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MAPFRE: FY2019 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results:
Premiums: € 5396.5 Bn (+1.5% vs. +1.7% BS(e) and +2.3% consensus);
Technical Result: € 326.9 M (+53.5% vs. +33.8% BS(e) and +35.2% consensus);
EBT: € 285.1 M (+58.2% vs. +44% BS(e) and +43.8% consensus);
Net Profit: € 146.5 M (vs. € 0 M in 4Q'18; € 96.9 M BS(e) and € 98.9 M consensus);
FY2019 vs. FY2018 Results:
Premiums: € 23.045 Bn (+2.3% vs. +2.3% BS(e) and +2.6% consensus);
Technical Result: € 1.534 Bn (+8.0% vs. +5.1% BS(e) and +5.3% consensus);
EBT: € 1.279 Bn (-3.9% vs. -5.8% BS(e) and -5.8% consensus);
Net Profit: € 609.2 M (+15.2% vs. +5.9% BS(e) and +6.2% consensus);
The company obtained € 146.5 M of Net Profit in 4Q’19, around +50% above expectations thank to higher capital gains (€ 73 M vs. € 53 M BS(e)) and lower taxes from the reversion in Mapfre Asistencia. On the negative side, the impact from the natural disasters (DANA storms in Spain, unrest in Chile and typhoons in Japan) was bigger than announced previously (€ 148 M vs. € 130 M in 2019, meaning around € -110 M in 4Q’19 on a standalone basis).
On the operating level, performance was slightly worse than expected in Non-Life, with slowing revenue growth (with premiums +0.4% in 4Q’19 vs. +3.7% as of 9M’19 and around +2% BS(e)) in most markets due to the negative impact from catastrophes. Thus, the Combined Ratio increased to 101.4% in 4Q’19 (vs. 100.1% BS(e)), leaving the cumulative YoY figure at 97.6%, in line with 2018. This negative performance in technical results is offset by the financial results. The operating results came in at € 122 M in 4Q’19 (~40% below our estimate and -20% vs. consensus). In Life, performance vs. expectations was the opposite, with higher premium growth (+4.6% vs. 4Q’18 and vs. -0.2% BS(e)), and the quarter’s operating results came in at € 205 M, doubling our expectations and ~50% above the consensus’ estimate. There seems to be improvement in Spain thanks to the integration of the Caja Granada and Caja Murcia business and to higher financial results.
By businesses, the improvement in Brazil continues, with a drop in premiums but with a 92% CR in 2019 (91% in 9M’19 and 98% in 2018), although without clear improving signs in the US (100.4% CR vs. 102% in 2018 and 100% in 9M’19), Assistance (the CR remains at 104%), and Eurasia (the CR also remains at 106%). Spain saw a slight deterioration given the impact of weather claims, although we view it as a one-off factor and not as a source of concern. Lastly, the result in Mapfre is fully distorted by catastrophe claims although offset by higher capital gains generation.
MAP reported € 609 M of Net Profit in FY2019, +15% vs. 2018, and excluding one-off effects (goodwill impairment, restructuring, one-off claims and capital gains generated), it would have come in at € 671 M (-3% vs. 2018). The company generates a 7.2% RoE and 8% in recurring terms.
With all this in mind, the results came in above expectations, but this was due to an impact from one-offs, and in our opinion the operating performance continues to follow the same trends: positive in Spain and Brazil, stable in the rest of the regions. SELL. T.P. € 2.66/sh. (upside +10.59%).