MAPFRE’s Revenue Exceeds 21.3 Billion Euros in the First Nine Months and Net Profit Totals 445 Million Euros

HIGHLIGHTS FROM THE FIRST NINE MONTHS

• The business grows by more than 5 percent with premium volume of 18 billion euros.
• The estimated impact from hurricanes and earthquakes is 176 million euros, reducing profits by 22.3 percent. Excluding this effect, earnings would have risen 8.6 percent.
• Excellent business performance in Spain, in terms of both profits (+9.2 percent) and premiums (+3.7 percent), comfortably outpacing the market.
• The reinsurance business makes a solid contribution, with premium growth delivering more than 97 million euros to earnings, despite the impact of natural disasters.
• MAPFRE maintains its interim dividend at €0.06 per share against 2017 results.

MAPFRE’s revenue in the first nine months of the year rose to 21.3 billion euros, a 1.6 percent increase on the same period of the previous year. Premiums grew by 5.1 percent to 18 billion euros, driven by business growth in Spain, Mexico and the reinsurance and global risks businesses. Net profit stood at 445 million euros, a decrease of 22.3 percent, due to the costs stemming from recent natural disasters in both North America and the Caribbean, the estimated impact of which is 176 million euros net. Excluding the effect of these catastrophes, attributable profit would have grown 8.6 percent.

These catastrophes (hurricanes and earthquakes) have affected both the Group combined ratio, which now stands at 98.7 percent, despite the severity of these events in scale and timing. Taking out the impact of these events, the combined ratio would have been 96.3 percent. It is important to note the progress in the reinsurance business, which contributed 97 million euros to profits, with a combined ratio of 96.6 percent, as well as the strong growth of the business in Spain, and especially in profitability.

Equity closed September 2017 at 10.8 billion euros, while shareholders’ equity rose to 8.8 billion euros and total assets at the close of September amounted to 67.7 billion euros.

MAPFRE’s investments totaled 49.4 billion euros at the end of September. Of this amount, 54 percent corresponded to sovereign debt, while 20 percent was invested in corporate fixed income, with 9 percent in equity and mutual funds.

The Solvency II ratio at the close of the first half of this year was 205.6 percent, with 87 percent of top-notch (TIER 1) capital, reflecting the robustness and stability of the Group, which is supported by broad diversification and strict investment and management policies.

1. Business performance:

During the first nine months of this year, the Insurance Unit’s premium volume rose to 14.8 billion euros, a 6.3 percent increase relative to the same period last year.

→ The Iberia Regional Area (Spain and Portugal) recorded very favorable increases in both premiums (+3.7 percent) and profits (+8.2 percent).

Spain showed a premium increase of 3.7 percent to 5.2 billion euros, well above the growth registered by the sector as a whole. The automobile business performed particularly well, with close to 1.7 billion euros in premium volume (+3.3 percent), with growth outpacing the market, and the combined ratio improved by 4.4 percentage points to 91 percent. It is important to note the improved claims ratio thanks to the cancellation of unprofitable policies, mainly in fleets, as well as VERTI’s positive business performance. The general P&C insurance business recorded premiums of almost 1.3 billion (+2.4 percent), with the third-party liability business and the majority of the individual and corporate Non-Life lines performing solidly. Health and accident premiums surpassed 606 million euros (+3.6).

MAPFRE VIDA grew 4.7 percent, recording premium volume of 1.6 billion euros, with the bank channel contribution, especially that of BANKIA MAPFRE VIDA (+65.4 percent), being worthy of mention. Mutual funds and others grew by 19.5 percent to reach almost 3.7 billion euros, while pension fund assets were up 9.9 percent, standing at 4.9 billion euros.

The attributable profit of the business in Spain in the first nine months of the year grew 9.2 percent to 390 million euros.

→ Premiums from the Brazil Regional Area totaled 3.5 billion euros, representing a 7.8 percent increase against September of 2016, reflecting the revaluation of the Brazilian real (+8.8 percent). General P&C insurance also made a strong contribution (1.4 billion euros, up 14 percent growth), while the Life business generated 1.1 billion euros, (+4.5 percent), with Automobiles producing 955 million euros, (+3.8 percent).

