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Mapfre to get more competitive in Spanish motor, rules out 'price war'

Mapfre SA aims to charge more competitive premium rates for motor insurance in Spain but will not start a "price war," according to CFO Fernando Mata.

Speaking to analysts about the Spanish insurer's financial results, Mata said Mapfre's Spanish motor combined ratio, a measure of nonlife underwriting performance, was 89.3% in the first half of 2018. A combined ratio below 100% denotes an underwriting profit. The motor combined ratio across Mapfre's Iberia business unit, which also includes Portugal, was 89.7%, and the overall Iberia nonlife combined ratio was 93.7%.

"The current excellent combined ratio allows us to be more competitive in tariffs and return to certain segments such as small fleets," Mata said.

Mata said he believes there is room for further growth in the Iberian motor space and sees 92% as a "reasonable" longer-term target for the auto combined ratio.

Though he said the company was willing to sacrifice a few combined ratio points for growth, Mata insisted that the company would engage in a fierce battle with competitors over price.

"It doesn't mean that there is room for a price war," he said. "Forget it."

The insurer's objective instead is to grow both gross written premium and profit, Mata explained.

Figures from Spanish insurance statistics association ICEA, quoted by Mapfre in its investor presentation, show that it grew its Spanish motor business at a slightly faster pace than the rest of the market in the first half of the year, with a 2.9% increase versus 2.4% growth for the wider market. They also show that Mapfre cut its average premium slightly more than the market in the first half, with a 0.7% reduction against a 0.5% reduction.

The Iberia nonlife performance was one of the bright spots in a mixed set of half-year results for Mapfre. Group-wide net profit fell 7.1% to €385.7 million in the first half of 2018 from €415.1 million in the first half of 2017. The main reason for the fall was depreciation in the U.S. dollar, Brazilian real and Turkish lira.

Restructuring costs

The insurer also took a one-off €7.2 million charge for restructuring its U.S. operations, where it is exiting five states: Tennessee, Kentucky, Indiana, New York and New Jersey.

While there is still work to be done in the U.S., as Mapfre expects to close the sale of its New York business and the book of renewal rights to its New Jersey business in the second half of the year, Mata told analysts that he did not expect any additional financial impact from the U.S. restructuring in the remainder of 2018.

The company also took a €9 million hit in its Brazilian business, which the company attributed to "a more prudent balance sheet valuation."