and Commercial lines. It is important to highlight VERTI’s solid performance, where premiums rose 7 percent to over 63 million euros, with earnings reaching 6 million euros, (compared to losses of 2 million euros in the same period of the previous year).
In the Automobile line, premiums fell 3.9 percent to just over 1.6 billion euros, along with a significant decrease in the combined ratio (9.6 percentage points), which fell to 83.7 percent as a direct result of reduced mobility.
Conversely, the Homeowners business saw accumulated growth of 4.3 percent up to September (1.7 points above the market). Likewise, the Condominium business saw growth of 7.2 percent, more than double the market average, and Commercial lines registered a 7.5 percent increase in premiums during the first nine months of this year.
A good growth rate was maintained in the Health and Accident line, with premium volume of 686 million euros, up 3.4 percent.
MAPFRE VIDA premiums stood at 1.2 billion euros at the close of September (down 36 percent), affected by Life-Savings. Life-Protection products, on the other hand, performed particularly well, growing 2.2 percent. Pension funds fell 1.1 percent to 5.4 billion euros, while that of mutual funds and others stood at 3.7 billion euros, 2.2 percent lower than at the close of December of the previous year.
Ø In the Brazil Regional Area, premiums in the first nine months of this year amounted to 2.4 billion euros (down 23 percent). This fall was significantly impacted by the 25 percent depreciation of the Brazilian real. In fact, in local currency, premiums would have grown by 2 percent. Attributable earnings in this regional area were 81 million euros (up 15 percent). It is also important to highlight the improvement of 4.3 percentage points in the combined ratio, which stood at 86.8 percent at the close of September.
Ø In LATAM North, premiums in the insurance business amounted to 1.2 billion euros, 23 percent lower than the first nine months of the previous year. This figure was impacted firstly by the absence of the PEMEX policy, which is biennial and was issued in June 2019, and secondly by the depreciation of the region’s main currencies: the Mexican peso (down 10.8 percent) and the Dominican peso (down 10 percent). However, in the first nine months of this year, earnings for this regional area increased 31 percent to 55 million euros, accompanied by a significant improvement in the combined ratio (up 5.5 percentage points) to 90.3 percent.
In Mexico, premiums amounted to 601 million euros (down 45 percent), affected by the PEMEX policy. A positive trend was maintained in terms of total net attributable earnings from Mexico, which grew 31 percent to 26 million euros.
Particularly strong performance was seen in the Central America sub-region, where business was up 28 percent to 604 million euros, with earnings of 29 million euros (up 30 percent). Within this sub-region, the Dominican Republic stands out, with premium volume exceeding 247 million euros, more than double the figure for the same period of the previous year, boosted by the incorporation of the ARS Palic health insurance business.
Ø Premiums in the LATAM South Regional Area stood at 1.1 billion euros at the end of September, a figure that represents a 9 percent fall. This was significantly impacted by the depreciation of the Argentine peso (down 29.7 percent), the Chilean peso (down 15.4 percent), the Colombian peso (down 12.9 percent) and the Peruvian sol (down 4.9 percent). The attributable earnings from this region increased 13 percent to 43 million euros, along with an improved combined ratio, which stood at 93 percent.
Peru maintained its position as the biggest regional contributor to Group earnings, delivering 17 million euros, followed by Colombia with 7 million euros and Argentina with a similar figure.
Ø In the North American Regional Area, premiums fell 10 percent to 1.6 billion euros, though earnings were up 2 percent to 66 million euros and the combined ratio also improved by 2 percentage points to 97.7 percent.
In the United States, premiums exceeded 1.3 billion euros (down 10 percent). This is a consequence not only of the COVID-19 crisis but also of the business restructuring in this region. The profitable growth strategy and the sale of a real estate asset raised earnings by 50 percent to 74 million euros. Premium volume in Puerto Rico fell 6 percent to 295 million euros, and losses exceeded 8 million euros, as a result of earthquakes in the first half of the year (with an impact of 26 million euros).
Ø Premiums in the EURASIA Regional Area between January and September of 2020 amounted to 1.1 billion euros (down 14 percent). The depreciation of the Turkish lira (down 17.4 percent) had a significant impact on revenue in Turkey, which in euros, fell by 25 percent to 249 million euros. Despite this, the country’s earnings rose to more than 21 million euros. In Italy, revenues amounted to 290 million euros (down 21 percent), while in Germany revenue grew 4 percent to 288 million euros. In Malta, premiums totaled 254 million euros (down 6 percent). This regional area remained in positive territory, delivering attributable earnings of 31 million euros, almost 10 times higher than the result for the first nine months of the previous fiscal year. Moreover, the combined ratio also improved by 8 percentage points to 98.9 percent.
MAPFRE RE’s premiums for the first nine months of this year stood at 4.2 billion euros, a 3 percent increase, with a negative result of 20 million euros, mainly due to the influx of claims associated with COVID-19.
The reinsurance business closed the first nine months of the year with premiums of 3.2 billion euros (down 3 percent) and a negative result of 26 million euros. This was due to an increase in catastrophe frequency, the most salient of which were claims resulting from COVID-19 (57 million euros) and the earthquakes in Puerto Rico (32 million euros).
Conversely, Global Risks premiums increased by 30 percent to just over 1 billion euros, with a positive result of 6 million euros.
Finally, at the close of September, revenue from the Asistencia unit was 564 million euros, a 26 percent decrease compared to the same period of the previous year. The loss (18 million euros) corresponded mainly to travel cancelation coverage due to the pandemic.