ANNUAL REPORT CONSOLIDATED ANNUAL ACCOUNTS AND MANAGEMENT REPORT 2019 CONSOLIDATED ANNUAL ACCOUNTS AND CONSOLIDATED MANAGEMENT REPORT 2019 2 3 128 1 2 CONSOLIDATED 1.5 Significant events after CONSOLIDATED ANNUAL Contents MANAGEMENT REPORT the fiscal year-end 46 ACCOUNTS 2019 FISCAL YEAR 2019 1.6 Information on expected performance 47 2.1 Consolidated annual 1.1 Organization Overview 4 1.7 R&D+i acativities 49 accounts 129 1.2 Business performance 1.8 Acquisition and disposal 2.2 Appendices 245 and results 10 of treasury stock 51 1.3 Liquidity and capital 1.9 Other relevant resources 36 information 52 1.4 Main risks and 1.10 Corporate governance uncertainties 45 report 63 265 3 AUDIT REPORT OF THE CONSOLIDATED ANNUAL ACCOUNTS 2019 1. Consolidated management report CONSOLIDATED ANNUAL ACCOUNTS AND CONSOLIDATED 3 MANAGEMENT REPORT 2019 1 Consolidated management report 2019 1. Consolidated management report CONSOLIDATED ANNUAL ACCOUNTS AND CONSOLIDATED MANAGEMENT REPORT 2019 4 The content of this Consolidated Management Report (hereinafter “the Report”) was prepared in accordance with the 1.1. recommendations set out in the “Guide for the preparation of management reports by listed companies” published by the Spanish National Securities and Exchange Commission (the Organization CNMV). Overview The Alternative Performance Measures (APMs) used in the report, which refer to financial measures not defined or specified in the applicable financial reporting framework, along with their BUSINESS MODEL definition and method of calculation, can be found on our website at the following address: https://www.mapfre.com/ The vision of MAPFRE is to be THE MOST TRUSTED GLOBAL corporate/institutional-investors/financial-information/ INSURANCE COMPANY, a concept that refers not only to its Profitable Geographic Some of the figures included in this Report have been rounded. geographic presence but also to the wide range of insurance and growth diversification reinsurance products and services that it promotes worldwide. Therefore, discrepancies may occur in the tables between the It aims to become a leader in the markets in which it operates, totals and the amounts listed due to this rounding. through its proprietary and differentiated business model, based on transformation and innovation, designed to achieve profitable growth with a clear and decisive focus on the client, both private and corporate, a multi-channel approach and a firm vocation for The most trusted service. Client global insurance Multiline company The influx of new insurance business models - insurtech - based orientation and vocation on digital tools is causing a veritable revolution in the sector, and for service MAPFRE is ready to act swiftly in order to offer all its stakeholders value experiences. The business model that MAPFRE has adopted Multichannel is not focused solely on financial results, but also on the social sphere. MAPFRE aspires to lead the markets in which it operates, using a proprietary management model founded on innovation 1. Consolidated management report CONSOLIDATED ANNUAL ACCOUNTS AND CONSOLIDATED MANAGEMENT REPORT 2019 5 Accordingly, MAPFRE: This commitment to continuous improvement is underpinned by • Is firmly committed to growth, both in terms of business volume the following values, which assist in executing the mission and and geographic development, generating adequate and sufficient achieving the company’s vision: profitability from its activities. • Manages its business in an efficient manner and constantly improves productivity, reducing structural costs on a continuing basis in order to enhance its competitiveness. Financial strength with sustainable results and full capacity to meet all • SOLVENCY • Professionally manages the risks it assumes, ensuring sustainable obligations to stakeholders. growth and results. • Steers its development by diversifying its portfolio of insurance, Ethical conduct as a core element in how everyone (senior executives, employees, reinsurance and service businesses as a means of boosting • INTEGRITY agents and collaborators) behaves, with a socially responsible focus on all long- growth and minimizing risks. term activities and commitments. • Deploys a global management model with ample capacity for The constant quest for excellence in the pursuit of its activities and a continuous local implementation, ensuring an appropriate balance between • V OCATION FOR SERVICE corporate involvement and business development in each focus on building strong relationships with clients country. • Makes its resources available to the entire organization, thus • INNOVATION FOR Differentiation as a key aspect of continuous growth and improvement, using harnessing the synergies derived from sharing talent, processes LEADERSHIP technology to service the different businesses and their objectives. and tools. Full engagement of employees, senior executives, agents and other collaborators • Promotes specialized management as a means of continuously • COMMITTED TEAM with the MAPFRE project and continuous development of the team’s skills and optimizing results and enhancing service quality. abilities. MAPFRE’s stated mission is to be a multinational team that strives to constantly improve services and develop the best possible relationships with clients, distributors, providers, shareholders and society in general. 