MAPFRE RE has announced that its Board of Directors has agreed to raise the company’s capital by the amount of €250 million as it seeks to offer greater reinsurance capacity to its clients and capitalise on favourable pricing conditions.
Funding for the capital increase will be sourced internally, from surpluses resulting from MAPFRE’s recent exits from bancassurance agreements.
It will be used to reinforce MAPFRE RE’s balance sheet and expand its capacity on offer, while also giving it greater flexibility to structure its own reinsurance protections.
MAPFRE explained that the injection forms part of its larger capital allocation strategy, which looks to facilitate growth for those units with the “greatest potential” and to improve profitability.
“We are going to have more capacity to provide coverage to our customers at a time when the presence of solvent operators with a vocation for long-term service is required, which will allow us to grow at a time of improved technical conditions in the market while maintaining our traditional prudent management of the business,” explained Eduardo Pérez de Lema, CEO of MAPFRE RE.
MAPFRE’s reinsurance unit is currently the second largest contributor to Group earnings, behind its Spain operation.
Over the last 15 years, MAPFRE RE has contributed accumulated earnings after taxes of more than €1.7 billion to its parent group.
In the same period, the company registered an average ROE close to 11% and an average net combined ratio of 96%, despite including years of high catastrophic claims in the reinsurance sector.
Once the subscription period of the new shares is completed, MAPFRE estimates that its shareholding in MAPFRE RE will rise up to 94.43%.