Fitch Affirms Mapfre Genel Sigorta's National IFS at 'AA(tur)'; Outlook Stable
KEY RATING DRIVERS
The rating reflects the strong position of MGS in the Turkish non-life insurance market, solid underwriting performance, a prudent investment policy, and Fitch's view of its importance to its ultimate parent, Mapfre SA (Issuer Default Rating BBB+/Stable). Offsetting these factors are MGS's somewhat weakened capitalisation, the competitive pricing environment of the Turkish non-life insurance market and risks associated with MGS's rapid growth over the past five years relative to peers.
MGS's rating benefits from a single-notch uplift for Mapfre SA's ownership and for the parent's expertise in corporate governance, operational support and risk management. Fitch believes that capital support would also be provided to MGS by the parent, should it be required.
On 19 August 2016, Fitch revised Turkey's Outlook to Negative from Stable, while affirming the sovereign's Long-Term Foreign Currency and Local Currency Issuer Default Ratings at 'BBB-'. A one notch downgrade to the sovereign is unlikely to impact MGS's national scale ratings, as its relative credit worthiness to the sovereign would likely remain unchanged in Fitch's view.
Key rating drivers that could lead to a downgrade include a decline in the regulatory solvency ratio to below 100% over a sustained period, deterioration in underwriting profitability (with the combined ratio above 110% for an extended period), or significant deterioration in MGS's competitive positioning in Turkey (decline in market share to below 4%). A decline in MGS's importance to Mapfre SA could also lead to a downgrade.
An upgrade is unlikely in the near term, given MGS's high rating on the Turkish national scale and its small contribution to Mapfre SA precludes an increase in the rating uplift.