The official word from MAPFRE, following the formal break-up with Bankia; there’s more background to the story at El Pais here by the way.
Both parties will submit to an arbitration procedure for an additional compensation amounting to up to 52 million euros, so the final amount could reach 623 million euros.
Once the resolution of this alliance has been formalized, MAPFRE will take all corresponding legal actions due to a non-conformity in the market value of the Life business determined by the independent expert.
The operation generates a profit of 171 million euros for MAPFRE that will be used to boost the future profitability of the company, adapting and improving the operational efficiency of its operations in Spain and Italy, as well as optimizing the financial structure of the Group.
MAPFRE and CaixaBank signed today the termination of their bancassurance agreement, a process that began due to a change in ownership last March, once Bankia’s integration process into CaixaBank had been approved. The agreement means that MAPFRE has received 571 million euros, corresponding to the valuation of 51% of the Bankia Vida entity, and the commercial agreement for the sale of non-life insurance.
Likewise, by mutual agreement with CaixaBank, an additional compensation amounting to another 52 million euros will be submitted to arbitration, subject to how the Bankia merger operation that gave rise to the resolution is interpreted. In accordance with the contracts signed at the time, this matter may represent an additional 10% for MAPFRE, which would raise the final compensation to 623 million euros.
In relation to the valuation carried out, MAPFRE has expressed its disagreement with the value attributed to Bankia Vida’s business, given that it was a company that recorded profits and distributed dividends on a stable and recurring basis every year, and with which it had a perpetual exclusivity agreement for the distribution of Life insurance through the then Bankia branch network.
The resulting valuation is lower than the intrinsic value of the company in terms of Market Consistent Embedded Value; it is below the book value of the company and, lastly, it would imply a price to earnings valuation (PER) of just 4.4 times 2020 profit.
Consequently, MAPFRE will take legal action in defense of its legitimate interests in relation to the valuation of the Life business.
171 million in profit
The termination of this alliance represents a profit of 171 million euros for MAPFRE. In this context, in Spain, the company will accelerate the transformation processes of its operating model to reinforce its commercial strategy and will allocate 100 million euros to a voluntary retirement program to be carried out in the next two years. Likewise, it will also advance in the digitization of its business in Italy, and will optimize its financial structure after the debt buy-back operation carried out a few weeks ago. These decisions to strengthen future profitability will produce at least 161 million euros in savings over the next five years.
MAPFRE will continue to invest in its business, analyzing opportunities with a focus on strategic markets and channels, improving efficiency and with it, also profitability in order to continue producing a sustainable dividend over time.
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