S&P warns Spain’s Mapfre

Standard & Poor's has revised its outlook on Spain-based Mapfre and related its core subsidiaries to negative from stable because the firm’s capitalisation is too low.

In a statement, the rating agency said: “We revised the outlook because the level of capitalisation continues to be below that implied at this rating level. We have some tolerance for highly rated insurers operating with a level of capital lower than the rating would normally imply, particularly during times of significant market dislocation. That said, although Mapfre has a very strong earnings track record, we believe that its ability to rebuild capital to a more supportive level over the rating horizon is constrained by the weaker operating environment.”

Standard & Poor's credit analyst Peter McClean said: "The negative outlook reflects Standard & Poor's concerns that the economic and market environments may limit Mapfre's ability to rebuild capital adequacy to a level more supportive of the ratings in 2009. Although the group has signalled its intention to issue further hybrid equity, it is unclear when this option will become financially viable for the group."

S&P confirmed its 'A+' long-term counterparty credit rating on Mapfre and our 'AA' long-term counterparty credit and insurer financial strength ratings on Mapfre's core operating subsidiaries. The ratings and outlook on Mapfre's Massachusetts-based subsidiary Commerce Group Inc. (Commerce; BBB/Stable/--), including its insurance subsidiaries Commerce Insurance Co. and Citation Insurance Co. (MA) (both rated A/Stable/--), are unchanged.