Mapfre will foreseeably face the same situation as BBVA due to its business in Turkey and will have to apply accounting for hyperinflation after the IPC of the Ottoman market has run wild by more than 70% in the year and the lira suffered a strong depreciation.
Its president, Antonio Huertas, admitted yesterday that they are pending the decisions that the supervisors (CNMV and Bank of Spain) adopt in this regard, but defended that he does not compromise his bet.
“We are not going to leave Turkey,” he assured during a conference organized by Apie at the UIMP in collaboration with BBVA, where he recalled that the group invested 12 years ago in Turkey, convinced that the economic and regional potential is “extremely important, and “it continues to be a great country.” “It will have opportunities for economic improvement when the turbulence passes,” he added.
The adoption of hyperinflationary accounting, which Mapfre has previously applied in Argentina and Venezuela, harms the line of results but reinforces solvency due to the higher value of the euro against the lira. In any case, Turkey’s position in the group’s accounts is limited.
Where it is withdrawing is from Algeria, due to its decision to close the assistance subsidiaries where it does not have a direct insurance business. And when questioned about the risks in the country, he attacked the “regrettable” problem caused. “Companies and the economic world have been put between a rock and a hard place,” he criticized, hoping that “the diplomatic world, discreetly, can placate these differences.”
In economic terms, he called for “everyone’s effort” to negotiate a salary pact that would allow the challenge posed by unstoppable inflation to be adequately managed, since it reduces the purchasing power of workers, but the company should not be penalized with everything.
His wake-up call was for employers and unions, since he disassociated the Government from these conversations. “Unilateral actions by the government are not well received, I think by anyone,” he indicated, betting on dialogue.
Inflation puts special pressure precisely on the insurance business, when there is also strong competition in some branches. Here he recognized that, “as long as -the costs- grow, in some way, they will have to be passed on”, since the repairs are becoming more expensive due to the higher cost that the suppliers commit, although he clarified that the processes have become more efficient and that allow to limit the impact.
“Inflation is not desirable because if we all increase deposit after layer it will be very difficult to get out of it,” he warned.
In the specific case of Mapfre, he assured that his bet is for “personalized rates” based on the individual risk of each client.