Mapfre Profit Falls on Bankia, Greek Bond Costs; Shares Drop

Mapfre SA, Spain’s biggest insurer, said profit last year fell 31 percent, missing analysts’ estimates, as it booked costs associated with Greek bonds, real estate and a stake in Bankia SA. The shares slumped.

Net income slid to 665.7 million euros ($900.4 million) from 963 million euros in 2011, the Madrid-based company said in a filing to regulators today. Earnings compared with the average 897 million-euro estimate of 13 analysts who provided figures within the last 28 days.

Mapfre is relying on growth in markets in Latin America such as Brazil to help compensate for its business in Spain, where premiums are shrinking due to a recession. The insurer said it acted “prudently” to clean up its balance sheet by booking costs amounting to 404.8 million euros.

“We have preferred to take the leap towards interpreting a scenario that’s quite a lot worse than can be expected so we can have a state of financial and balance sheet health that will not give us surprises in the years to come,” Mapfre Chairman Antonio Huertas said at a news conference in Madrid.

Mapfre dropped 4.4 percent to 2.13 euros at 4:04 p.m. in Madrid, the biggest decline on the 33-member Stoxx 600 Insurance Index, which lost 1.4 percent.

Premium Income

Mapfre increased premiums last year by 10 percent to 21.6 billion euros and revenue by 7.5 percent to 25.3 billion euros, it said.

Premiums in the Spanish insurance business fell 4.5 percent while premiums elsewhere jumped 23 percent, Mapfre said. The contribution of Spanish premiums fell to 38 percent in 2012 from 55 percent the previous year, while Brazil’s contribution climbed to 15 percent from 7 percent.

The combined ratio for Mapfre’s non-life business reached 95 percent in 2012 compared with 97 percent a year earlier. A ratio above 100 percent means claims and costs exceed premium income, making underwriting unprofitable.

Mapfre wrote down the value of its stake in Bankia by 142 million euros to 11.5 million euros and now values the shares at 39 cents compared with the 3.75 euros they were sold at in the bank’s initial share sales in 2011, the insurer said. The company, which at one point held Greek bonds valued at 252 million euros, now has none, Mapfre said.