A.M. Best Affirms Financial Strength Ratings and Downgrades Issuer Credit Ratings of MAPFRE PRAICO Insurance Company and Its Affiliates

A.M. Best Co. has downgraded the issuer credit ratings (ICR) to "a" from "a+" and affirmed the financial strength rating of A (Excellent) of MAPFRE PRAICO Insurance Company (PRAICO), its wholly owned subsidiary, MAPFRE Preferred Risk Insurance Company (PRICO), and an affiliate, MAPFRE Pan American Insurance Company (PAICO) collectively known as the MAPFRE PRAICO Group (MPG). All ratings have been removed from under review with negative implications and assigned a negative outlook. All the above companies are domiciled in San Juan, Puerto Rico, unless otherwise specified.

These rating actions follow A.M. Best Europe – Rating Services Limited's downgrading of the ICR to "a" from "a+ of MPG's affiliate company, MAPFRE Re, Compania de Reaseguros, S.A. (MAPFRE RE) a key subsidiary of MAPFRE S.A. (both domiciled in Spain), the ultimate holding company of MPG. The rating actions reflect MAPFRE S.A.'s exposure to the continuing negative developments regarding the eurozone sovereign debt crisis through sizeable exposures to peripheral eurozone debt.

MAPFRE RE and MAPFRE S.A. (the consolidated group) face higher country risk due to the deterioration in the sovereign creditworthiness of Spain, whose debt accounts for 53% of the consolidated group's EUR 38 billion invested assets at year-end 2011, the majority of which is derived from investments in government and financial institutions. MAPFRE S.A. also maintains sizeable commercial property investments in Spain through its investment holdings. Spain remains the main profit center for the consolidated group, with approximately 40% of its consolidated gross written premiums and 60% of insurance results derived from its core market. Although the consolidated group enjoys a well spread geographically diversified portfolio, particularly in Latin America and the United States, the majority of its business is derived from countries with sovereign creditworthiness equal to or lower than that of Spain.

Negative rating actions could occur if MAPFRE S.A. incurs a weakening in its risk-adjusted capitalization, which is tied to investment losses or a deterioration occurs in the operating environment of its key territories.

The ratings assigned to MPG are based on its consolidated operating results and the financial position of PRAICO, PRICO and PAICO. The ratings reflect MPG's excellent capitalization, strong operating performance, which is reflective of its solid investment income and consistently profitable underwriting results, established market presence within Puerto Rico and strong risk management practices. The ratings also recognize MPG's solid brand name and its integral role as a member of MAPFRE S.A.

Partially offsetting these positive rating factors is MPG's geographic concentration of risk, which potentially exposes its capital to frequent and severe weather-related events. Operating almost exclusively within Puerto Rico, operating results remain exposed to potential changes within the judicial, regulatory and economic climate. The negative outlook is driven by A.M. Best's concern that MAPFRE S.A. has exposure to continuing negative developments regarding the eurozone sovereign debt crisis given its sizeable exposures to peripheral eurozone debt.

The positive rating factors reflect MPG management's conservative underwriting philosophy and comprehensive reinsurance program, which protect surplus from potential shock losses while enhancing the stability of earnings. Management remains conservative in establishing reserve estimates as evidenced by favorable calendar year reserve development over the long term. The Puerto Rican insurance market remains competitive as local insurers challenge each other for market share, particularly within the commercial lines that are unregulated.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Rating Members of Insurance Groups"; "Risk Management and the Rating Process for Insurance Companies"; "Catastrophe Analysis in A.M. Best's Ratings"; and "Understanding BCAR for Property/Casualty Insurers." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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Contacts:

A.M. Best Co.
Gordon McLean, 908-439-2200, ext. 5304
Senior Financial Analyst
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or
Gerard Altonji, 908-439-2200, ext. 5626
Assistant Vice President
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or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
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or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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