Seven years later Mapfre is one step away from being a buy again for the market consensus. It has not been easy to get here, after a failed strategic plan -that of 2018- analysts now count on that some objectives of the new roadmap -which ends in 2021- will not be reached, but others, such as the goal of achieving an ROE of 8% yes. This is one of the reasons for the recommendation improvement, after knowing the semi-annual results in July that reflected a certain change (in favor) of the trend.
On the one hand, we must count on the tailwind of the Brazilian real – the second market for the insurer behind Iberia, with 13% of premiums – which this year rises by 3.75% in its exchange rate against the euro, and it is the first time that it has regained ground since 2016. In fact, the trend changed radically at the beginning of March, when it hit a minimum of 0.1437 euros and has risen 13.8% since then, to 0.1634.
In addition, the catalyst that the dividend represents for its shares has returned to its fullness after the limitations on payments to the insurance sector have also been removed – as in the banking sector. And, ultimately, the punishment that all financial titles have suffered during the current crisis cannot be ignored.
Mapfre is far from recovering pre-Covid levels, but it has come quite close to the highs of the year – at 1.88 euros -, from which it is separated by a rise of 1.6%. Compared to pre-pandemic levels – above the 2.13 euro area – it is still trading 13% below.
Its target price is on average 1.95 euros, but the truth is that the latest reviews carried out throughout the month of August (of 7 analysis houses in total) raise its average objective to 2.08 euros. . This implies a potential for twelve months over 12%.
So far this year, Mapfre shares have risen twice as much as the insurance sector in Europe , 21% over 11%, and with this it has managed to close the gap – against it – opened in the last year. Since September 1 of last year, their titles have appreciated 27% compared to 24%, on average, of their continental counterparts.
Even so, the company still trades at a 33% discount in the market compared to the value of its equity (valued at 8,536 million euros at the end of June).
The insurer managed to get slightly above consensus with its first-half accounts. Premiums, both life and non-life, increased 4% and 7%, respectively. In addition, it managed to beat the 200% level in its solvency ratio – compared to 193% in 2020 -, as highlighted by JP Morgan in its report, and lowered the combined ratio to 95.1%, compared to 97% in the same period of 2020 -already benefited by a lower accident rate due to confinement-.
Barclays also highlights how the company has been able “to maintain its guidance despite the loss of earnings brought by the agreement with Bankia [which ended with the acquisition of CaixaBank]” and says it expects “new acquisitions”. The last one has been signed in the US, where it has established an alliance with AAA -the American version of RACE-, which has 50 million clients. North America represents 9.1% of premiums and is its third most important country.
The analysts’ forecast is that Mapfre will reach 718 million euros in profit at the end of this year, 100 above the profits of 2019 (of 609 million). The return on capital will be above 8%, a level to which the company’s own management has committed itself.
Its great strength continues to be the dividend , which will return to pre-Covid levels charged to this year, up to 0.14 euros and a profitability of 7.5%, which will reach 7.7% next year.