III. INTERIM MANAGEMENT REPORT OPERATING REVENUES AND FUNDS UNDER MANAGEMENT Direct insurance and accepted reinsurance premiums written by the Group s subsidiaries amounted to 6,476.2 million in the first quarter of 2013, a 3.7% increase. Consolidated premiums totalled 5,903.8 million, a rise of 0.2%. Total operating revenues reached 7,091.9 million, including 150.1 million of new gross contributions to pension funds. The breakdown of these revenues by business line is shown in the following table: 3M 2013 (1) 3M 2012 % 13/12 Spain & Portugal Insurance 2,886.2 2,919.4 (1.1%) - Gross written and accepted premiums 2,286.9 2,387.3 (4.2%) - Income from investments 456.3 411.9 10.8% - Non-insurance revenues and other 143.0 120.2 19.0% International Insurance 3,127.7 2,954.3 5.9% - Gross written and accepted premiums 2,829.1 2,652.7 6.6% - Income from investments 262.5 271.2 (3.2%) - Non-insurance revenues and other 36.1 30.4 18.8% Global Businesses 1,545.4 1,369.0 12.9% - Gross written and accepted premiums 1,360.2 1,205.5 12.8% - Income from investments 140.6 111.5 26.1% - Non-insurance revenues and other 44.6 52.0 (14.2%) Parent company 19.6 16.1 21.7% TOTAL REVENUES 7,578.9 7,258.8 4.4% Consolidation adjustments and other companies (637.1) (424.0) 50.3% TOTAL CONSOLIDATED REVENUES 6,941.8 6,834.8 1.6% Gross contributions to pension funds (2) 150.1 175.0 (14.2%) TOTAL REVENUES FROM OPERATIONS 7,091.9 7,009.8 1.2% (1) The figures for 3M 2013 reflect the 2013 operational structure. (2) Includes MAPFRE INVERSIÓN, CATALUNYACAIXA, BANKINTER VIDA, CCM VIDA Y PENSIONES and DUERO PENSIONES.
In the first quarter of 2013, the total consolidated revenues exceeded the figures for the previous year on the back of the good growth levels at MAPFRE ASISTENCIA and MAPFRE INTERNACIONAL. The following table shows the evolution of funds under management in Life assurance and Savings products: 3M 2013 3M 2012 % 13/12 Life assurance technical reserves (1) 24,108.1 22,408.4 7.6% Pension funds 5,118.5 5,146.0 (0.5%) Mutual funds and managed portfolios 3,836.8 2,616.7 46.6% TOTAL 33,063.4 30,171.1 9.6% (1) Includes all the technical reserves from Life Assurance subsidiaries and the Life Assurance reserves from multi-line insurance companies. Note: in 3M 2013, the mutual funds managed outside of Spain are included for the first time; excluding this effect, the growth rate would be 5.7%. The variation in funds under management mainly reflects the growth of the Life Assurance business in Latin America, as well as the good performance of mutual funds and the issuance in the bank channel in Spain. Excluding the impact of the adjustments arising from the change in the market value of the assets backing Life assurance technical reserves, funds under management would have increased 7.0%. 2
Spain & Portugal Insurance Direct insurance and accepted reinsurance premiums written by the Group s direct insurance companies operating primarily in Spain and Portugal reached 2,286.9 million, to which 150.1 million of new gross contributions to pension funds must be added, with the following breakdown by company: 3M 2013 (1) 3M 2012 % 13/12 MAPFRE FAMILIAR 1,349.7 1,406.8 (4.1%) MAPFRE EMPRESAS 220.6 217.2 1.6% NON-LIFE INSURANCE SPAIN 1,570.3 1,624.0 (3.3%) LIFE SAVINGS 530.7 595.7 (10.9%) Agents' channel 249.7 332.6 (24.9%) Bank channel - MAPFRE-CM VIDA 53.6 39.5 35.7% Bank channel - CATALUNYACAIXA 123.7 90.1 37.3% Bank channel - Other (2) 103.7 133.5 (22.3%) LIFE PROTECTION 129.9 134.6 (3.5%) Agents' channel 62.7 64.0 (2.0%) Bank channel - MAPFRE-CM VIDA 25.5 25.8 (1.2%) Bank channel - CATALUNYACAIXA 16.8 17.1 (1.8%) Bank channel - Other (2) 24.9 27.7 (10.1%) ACCIDENTS 25.1 33.0 (23.9%) MAPFRE VIDA 685.7 763.3 (10.2%) MAPFRE PORTUGAL 30.9 --- --- TOTAL PREMIUMS 2,286.9 2,387.3 (4.2%) Gross contributions to pension funds (3) 150.1 175.0 (14.2%) (1) The figures for 3M 2013 reflect the 2013 operational structure. (2) Includes BANKINTER VIDA, CCM VIDA Y PENSIONES and UNIÓN DUERO VIDA. (3) Includes MAPFRE INVERSIÓN, CATALUNYACAIXA, BANKINTER VIDA, CCM VIDA Y PENSIONES and DUERO PENSIONES. The variation in premiums is the result of: - the deterioration of the market environment, characterised by a decline in the demand of Non-Life insurance, which affected in particular the Motor line; - the recovery in the Commercial and Burial lines; 3
- a better performance than the market in the Life-Protection business (-3.5% versus -5.3%); - a comparatively lower volume of Life-Savings operations in the agents channel, due to differences in the schedule of sales campaigns, which in the first quarter focused on the winning of mutual funds. Noteworthy recovery in the issuance of Life-Savings products in the bank channel. The premiums at MAPFRE PORTUGAL totalled 30.9 million, a 13% decrease. The following table shows the premiums written in Spain through the agents and bank channels: AGENTS' AND OTHER CHANNELS BANK CHANNEL TOTAL 3M 2013 3M 2012 Var. % 3M 2013 3M 2012 Var. % 3M 2013 3M 2012 Var. % MAPFRE VIDA 332.1 424.2 (21.7%) 353.6 339.1 4.3% 685.7 763.3 (10.2%) MAPFRE FAMILIAR 1,301.2 1,344.4 (3.2%) 48.5 62.4 (22.3%) 1,349.7 1,406.8 (4.1%) MAPFRE EMPRESAS 218.8 214.1 2.2% 1.8 3.1 (41.9%) 220.6 217.2 1.6% NON-LIFE 1,520.0 1,558.5 (2.5%) 50.3 65.5 (23.2%) 1,570.3 1,624.0 (3.3%) TOTAL 1,852.1 1,982.7 (6.6%) 403.9 404.6 (0.2%) 2,256.0 2,387.3 (5.5%) Other revenues from the companies operating primarily in Spain and Portugal amounted to 143.0 million, an increase of 19.0% over the previous year. Their breakdown by company is shown in the following table: 4
3M 2013 (1) 3M 2012 % 13/12 MAPFRE FAMILIAR 105.8 83.4 26.9% MAPFRE INVERSIÓN and subsidiaries 26.5 21.8 21.6% Other entities 10.7 15.0 (28.7%) TOTAL 143.0 120.2 19.0% (1) The figures for 3M 2013 reflect the 2013 operational structure. The said increase in revenues reflects mainly the consolidation of FUNESPAÑA, whose business was integrated in the fourth quarter of 2012. The subsidiaries that operate in stockbroking, as well as mutual and pension fund management, which are grouped under MAPFRE INVERSIÓN, obtained revenues of 26.5 million, a 21.6% increase versus the first quarter of 2012. The volume of assets in mutual funds and managed portfolios stood at 2,657.3 million, equivalent to a 1.6% increase. At the end of the period, assets managed in pension funds amounted to 1,561.9 million, a 1.1% rise. International Insurance Premiums written and accepted by the Group s international direct insurance companies evolved as follows: 3M 2013 (1) 3M 2012 % 13/12 Life 646.1 613.2 5.4% MAPFRE AMÉRICA 614.9 577.8 6.4% MAPFRE INTERNACIONAL 31.2 35.4 (11.9%) Non-life 2,183.0 2,039.5 7.0% MAPFRE AMÉRICA 1,551.3 1,515.4 2.4% MAPFRE INTERNACIONAL 631.7 524.1 20.5% TOTAL PREMIUMS 2,829.1 2,652.7 6.6% (1) The figures for 3M 2013 reflect the 2013 operational structure. 5
