MAPFRE: FY2020 RESULTS (ANÁLISIS BANCO SABADELL)
4Q'20 vs. 4Q'19 Results:
Premiums: € 4.933 Bn (-8% vs. -10.2% BS(e) and -8.4% consensus);
Operating Result: € 300.4 M (-17.8% vs. -11.7% BS(e) and +17% consensus);
EBT: € 257.8 M (-79.8%);
Net Profit: € 76.1 M (-48% vs. -72.2% BS(e) and -72.0% consensus);
FY2020 vs FY2019 Results
Premiums: € 20.482 Bn (-11.1% vs. -11.5% BS(e) and -10.9% consensus);
Operating Result: € 1.337 Bn (-12.8% vs. -8.6% BS(e) and -7.6% consensus);
EBT: € 1.118 Bn (-12.6%);
Net Profit: € 526.5 M (-13.6% vs. +1.8% BS(e) and +2.0% consensus);
The company obtained € 526.5 M of Net Profit’20 (-15% vs. expectations), meaning 4Q’20 Net Profit of € 76.1 M vs. €~170 M expected, due to € -132 M of goodwill impairments (vs. around €-50 M BS(e)) in the Turkey, Indonesia and Italy subsidiaries. We should point out that on the reported level, these impairments are included in the Financial Result of the Non-Life business, thus affecting the operating comparison (€~300 M in 4Q’20 vs. € 365 M BS(e) and consensus). Excluding this, adjusted Net Profit would have beaten expectations by around +22%.
The operating performance excluding these impairments has followed the same trend of recovery seen in 9M’20, with premiums falling -8% in 4Q’20, in line with expectations, and with better Combined Ratio (CR) performance (94.8% vs. 95.4% expected). By regions, Net Profit performance was in line with expectations in Spain (€ 119.6 M, -19% vs. 4Q’19 due to lower capital gains realised) and LatAm (€ 51 M of Net Profit, -10% vs. 4Q’19), with a slight rise in CR in Brazil (to around 90%). Meanwhile, performance was slightly better in the international business (US and Eurasia, +14% in Net Profit) and with better performance in the reinsurance business (€ 16.8 M of Net Profit vs. around € 3 M expected).
Solvency levels remain largely unchanged (180.2% as of 9M’20; ~190% including Mapfre Vida’s internal models). The company has announced a final dividend’20 of € 0.075/sh. (-11% vs. 2019; 4.5% yield), meaning a DPS’20 of € 0.125/sh. (-14% vs. 2019; 7.6% yield), in line with the consensus but above our estimate of € 0.107/sh. We expect a negative share price reaction initially (around -3% vs. Ibex) that would moderate throughout the session. Conference call at 12:00 (CET). BUY. T.P. € 2.17/sh. (+32.24% upside).