→ The LATAM North Regional Area grew its business by 53.4 percent to 1.5 billion euros, with Mexico’s contribution of 1 billion euros (+83.8 percent), which includes the renewal of the Pemex policy, being a particular highlight. Panama generated 166 million euros (+11.3 percent), and the Dominican Republic was 5.9 percent better, producing 90 million euros in premiums.

→ The LATAM South Regional Area’s premiums amounted to 1.3 billion euros, 0.3 percent better than the figure recorded for the comparable period of last year. It is important to note that all countries in this region enjoyed growth increases with the exception of Chile, which suffered falls in the Automobile and general P&C insurance business due to the non-renewal of some loss-making business and portfolio cleansing. Peru contributed 359 million euros (+1.7 percent), while the growth of Colombia was another particular highlight, being 1.3 percent better with premiums of 309 million euros and a Group profit contribution of 10 million euros, against the more than 22 million euros in losses for the same period last year.

→ The North America Regional Area recorded premium volume of almost 2 billion euros, which is 1.2 percent lower than the same period last year. In the United States, premiums slipped 0.1 percent to 1.7 billion, as a consequence of the cancellation of loss-making business outside Massachusetts, with the objective of improving profitability in those states. In Puerto Rico, premiums were down 8 percent to 260 million. This decrease also comes on the back of the non-renewal of loss-making business and a significant reduction in sales activity in September, as a consequence of the hurricanes that hit the country.

→ Premiums in the EMEA Regional Area stood at 1.4 billion euros, down 4.1 percent. In Turkey, premiums shrank by 18.8 percent (remaining stable in local currency) to 501 million euros, due, among other reasons, to the depreciation of the Turkish lira and a stricter underwriting policy focused on profitable growth. In Italy, business grew by 2.1 percent to 352 million as a consequence of portfolio cleansing and a pricing policy in line with the objective of profitable growth. Premiums in Germany grew by 7.5 percent to 259 million euros. It is important to note that since June in Germany, MAPFRE has operated under the VERTI brand, with solid progress both in new business and renewals. In addition, this market began selling life insurance in August. In Malta, the insurance business grew 12.8 percent to 278 million euros.

→ The APAC Regional Area raised premium volume during the first nine months of the year by 63.5 percent, to 56 million euros. This growth was driven by the inclusion of the ABDA business (Indonesia) from June onward. MAPFRE now controls 62.3 percent of ABDA since the public takeover was launched.

Premiums at the Reinsurance Business Unit increased 3.8 percent during the first nine months of the year, reaching 3.3 billion euros. It is important to note the positive contribution of this business to the Group, both in premium and result terms. At the close of September, MAPFRE RE recorded earnings of 97 million euros (-20.7 percent); this despite catastrophic events involving a net cost of approximately 73 million euros for this business unit. However, MAPFRE RE’s non-catastrophic risk portfolio maintains excellent profitability levels. MAPFRE RE contributed 21.9 percent of the Group’s attributable profit.

The Global Risks Business Unit registered premium growth of 6.9 percent in the first nine months of the year, producing 950 million euros. The LATAM North and EMEA Regional Areas performed especially well, posting double-digit growth. Recent catastrophic events have cost this unit 73 million euros, giving rise to losses of 87 million euros.

Finally, the restructuring process continues at the Asistencia Business Unit, with exits from unprofitable markets.

2. Dividend:

The Board of Directors has ratified maintaining the interim dividend against 2017 earnings at €0.06 per share.

^{(1) Includes: investment portfolio, mutual funds and pension funds}

^{The definition and calculation of Alternative Performance Measures (APM) used in this Report, which refer to financial measures that are neither defined nor included in the applicable financial reporting framework, can be accessed via the following website: https://www.mapfre.com/media/shareholders/2016/alternative-performance-measures.pdf}