The premiums development at MAPFRE AMÉRICA reflects: the growth of the economies in the region, and in particular of its insurance markets; the transfer of the business operations in PUERTO RICO to MAPFRE INTERNACIONAL; the sale of the MAPFRE ART and MAPFRE SALUD businesses (Argentina), which contributed premiums of 55.2 million in 3M 2012; the negative impact of the depreciation of the Brazilian Real and the Argentine Peso, as well as the devaluation of the Venezuelan Bolivar. The following table shows the breakdown of the growth rates of direct insurance premiums achieved in the various countries: PREMIUMS (LIFE AND NON-LIFE) Local Currency COUNTRY 3M 2013 (1) 3M 2012 % 13/12 % 13/12 BRAZIL 1,203.9 1,142.0 5.4% 18.0% MEXICO 206.6 172.0 20.1% 16.4% COLOMBIA 187.4 142.3 31.7% 31.9% VENEZUELA 186.3 173.6 7.3% 35.2% CHILE 99.0 78.5 26.1% 22.7% ARGENTINA 84.0 134.3 (37.5%) (38.9%) PERU 73.6 62.3 18.1% 13.7% CENTRAL AMERICA 65.1 60.1 8.3% --- OTHER COUNTRIES (2) 60.3 55.6 8.5% --- PUERTO RICO --- 72.5 --- --- MAPFRE AMÉRICA 2,166.2 2,093.2 3.5% (1) The figures for 3M 2013 reflect the 2013 operational structure. (2) Includes Ecuador, Paraguay, the Dominican Republic and Uruguay. 6
MAPFRE INTERNACIONAL s insurance subsidiaries obtained total premiums of 662.9 million, with an 18.5% increase, mainly due to: USA: positive impact of the appreciation of the US Dollar against the Euro and rate rises in all states; Turkey: strong growths in premiums in the Motor and Health lines, which reflect the company s attractive product range and generalised tariff increases in the market. Increases in the Fire and Engineering lines as well, due to the growing activity in industrial risks and the cooperation with MAPFRE GLOBAL RISKS; Malta: especially positive performance of the Life-Savings segment. The breakdown of the growth rates of Direct Insurance premiums achieved in the various countries is shown in the following table: PREMIUMS (LIFE AND NON-LIFE) Local currency COUNTRY 3M 2013 (1) 3M 2012 % 13/12 % 13/12 USA 385.8 373.7 3.2% 2.2% TURKEY 165.9 107.2 54.8% 55.7% PUERTO RICO 63.1 --- --- --- PORTUGAL --- 35.5 --- --- MALTA 37.7 35.0 7.7% --- PHILIPPINES 10.4 8.1 28.7% 21.4% MAPFRE INTERNACIONAL 662.9 559.5 18.5% (1) The figures for 3M 2013 reflect the 2013 operational structure. 7
Global Businesses Premiums written and accepted by the companies included in the Global Businesses Division performed as follows: 3M 2013 3M 2012 % 13/12 MAPFRE GLOBAL RISKS 253.2 293.6 (13.8%) MAPFRE RE 875.4 738.4 18.6% MAPFRE ASISTENCIA 231.6 173.5 33.5% TOTAL PREMIUMS 1,360.2 1,205.5 12.8% MAPFRE GLOBAL RISKS achieved a premiums volume of 253.2 million, a 13.8% decrease. This performance reflects the change in the accrual of a large contract, the consolidation of SOLUNION by the equity method and a lower level of renewals. In the accepted reinsurance business, MAPFRE RE and its subsidiaries recorded consolidated premiums of 875.4 million ( 738.4 million in the first quarter of 2012). The 18.6% growth reflects: the formalisation of new reinsurance operations with Group companies. Excluding this, the figure would remain stable; differences in the issuance schedule in the Life Assurance segment; the depreciation of the Euro. The total revenues (premiums and income from the sale of services) at MAPFRE ASISTENCIA and its subsidiaries reached 274.8 million, a 28.5% increase over the same period of the previous year. Of these, 231.6 million corresponded to written and accepted premiums, with a 33.5% increase, and 43.2 million to revenues from services, a 6.9% rise, reflecting the organic growth in Europe and Asia, and the positive impact in the USA of a Roadside Assistance contract as well as of the acquisition of Century, both signed in the second half of 2012. 8
