As so many companies struggle to keep up with difficulties brought about by an unfavourable economic climate, Victor Aquilina finds out what makes Mapfre tick.

There could have hardly been a more ironic twist to life in Madrid than two events that happened within 24 hours from each other earlier this month. The first was the annual general meeting of a leading insurance company in Spain, Mapfre, and the other, a protest by thousands of workers over labour law reforms which, the unions say, will make it cheaper and easier to fire workers.

Despite the country’s economic ills, Mapfre’s profits rose by 3.2 per cent, to a staggering €963 million last year

The irony lies in the fact that, while Mapfre was in a high celebratory mood, the people, already angered by a raft of austerity measures and high unemployment, were not.

But Mapfre had a very good reason to celebrate. Despite the country’s economic ills, its profits rose by 3.2 per cent, to a staggering €963 million last year. Its business in Spain rose by 6.1 per cent, and its international business, by 21 per cent, no mean feat in an environment marked by so much economic doom and gloom. And with the general meeting approving a healthy dividend (€0.15 per share), it is no wonder that the shareholders left the congress hall beaming with delight.

It is not surprising either that, with the exception of one shareholder who, for some strange reasons known only to him, decided to vote against all the resolutions presented to the meeting, the rest of the shareholders raised no difficulties. They had no reason to.

Their company was not only beating the odds and showing good results despite an unfavourable economic climate, but it is also firmly on course to raise its revenues even further this year. It is also expanding its operations further afield, not only in South America, where it has already established itself as the second largest operator overall, but also in the Far East.

Another reason for the celebratory mood at the annual general meeting was the changing of the guard at the company’s helm – the taking over of a new chairman and chief executive of the group, Antonio Huertas, on the retirement of José Manuel Martínez, the man who put Mapfre on the world map.

A politician anywhere in the world would envy the kind of standing ovation Mr Martinez was given when he sat down after giving his last speech to the shareholders and, also, after the well merited lavish tribute paid to him by the new chairman.

A most charismatic figure, Mr Martinez is credited with having put the company on solid foundations and also with making a strong contribution to the advancement of insurance as an institution in both Spain and Latin America. Next to Mr Martinez, Mr Huertas may come across as a bit austere, but once you talk to him, you’ll change your opinion of him in no time.

At the general meeting, Mr Martinez spoke of the company’s development and expansion in the business with a kind of infectious verve that reflects the dynamic ethos of the group he has helped to build up over the years.

But how are they beating the crisis when so many are falling by the wayside or struggling to keep their heads above water?

They attribute their success to a number of factors, but both at the general meeting and at their headquarters in Majadahonda, management leaders stress the pool of talent that they have within the company as well as the attention they pay to internal control and costs. They say they aim at concentrating on what they know best, the insurance and reinsurance businesses.

Once they established themselves as market leaders, they are now strengthening what they call their internationalisation model. In fact, more than 60 per cent of premiums and almost 50 per cent of profits are derived from their overseas business. Mapfre is now ranked as the sixth largest non-life insurer in Europe and one of the top 20 reinsurers in the world.

In all, it is represented in no fewer than 46 countries, having 34,390 employees. It has more than 23 million clients and is represented in most countries in Latin America, including Brazil, Argentina, Chile, Peru, Ecuador, Puerto Rico and Panama, whose economy is, incidentally, booming.

Mapfre may not have been very well known in Malta before they bought a majority stake in the local insurance firm Middlesea, even though they had had connections with the local company through reinsurance work and the holding of a minority interest for quite a number of years. But the name Mapfre is now getting increasingly familiar.

Compared to other interests they have elsewhere, the stake they have in Middlesea may be small, but Mapfre sees its expansion here as part of its plan to internationalise further its network. It holds 54.56 per cent in Middlesea; the Bank of Valletta has 31.08 per cent, and the rest is owned by the public. (Mapfre stands for Mutua de Accidentes de Propietarios de Fincas Rústicas de España, and the Spanish pronunciation of the name is Mafre.)

Their Malta operation now falls under their international wing, Mapfre Internacional, which also oversees their interests in the United States, the Philippines, Portugal, and Turkey.

What helps make Mapfre a real leader in insurance is the research and crash-testing centre it has in Avila. Here, they crash cars, motorcycles or even heavy vehicles to assess any structural weaknesses in material and, based on their findings, they are able to analyse better the safety features of the cars they test, and the cost of repairs. The work also enables them to be in a better position to set insurance prices.

Their argument, one that can hardly be faulted, is that the more you know about a subject – in this case, motor insurance business – the more easily you can control and manage it. The research centres’ work focuses on studying the different types of accidents and the consequences that these may have for the occupants of the vehicles involved and for other road users.

But is not such work carried out by the carmakers as well? Well, yes, but Mapfre prefers carrying out its own tests. Would they then pass on the test results to the carmakers? Only if they pay for them. And why was the centre set up in Avila? Simply because Mapfre had land available there for development.

Also in Avila, they have another building where vehicles considered as total loss are stripped for parts that can well be used again. These are sold to wholesalers. By the way, Avila is a delightful place. Its Romanesque medieval city walls are so impeccably well kept that they put most of our bastion walls to shame. It is also very clean and looks well ordered.

Mapfre is also proud of their foundation, which owns a controlling interest in the company (63 per cent). Its substantial budget is spent on safety education programmes, cultural activities, social work, and publication of history books.

What are the prospects for the company and for Spain?

Mr Huertas is expecting revenues to rise by six per cent this year. “In this increase, the dynamism of our international areas will play a pivotal role, although we also expect to achieve good income figures in Spain, increasing our market shares in all the sectors.” Mr Huertas said Mapfre would look for complementary distribution networks to increase its organic growth capacity in countries where it was already operating. They also plan to boost online sales in those countries with market opportunities.

As to the economic situation in Spain, now back in the news after the centre-right government of Mariano Rajoy earlier this month said that Spain would miss its deficit target this year, Mr Huertas is confident that it will recover, provided that the country carried out the necessary reforms.

Eurozone finance ministers have now given Spain some breathing space, but they have demanded that the country trim off an extra 0.5 per cent of its budget.

Mapfre’s new chairman says the transition may take two to three years, but he believes that Spain will afterwards be a more dynamic country, able to create new employment and generate new economic activities.

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