Wednesday, December 6

The break with Caixabank will boost Mapfre’s dividend

Caixabank Y Mapfre announced on Wednesday the arrival of a partial agreement for the dissolution of the bancassurance pact that the insurer had with Bankia.

Despite the fact that both entities will have to dispute whether an additional 52 million euros are paid, the injection of 571 million euros in Mapfre has been received with open arms by a market that expects the news to boost its dividend.

The Mapfre dividend has been precisely one of the company’s strong elements when it comes to convincing investors over the last year, who saw the company’s ability to sustain it as one of the main reasons to bet on their Actions.

From Barclays, for example, it was predicted before the completion of the operation with Caixabank that, after the increase in the dividend to 6 cents per share in 2021, the company “seemed to be on the right track” to return to a dividend of 14 cents like the one he distributed in 2019.

Mapfre has wanted to emphasize this commitment to return to a prepandemic dividend after the agreement with Caixabank, and the market has shown signs of believing in its promise.

571 million that do not finish satisfying Mapfre

In the notice Referred to the National Securities Market Commission (CNMV), Mapfre affirms that the total compensation of 571 million euros that it will receive from Caixabank is broken down as follows:

On the one hand, 294 million euros corresponding to 100 percent of the market value of its 51 percent stake in Bankia Vida.

On the other, 225 million euros with which the total non-life insurance business is assessed. Another 52 million, meanwhile, correspond to the insurer for the 10 percent penalty stipulated by the termination of the agreement it had with Bankia, due to its merger with Caixabank.

The insurer emphasizes that it disagrees with the market value assigned to Bankia Vida’s business and also explains that its right to receive an additional 10 percent of the values ​​of both the Life and Non-Life businesses will be submitted to arbitration.

The reason for seeking this additional compensation is Mapfre’s interpretation that, according to the agreements signed, the termination of the alliance produced by the Bankia merger implies a change of control that entitles it to receive 120 percent of the share. valuation, instead of the 110 percent that Caixabank maintains, considering the merger as an expansion of the Bankia network.

Apart from this dispute, Mapfre assures that a part of the funds received will be used to increase operational efficiency and reduce financial expenses, anticipating reaching annual savings of more than 46 million euros with which “it maintains the commitment to return as soon as possible. possible to the precovid dividend “.

Analysts approve the operation

From Bankinter the operation is analyzed positively, arguing that “it makes financial sense for Mapfre because it obtains a capital gain (net) of 141 million euros from the sale of Bankia Vida and (consolidates in the accounts a net attributable profit of 30 million euros” .

The combined amount of the operation, 171 million, is equivalent to 3.0 percent of Mapfre’s current market capitalization, explains the Bankinter report, and represents about 22.0 percent of the estimated net attributable profit for 2021.

Mapfre thus achieves, they consider from Bankinter, to reinforce its solvency and “gain financial flexibility to increase the dividend, restructure the business in Spain and reduce the cost of financing”.

The financial institution therefore maintains its recommendation to buy the company’s securities, to which it assigns a target price of 2.10 euros.

Optimism spreads

A similar opinion is shared by Renta 4, which values ​​positively that an agreement has been reached “despite the fact that the valuation has been below what the market was considering.”

In its analysis, the bank notes as positive the use that Mapfre plans to make of the funds and its intention to return to the pre-covid dividend as soon as possible, thus opting for an overweight recommendation on Mapfre shares, at which assigns a target price of 1.93 euros.

Other houses that have received the news of the operation with Caixabank positively are Alantra Equities and Bestinver Securities, which in their update of December 30 have chosen to maintain their purchase recommendations on the company, assigning prices of 2.35 euros and 2.17 euros respectively.

The average target price of the consensus as of December 30 is 2.11 euros at 12 months ahead, above the 1.82 euros with which the securities closed the day of December 29, and that throughout of the last trading day of the year 2021 has fallen 1.18 percent to 1.8 euros.