Why Mapfre rises more than 10% in five sessions

The Spanish insurer is receiving valuation improvements in the heat of its new strategic plan until 2026. Yesterday it was Bank of America (BofA) that said that 2024 will be a good year for European insurers and that, in this framework, Spanish insurers have a lot room for improvement. For the investment bank, Mapfre is a "cheap value with a lot of room to surprise" which is why it raises its recommendation from neutral to buy. It raises its target price to 2.70 euros, 18% above yesterday's close.

In his opinion, the insurer is better positioned than other competitors, with an attractive valuation and "a potential for growth in results" of more than 10% on average in the next three years. In 2024, the insurer will earn 924 million, 33.5% more than in 2023. In 2025, it will reach 998 million and 1,064 million in 2026, according to the firm.

The combined ratio, the weight of claims and operating expenses on premiums, which last year was 97.2%, will gradually improve until it reaches 96.1% according to BofA calculations. This indicator is key to gauge the efficiency of a non-life insurer.

Mapfre closed its 2023-2025 strategic plan a year ahead of schedule, of which it only failed to meet its objective combined ratio of 96%.

In its new roadmap for 2024-2026, the company has set the goal of achieving an average of between 96% and 95% in the three-year period, according to Antonio Huertas, president of the entity, at the entity's meeting last year. day 15.

Bank of America reiterates the advice to underweight Línea Directa Aseguradora (LDA). Its shares, the report notes, have substantially underperformed the sector, although it considers that its lows have been left behind.

BofA sees a recovery in LDA's earnings, but says: "It is not clear whether the significant underwriting advantage over the market (with a combined ratio 10% better than the average) will be achieved again soon. The The report points out about the sector that "market discipline is gradually improving" and that although "motor insurance prices took too long to increase, they are now accelerating." In its case, the valuation improves from 0.76 to 0.92 euros and yesterday it closed at 0.89 euros.

In his opinion, "it is likely that listed insurers will lose market share to mutual companies in the short term, but that should normalize, most likely, in the second half of this year."

After the greater underwriting requirements applied by companies to face the crisis in motor insurance results, the evolution of the quality of their risks also plays in favor of insurers, points out BofA. He maintains that "along with a reduction in inflation, the recovery of their margins should be encouraged."

This is the fourth consecutive year that Mapfre has risen on the stock market. In 2023, 7.23% was recorded.