Mapfre will use Caixa’s money in a plan of 280 incentivized withdrawals and pay for its last debt buyback

The insurer will sue Oliver Wyman for his downward appraisal of Bankia Mapfre Vida, which oscillates at 139 million euros.

Mapfre headquarters in Majadahonda (Madrid).

Mapfre you already know what you will use the almost 571 million euros (and other possible 52 depending on an arbitration) that you will receive from CaixaBank due to the breaking of its bancassurance agreement with Bankia. At first, it will encourage voluntary withdrawal of 280 people in the next two years. Too you will pay for your last debt buyback with this money.

In a privileged information sent to the National Securities Market Commission (CNMV) on the occasion of the agreement between the bank and the insurer, Mapfre advances that it will allocate 100 million euros for a new voluntary leave program provisioned in December 2021, in addition to the 75 million registered in June 2021, to be executed between 2022 and 2023.

As this newspaper has been able to confirm with Mapfre sources, the company’s estimates include encouraging the departure of 280 employees over the next two years. Along with the 275 people who have left in 2021, in the set of three years the insurer could see its workforce cut by 555 workers.

Cost savings estimated by Mapfre for the period 2021-2025 after the operation.

Cost savings estimated by Mapfre for the period 2021-2025 after the operation.

Departures will occur for different reasons. The main one, the readjustments that Mapfre will have to carry out in the part of Bankia Mapfre Vida’s workforce that touches it. Although some of these professionals will be integrated into the parent company or one of its subsidiaries, the departure of a good part of them will be encouraged. “In the best possible conditions.” Other causes are the digitization process that the multinational is implementing and the “natural” march of employees with a “commercial profile who have been with the insurance company for many years,” explain the sources consulted.

On the other hand, it will assign to this new money the cost of its last repurchase of obligations carried out in December, amortizing around 143 million euros nominal outstanding senior debt maturing in May 2026.

Cost savings of 161 million

In its presentation, and in line with the above, Mapfre states that a part of the funds received will be used to increase operational efficiency and reduce financial expenses, “reaching some annual savings of more than 46 million euros ”. For the period 2021-2025, the total cost savings would be 161 million.

The company chaired by Antonio Huertas maintains its commitment to return “as soon as possible” to the pre-Covid dividend; affirms that it will continue to invest in the business, “analyzing both organic and inorganic opportunities, with a focus on markets and strategic channels”, and will put part of the resources obtained to transform the business model in Italy, currently in the analysis and quantification phase.

Demanda a Oliver Wyman

The thorniest issue has to do with valuation of Bankia Vida, of which CaixaBank acquires the 51% it did not have. The independent consultant hired for this purpose from among the list of possible experts in common agreement for a hypothetical resolution, Oliver Wyman,predictably he will be sued by Mapfre in his work as an expert in the operation, as advanced sources from the insurer.

In April of this year, Willis Towers Watson, who was exclusively hired by Mapfre to provide a support value, estimated at almost 715 million euros intrinsic value –market consistent embedded value– of the entire life society, that is, the impact that the exit of Bankia Vida would have on Mapfre. However, Oliver Wyman’s final estimate has been 576 million, throwing a downward difference of 139 million.

This oscillation is due to Oliver Wyman has not valued the future benefit of the life portfolio, In other words, this value does not include future benefits for new policies derived from the exclusive distribution agreement. Consequently, “Mapfre will exercise the pertinent legal actions in defense of its legitimate rights”, as stated in the document, “for breach of the instructions issued by the parties for its determination.”

All in all, the operation supposes for Mapfre a net profit of 171 million euros, which could be increased by 52 million euros gross in 2022 from the arbitration procedure that runs in parallel by other fringes of the resolution of the bancassurance agreement.