MANAGEMENT RATIOS In Non-life lines, the consolidated combined ratio was 95.1%, reflecting an improvement in the expense ratio in Direct Insurance and the decrease in the loss experience in Latin America and in Reinsurance, which offset a higher loss ratio in Spain, the USA and Turkey. The development of the main management ratios is shown in the following table: RATIOS EXPENSE RATIO (1) LOSS RATIO (2) COMBINED RATIO (3) COMPANY 3M 2013 (4) 3M 2012 3M 2013 (4) 3M 2012 3M 2013 (4) 3M 2012 MAPFRE S.A. consolidated 27.2% 28.1% 67.9% 67.5% 95.1% 95.6% Spain & Portugal Insurance 19.1% 19.5% 71.8% 68.8% 90.9% 88.3% MAPFRE FAMILIAR 18.7% 20.0% 75.0% 70.8% 93.7% 90.8% MAPFRE EMPRESAS 20.6% 16.1% 51.3% 53.8% 71.9% 69.9% MAPFRE PORTUGAL 26.5% --- 78.2% --- 104.7% --- MAPFRE VIDA (5) 1.0% 1.1% International Insurance 32.1% 34.8% 67.2% 66.9% 99.3% 101.7% MAPFRE AMÉRICA 34.3% 37.7% 61.6% 64.3% 95.9% 102.0% MAPFRE INTERNACIONAL 28.2% 27.3% 78.5% 73.5% 106.7% 100.8% Global Businesses 27.8% 27.2% 65.1% 67.0% 92.9% 94.2% MAPFRE GLOBAL RISKS 32.1% 26.5% 64.7% 65.7% 96.8% 92.2% MAPFRE RE 27.2% 27.2% 64.2% 67.1% 91.4% 94.3% MAPFRE ASISTENCIA 27.6% 27.5% 67.8% 67.5% 95.4% 95.0% (1) (Operating expenses, net of reinsurance + profit sharing and returns other technical income + other technical expenses) / Net premiums earned. Figures for the Non-life business. (2) (Net claims incurred + variation in other technical reserves) / Net premiums earned. Figures for the Non-life business. (3) Combined ratio = Expense ratio + Loss ratio. Figures for the Non-life business. (4) The figures for 3M 2013 reflect the 2013 operational structure. (5) Net operating expenses / average third party funds under management. Annualised figures. 9
RESULTS The net result attributable to the parent company (after minority interests) amounted to 264.3 million, a 2.6% decrease. The following table shows the sources and breakdown of results: 3M 2013 3M 2012 % 13/12 NON-LIFE INSURANCE AND REINSURANCE Gross written and accepted premiums 4,464.7 4,386.4 1.8% Premiums earned, net of ceded and retroceded reinsurance 3,208.4 3,286.9 (2.4%) Net claims incurred and variation in other technical provisions -2,179.7-2,219.5 (1.8%) Operating expenses, net of reinsurance -864.8-908.7 (4.8%) Other technical income and expenses -6.8-16.3 (58.3%) Technical Result 157.1 142.4 10.3% Net fin'l. income and other non-technical income and expenses 184.7 205.8 (10.3%) Result of Non-life business 341.8 348.2 (1.8%) LIFE ASSURANCE AND REINSURANCE Gross written and accepted premiums 1,439.1 1,507.6 (4.5%) Premiums earned, net of ceded and retroceded reinsurance 1,237.1 1,289.5 (4.1%) Net claims incurred and variation in other technical reserves -1,138.0-1,164.2 (2.3%) Operating expenses, net of reinsurance -263.7-266.0 (0.9%) Other technical income and expenses 2.2 1.7 29.4% Technical Result -162.4-139.0 16.8% Net fin'l. income and other non-technical income and expenses 267.9 284.8 (5.9%) Unrealised gains and losses in Unit-Linked products 27.3 18.8 45.2% Result of Life business 132.8 164.6 (19.3%) OTHER BUSINESS ACTIVITIES Operating revenues 142.2 109.9 29.4% Operating expenses -134.5-108.0 24.5% Other revenues and expenses -21.0-14.8 41.9% Results from other business activities -13.3-12.9 3.1% Result on restatement of financial accounts -2.6-1.7 52.9% Result before tax and minority interests 458.7 498.2 (7.9%) Taxes -112.6-144.8 (22.2%) Result after tax 346.1 353.4 (2.1%) Result after tax from discontinued operations 0.0 0.0 --- Result for the year 346.1 353.4 (2.1%) Result attributable to minority shareholders -81.8-82.0 (0.2%) Result attributable to the controlling Company 264.3 271.4 (2.6%) The result attributable to the parent company includes in both years a series of extraordinary items. Excluding these, it would have decreased 3.4%. 10