1. Consolidated management report CONSOLIDATED ANNUAL ACCOUNTS AND CONSOLIDATED MANAGEMENT REPORT 2019 6 ORGANIZATIONAL STRUCTURE AND GOOD GOVERNANCE A) ORGANIZATIONAL STRUCTURE MAPFRE is a multinational company chiefly devoted to The activities of the different Business Units are supplemented The Global Business Committee is also responsible for analyzing insurance and reinsurance activities, and operates in 44 countries by those of the Corporate Areas (Internal Audit, Strategy and the development of MAPFRE’s insurance business and services worldwide. M&A, Finance and Resources, Investments, Business and Clients, throughout the world, its compliance with approved plans, and Operations, People and Organization, External Relations and for proposing measures to correct or improve them. The Group’s parent company is MAPFRE S.A., whose shares are Communication, General Counsel and Legal Affairs, Business listed on the Madrid and Barcelona Stock Exchanges. MAPFRE Support, and IT and Processes), which have jurisdiction over The management, coordination and supervision of the activities S.A. is also a component of the IBEX 35, IBEX Top Dividend, Stoxx all MAPFRE companies worldwide in terms of the definition, of the different Units and Areas are carried out, according to Europe 600 Insurance, Euro Stoxx Insurance, MSCI Spain, FTSE development, implementation and monitoring of global, regional their respective remit, by the local, regional and business unit All-World, FTSE Developed Europe, FTSE4Good, FTSE4Good IBEX, and local corporate policies. management committees as well as the Executive Committee. Dow Jones Sustainability World and Ethibel Sustainability Index- Excellence Europe indices. The fact that the different MAPFRE companies belong to a Each of the subsidiary companies has its own governing bodies, business group implies, without prejudice to their legal autonomy, in which the structure and complexity depend on the importance MAPFRE S.A. is a subsidiary of CARTERA MAPFRE, S.L. a single- that they form an integral part of an organic structure that of their activities and any legal provisions that may be applicable. member company that is wholly controlled by Fundación regulates their interrelations, the coordination of their activities, They usually feature a Board of Directors and, depending on the MAPFRE. and the oversight of the controlled companies by the controlling importance of their activities, a Management Committee as well. companies and, in the final instance, by the parent company. In the case of shell or very small companies, these bodies are The Group pursues its business activities through an replaced by two administrators. organizational structure made up of four Business Units The MAPFRE S.A. Board of Directors is the senior management (Insurance, Assistance, Global Risks and Reinsurance); three and supervisory body for the entire Group. It features a Steering Territorial Areas (IBERIA, LATAM and INTERNATIONAL); and six Committee that acts within all of its powers, except those which Regional Areas (Iberia (Spain and Portugal), Brazil, LATAM North cannot be ceded by law, bylaws or the regulations of the Board of (Mexico and the subregion comprising Central America and the Directors, and three delegate committees (Audit and Compliance, Dominican Republic), LATAM South, North America and EURASIA Appointments and Remuneration, and Risks). (Europe, Middle East, Africa and Asia-Pacific). The Executive Committee is the body that exercises direct The Insurance Business Unit is organized in line with the MAPFRE supervision over management of the Business Units and Regional Areas, which are the geographic units that plan, support coordinates the various Areas and Units in the Group. The and oversee the region. Transformation and Innovation Committee reports to the Executive Committee and has decision-making powers in relation The Reinsurance and Global Risks units are merged within to all transformation and innovation initiatives within MAPFRE. MAPFRE RE. 1. Consolidated management report CONSOLIDATED ANNUAL ACCOUNTS AND CONSOLIDATED MANAGEMENT REPORT 2019 7 The Group’s current organizational chart is as follows: