Huertas (Mapfre): "There are extremes that are not appropriate for one or the other. Legal certainty is fundamental"

Mapfre, the largest Spanish insurer, achieved a profit of 692 million euros during 2023, which represents a growth of 7.7%, despite the fact that the automobile insurance business continues to be impacted by the increase in prices in the chain. of supply that affects repairs and workshops. The increase in premiums paid by policyholders has not been sufficient to compensate for this.

The result in Iberia rose to 361 million euros, which represents a drop of 3.9% compared to 2022, compared to premiums that grew at a rate of 15.8%, to exceed 8.8 billion euros. This year Latin America is placed above the national market with profits of 373 million after they have increased by 24% during 2023 and premiums that reached 9.8 billion euros, with Brazil as the main market for the insurer where it earned 233 million euros , 62% more.

The importance of “stability and predictability” is something that the president of Mapfre, Antonio Huertas, wanted to highlight during the presentation of annual results this Wednesday in Madrid. “If there is no clairvoyance about what is going to happen, we will limit our appetite” in reference to investments and growth, Huertas responded to questions from journalists about the current political situation that Spain is going through with the Catalan amnesty under the spotlight.

“What we must demand is dialogue. The moments are not easy. There are extremes that are not suitable for one or the other.. Legal certainty is fundamental,” Huertas wanted to emphasize, but “the fiscal framework is not ideal and will not be if adjustments are not made” that motivate the initiative of private companies to invest in a country like Spain.

SPAIN

For yet another year, Mapfre has accused the high competition that exists in car insurance, to which was added the return of claims (or accidents) after the closure of the pandemic and for a year and a half the skyrocketing costs due to the increase in interest rates in the Eurozone. The company is clear that, in a context like the current one of high rates, it would be necessary to rebalance the forces by giving greater weight to financial income (which increases thanks to higher returns on the debt in which they are invested), to the Reinsurance business. (the one that focuses on large natural catastrophes at an international level and that achieved the highest profit in its history in 2023) until the car insurance business in Spain becomes profitable again.

The automobile business obtained a combined ratio of 106% in global terms (which is the difference between what an insurer charges for insurance and the cost it entails and whenever it is greater than 100% it indicates that it is not being profitable). It is the third consecutive year above 100%, since just after the pandemic. Last year Mapfre reduced the number of insured, to 6.1 million vehicles in Spain, and did so through a recognized selection of risks, discarding those drivers with the worst track records.

Mapfre maintains, like the rest of the sector, that there have been selective increases in premiums during 2023, without giving figures. “Insurers have the obligation to have a sufficient rate” to compensate for the rise in prices. Huertas has recognized that, although apparently “inflation is controlled”, this is not the case in the channels that directly affect insurers.. Are you worried about losing market share due to this price increase? The company recognizes that it is something generalized throughout the sector and that “you cannot play cat and mouse” with other comparable companies and is not afraid of “losing market share.”

Asked if they foresee new increases in the price of insurance during 2024, Fernando Mata, the company's financial director, has assured that there is still a way to go until this part of the business returns to positive profitability (with a combined ratio below 100 %) and that, therefore, it will not be possible to say until it is achieved that “inflation has been hunted”. This makes it foreseeable to expect a new increase in premiums if this situation continues over time.. They hope, however, to have the situation “under control” in a period of six to twelve months.

Forecasts

The insurer has announced that it will take advantage of the General Shareholders' Meeting to review its objectives taking into account how the environment has changed as a result of the rate increase. “The combined ratio of 96% is required of a company like ours, but it is also excusable in an environment like the current one with this interest rate environment. “Interest rate expectations are extending over time,” Huertas stated during the presentation of results.. This implies that “the combined ratio can relax a little while the rates are generous to the group” and that it allows them to compensate some areas with others.

Likewise, Mapfre has acknowledged that it is exploring increasing collaboration with banks after the agreement with Bankia ended due to the absorption by CaixaBank.. At the moment, the company maintains alliances with Bankinter and Banco Santander.

Dividend

As far as shareholders are concerned, Mapfre remains faithful to its commitment. It will distribute 67% of the profits among its investors with a profit that increases to 0.15 euros gross per share and achieves a profitability of 7.7%, one of the highest of the Spanish listed companies.

The key to this increase will be reflected in the complementary payment (second of the year), which is where the increase will occur, from 0.085 euros to the current 0.09 euros that must be approved at the Shareholders' Meeting.. The stock has not reacted positively to the presentation of the annual accounts and, after the mid-session, it fell 5%, to 1.93 euros per share. In the year Mapfre loses almost 2%, and increases up to 21% in the balance of the last five.