The contribution of the main Units and Companies to the consolidated results is shown in the following table: Contribution Contribution to consolidated to consolidated Net Minority result result Result interests 3M 2013 (1) 3M 2012 Spain & Portugal Insurance 124.9 124.9 136.5 MAPFRE VIDA 39.5 39.5 40.6 MAPFRE FAMILIAR 52.3 52.3 60.5 MAPFRE EMPRESAS 32.6 32.6 35.4 MAPFRE PORTUGAL 0.5 0.5 --- Internacional Insurance 88.8 88.3 67.7 MAPFRE AMÉRICA 65.5 (0.5) 65.0 45.6 MAPFRE INTERNACIONAL 23.3 23.3 22.1 Global Businesses 58.6 55.6 43.6 MAPFRE GLOBAL RISKS 16.7 16.7 5.2 MAPFRE RE 35.5 (3.0) 32.5 32.9 MAPFRE ASISTENCIA 6.4 6.4 5.5 Other activities 0.2 0.2-0.1 Other companies and consolidation adjustments -4.7 23.7 MAPFRE S.A. 264.3 271.4 (1) The figures for 3M 2013 reflect the 2013 operational structure. 11
BALANCE SHEET The following table shows the consolidated balance sheet: 31.3.13 31.12.12 31.3.12 ASSETS Goodwill 2,185.6 2,146.2 2,271.1 Other intangible assets 2,330.8 2,264.2 2,340.0 Other fixed assets 320.3 306.7 383.1 Cash & equivalents 780.1 1,018.0 702.0 Investments & real estate 39,984.4 38,745.7 37,754.2 Participation of reinsurance in technical reserves 3,362.0 3,275.8 3,126.8 Insurance & reinsurance receivables 5,237.1 4,398.3 4,901.6 Deferred tax assets 1,240.4 1,236.3 1,189.7 Other assets 3,614.3 3,592.0 3,510.9 TOTAL ASSETS 59,055.0 56,983.2 56,179.4 LIABILITIES Shareholders' Equity 8,000.0 7,810.5 7,105.5 Minority interests 2,491.4 2,325.8 2,722.3 Financial & subordinated debt 1,891.5 1,908.1 1,849.5 Technical reserves 39,259.1 37,976.0 37,450.3 - Life assurance reserves (1) 22,651.5 21,950.9 21,128.2 - Other technical reserves 16,607.6 16,025.1 16,322.1 Reserves for risks and expenses 1,072.8 1,054.0 1,103.7 Insurance & reinsurance payables 2,038.2 1,654.9 1,595.7 Deferred tax liabilities 1,793.7 1,773.1 1,664.4 Other liabilities 2,508.3 2,480.8 2,688.0 TOTAL LIABILITIES 59,055.0 56,983.2 56,179.4 1) Includes unit-linked reserves Total assets under management, including mutual and pension funds, amounted to 68,010.3 million ( 63,942.0 million at the end of the first quarter of the previous year), a 6.4% increase. SHAREHOLDERS EQUITY AND RETURNS The net consolidated equity stood at 10,491.4 million, compared to 9,827.8 million in the first quarter of 2012. Of said amount, 2,491.4 million corresponded to minority interests in subsidiaries. Consolidated shareholders 12
equity per share amounted to 2.60 at the end of the first quarter of 2013 ( 2.31 as at 31.3.2012). The variation in net equity during the year is shown in the following table: 31.3.13 31.3.12 BALANCE AS AT PRIOR YEAR END 10,136.3 9,726.6 Additions and deductions accounted for directly in equity Investments available for sale 273.9 321.5 Translation adjustments 197.5 (117.8) Shadow accounting (196.6) (155.3) Other income and expenses recognised in equity 0.2 --- TOTAL 275.0 48.4 Result for the period 346.2 353.4 Distribution of previous year's result (221.1) (246.4) Interim dividend for the year --- --- Other items (45.0) (54.2) BALANCE AS AT PERIOD END 10,491.4 9,827.8 The evolution of net equity reflects: the results for the quarter; the recovery in the market value of investments, partly offset by the application of shadow accounting; the appreciation of the US Dollar and the Brazilian Real; the dividend approved by the Annual General Meeting, which will be paid in June, and the dividends paid by subsidiaries with minority interests. 13
HUMAN RESOURCES The number of employees at the end of the first quarter of the year and its breakdown by line of business is shown in the following table: 3M 2013 3M 2012 %13/12 Insurance companies 29,024 28,704 1.1% Other businesses 6,321 5,578 13.3% TOTAL 35,345 34,282 3.1% At the end of the first quarter of 2013 there were 10,564 employees in Spain and 24,781 abroad (10,737 and 23,545, respectively, as at 31.3.2012). 14