Newindustry figures should give MAPFRE SA cause to celebrate, but some exposures outsideits home market in Spain are likely to weigh on its bottom line in comingquarters.

Unespa,a Spanish industry lobby group, reported July 20 that the motor business in thecountry increased by 4.76% year over year in the first quarter, to €5.41billion, boosting the nonlife market over the period by 4.15%.

Suchgrowth has been particularly good news for MAPFRE, Spain's biggest insurancecompany. In the first quarter, its motor business premiums by 1.5% to €516 million, whilethe business' combined ratio — a measure of underwriting profitability thatexpresses claims and costs as a proportion of premiums — improved by 4.2%, at94.6%.

The trend looks set to continue into the second quarter, Carlos Peixoto, an analystwith Banco BPI, told S&P Global Market Intelligence. He noted that demandfor MAPFRE's motor insurance products is likely to get a boost because stiffcompetition among Spanish auto dealers should lower prices for vehicles, makingthem more affordable to more consumers.

Meanwhile,after several years in the doldrums, Spain economy — and consumer confidence —are set to rebound, potentially also spurring the local motor insurancebusiness, Javier Bernat, an analyst with BEKA Finance, told S&P GlobalMarket Intelligence.

MarcoStringa, an economist with Deutsche Bank, noted in an interview that the nextcouple of years are likely to be fruitful for the Spanish economy despite theinability of the country's political parties to form a government after tworecent general elections. "Our [base] scenario isthat a government will be formed, [even if] it is a government that will beunstable and that will not do any structural reforms to improve thecompetitiveness of the Spanish economy," he said. "We do expect aslowdown of the Spanish economy, but we expect it to growth at a faster ratethan the euro area this next year and the following one." Stringa predictsSpanish GDP to grow 2.8% in 2016 and 1.7% in 2017.

Bernatbelieves that GDP growth is likely to translate into more business for MAPFRE."The threshold ofemployment creation [in Spain] is between 0.7% and 1.0% of GDP growth, and ofcourse the first thing we do when we have a salary is … to save for a home thenprobably to buy a car," Bernat said.

Trouble beyond home shores

However,MAPFRE's exposures outside of Spain are looking less rosy, including in Brazil,whose economy has been buffeted by fallout from government scandals, amongother factors. In the first quarter, gross written and accepted premiums forMAPFRE's Brazilian business were down 21.4% year over year, to €937.3 million. Some€653.9 million of this amount came from nonlife which, despite its larger size,only contributed €46.8 million to the MAPFRE group, compared with €115.7million for the life business.

In an effort to build more momentum around its operations inLatin America, where it remains the leading nonlife player, MAPFRE isin the process ofrolling out online insurance offerings into Colombia, Peru, Mexico andpotentially Brazil. Though details on this online strategy remain scarce, thegroup as a whole is hoping to grow its online offerings by 50% between 2016 and2018, according to a presentation to investors on July 1.

MAPFRE is set to release its second-quarter results on July27.