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FOR IMMEDIATE RELEASE
OLDWICK - OCTOBER 02, 2019 03:37 PM (EDT)
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” of MAPFRE PRAICO Insurance Company and its affiliate, MAPFRE Pan American Insurance Company, collectively known as the MAPFRE PRAICO Group (MPG). The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in San Juan, Puerto Rico.
The ratings reflect MPG’s balance sheet strength, which AM Best categorizes as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The balance sheet strength is derived from risk-adjusted capitalization being assessed at the strong level and benefiting from a high quality investment portfolio and strong liquidity measures, partially offset by elevated underwriting leverage and adverse loss reserve development in recent calendar years. Surplus growth in the most-recent five-year period was constrained by significant dividend payments to the parent company.
AM Best considers operating performance to be strong, as evidenced by the group’s five-year average pre-tax return on revenue and equity measures that significantly outperformed the averages for the private passenger standard automobile and homeowners’ composite. With the exception of 2017, when losses from hurricanes Maria and Irma negatively impacted results, net underwriting income results have been consistently positive and compare favorably with peer averages.
The limited business profile is driven by the geographic exposure to Puerto Rico, which accounted for 99% of direct written premiums, which subjects the group to above-average levels of regulatory, event and market risks. This is mitigated partially by the group’s product diversification and solid market position as the second-largest property/casualty insurance group in the commonwealth. ERM is considered appropriate for the group’s size and complexity of its underwriting, investment and other risks based on its ERM framework and controls.
The ratings also benefit from the role and strategic importance of MPG as an attractive market to its parent company, MAPFRE S.A. (MAPFRE), one of the largest insurance groups in Spain. MPG is integrated fully into the operations and the management of the group globally and carries the MAPFRE name commercially. MAPFRE also provides support to MPG through reinsurance, staffing of senior leadership positions and ERM guidance. MAPFRE also has demonstrated support to MPG by forgoing any dividend payments in 2017 and 2018, in order to re-establish MPG’s capital position to the level it had prior to the hurricanes.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency and information provider with an exclusive focus on the insurance industry.