Spanish insurance giant Mapfre Internacional is to embark on a knowledge transfer initiative in its bid to support Middlesea Insurance plc’s renewed focus on its core home market and the development of niches, the company’s chief executive Javier Fernández-Cid told The Times Business in Spain last week.
As part of the regulatory process, the Malta Financial Services Authority last week granted approval to Mapfre Internacional to acquire Munich Re’s 19.9 per cent shareholding in Middlesea Insurance. Once the regulatory process is complete this means that the Spanish company will have a controlling interest in Middlesea with a shareholding of 50.98 per cent. At that stage, following the conclusion of the transaction with Munich Re, Mapfre will proceed to issue a mandatory offer to the remaining shareholders as required by the Listing Rules.
“The leading name of Middlesea is an asset which is valued, and therefore we have an interest in maintaining and increasing that asset. The insurance market in Malta is mature in terms of level of expertise but there is possible under-insurance,” Mr Fernández-Cid said at the company’s head offices in Majadahonda last week.
“Penetration can grow in the life insurance segment and other new specialities. If, one day, the pension system in Malta is opened, a logical and positive evolution, it will benefit customers. We will support Middlesea in taking advantage of that new market.”
Mr Fernández-Cid, a member of the Middlesea board for the past four years, added: “Our knowledge of Middlesea is deep. It is why we decided to step forward and invest further in the company. By increasing investment, we become the largest shareholder of a leading organisation in a sovereign market.”
Mapfre SA, the leading insurer in Spain and the leading non-life insurer in Latin America, is present in 43 countries in Europe, Asia, Africa and the Americas.
According to Mapfre’s business principles, the brand is “committed” to innovation, high-quality customer-oriented service and continuous research to upgrade its offering and efficiencies.
Millions of euros are channelled into research: from Mapfre’s centre for experimentation and road safety, Cesvimap, to Mapfre Vida which designs up to 100 new products a year, and Mapfre Familiar which offers innovative insurance packages and operates various call centres in Spain.
In 2010, the group generated revenues of over €20.4 billion and wrote premiums close to €17 billion.
Several arms within the group boast extensive market and operational experience in various classes.
Cesvimap, with subsidiaries in Brasil, Argentina, Mexico, France and Colombia, offers extensive training on aspects relating to the repair and evaluation of damage sustained by vehicles in road accidents and consultancy services for insurance companies. It offers online courses and even university degrees. It issues various publications and educational videos for different car brands and has an authorised treatment centre, Cesvi Recambios, for end-of-life vehicles.
This knowledge will put Middlesea in a better position to study claims and fine-tune premiums which will ultimately benefit the policyholder.
Mapfre Global Risks, which writes business in the aviation, marine and energy markets, would be able to support MSI’s ambitions to tap the potential within these markets.
The opportunities presented by Malta’s legislative framework for captive insurance operations and insurance management are a very positive “add-on”, Mr Fernández-Cid added.
Major clients of Mapfre Global Risks have captive insurance operations and 60 per cent of the company’s business involves captive companies. With the impending implementation of the Solvency II Directive, Mapfre looks positively on the business opportunities in Malta.
Mr Fernández-Cid also said that Middlesea can take advantage of Malta as a specialised venue attracting international attention through “a very important alliance” with Bank of Valletta.
This “alliance” is one of the main reasons why Mapfre is so “enthusiastic” about this new venture with Middlesea, the CEO said. Mr Fernández-Cid is also a director of MSV Life, the 50-50 joint venture between Middlesea and BoV.
Life company Mapfre Vida, which also has an asset management operation, operates mainly in the bank assurance markets: more than 70 per cent of new policies sold in the market are through 5,000 bank branches in Spain. The branch network adds to more than 3,200 Mapfre has across the country. Specialty risk insurance company Mapfre Asistencia provides services to the wider group’s subsidiaries around the world with a business strategy centred on anticipating and adapting to market needs. Its portfolio includes customer support with home, travel and leisure insurance, and ancillary products related to motor including claims management and warranty extensions.
Mapfre Re, the group’s reinsurer arm, focuses a third of its business on the group with the rest of its activity targeted at international business, operating offices from Beijing to Santiago.
“You have to be a leading player in each and every market with leading teams and professionals adapted to that market,” Mr Fernández-Cid emphasised. “Everyone is important because everyone is different.”
Mapfre’s relationship with Middlesea dates to 2000. Its shareholding in Middlesea grew to 31.08 per cent in 2010 – becoming a major MSI shareholder with BoV – following the €40 million rights issue the previous year. Mapfre had underwritten €14 million.
In effect, knowledge transfer began two years ago when Mapfre Internacional general manager Pedro López de Solanes joined MSI with a mission to tweak techniques and introduce updated best practice. Mr López de Solanes has since been named an executive director of Middlesea. The first vice-chairman of Mapfre and chairman of the International Direct Insurance and Global Business Divisions, Andrés Jiménez, also sits on MSI’s board.
Mr Fernández-Cid did not exclude Middlesea expanding abroad again in the long-term.
“The geo-politics is such that an efficiently-run operation should give us access to other markets,” he said. “Malta is next to other markets which we could tap together. As in life, opportunities in business will be considered on the basis of rationale and feasibility. Any market niche to be considered in Malta or abroad is based on an assessment of financial feasibility, risk and fit with our strategies and corporate values”.
He reiterated however, that the priority focus of MSI for the moment was the local market.