Fernando Mata to investors: “We’re comfortable with the risk profile we have and the countries we operate in”
Diversification, technical rigor and leadership were just some of MAPFRE’s core strengths that Fernando Mata, CFO and member of the board, highlighted at a meeting with retail investors organized by Renta 4 this week, a company with which MAPFRE recently signed an insurance distribution agreement.
During the event, the advantage of geographic, business and balance sheet diversification was discussed. Mata pointed out, that the “current geographic footprint is the one we want.” MAPFRE has a global presence, is currently the largest Spanish-owned insurance company in the world, the largest multinational insurer in Latin America and is among the 10 largest European groups by premium volume. “We’re comfortable with the risk profile we have and the countries we operate in,” he said. He added that “we don’t see a new restructuring on the horizon”, referring to the recent processes completed in the assistance unit or strategic exits from some states in the USA as well as the Philippines and Indonesia. What’s more, the executive stated that, contrary to retreating in any sense, “if we see a business that’s a good fit for us, then we’ll take a look at it.”
Despite the complicated backdrop with inflation at historic highs, Mata, accompanied by Felipe Navarro, corporate director of capital markets and treasurer, highlighted the growth that the reinsurance business is seeing, and also noted that Brazil is the company’s number one contributing market in relative terms. “Brazil is the jewel of the crown; it’s growing above inflation and average premium rises are in excess of 20%,” explained the CFO.
Specifically, the biggest hurdle facing the sector now is how to transfer price increases to premiums, particularly in automobiles. Mata explained that MAPFRE has opted for individualized pricing because the objective is for “the client to stay with us.” “Premium increases occur in an orderly manner and what we pass on is our rise in costs, not inflation.”
Central banks have reacted to soaring inflation with the highest rate hikes in history. This has led insurers to change their portfolio management strategy. Mata acknowledges that the portfolio structure hasn’t changed substantially, nor has it ever. Small adjustments have been made and “the most important defense has been fixed income linked to inflation at central bank interest rates, both in Europe and Latin America.” In addition, “we’ve made a little progress in alternative investments, but very prudently.” Navarro added that the financial sector tends to complain both when rates are low and when they are high. However, he reminded those in attendance that “insurance companies fare better in positive interest rate environments” for two reasons, in that they are able to market traditional savings products that add value to the client and because investments produce returns that help improve overall profitability.
Data for the first quarter of the year show that the insurance sector filled a gap left by banks after they decided not to raise deposit rates, which drove above-average growth in savings capture – more than 1 billion euros in the first quarter in MAPFRE’s case. Mata indicated however that this was not typical and that subsequent inflows would be in the 100 to 150 million range.