Ignacio Garralda has been at the helm of the Spanish insurer Mutua Madrileña for five years. During that period, Mutua has acquired health insurer Adeslas and entered a bancassurance joint venture (selling insurance through a bank network) with savings bank La Caixa, regained and later increased its market share in the auto insurance business -- where this year it is aiming to sell over two million policies for the first time -- and is planning investments overseas worth 500 million euros.
Its strategy is to move toward a company that is more diversified both in its lines of business as well as geographically. It has also decided to slightly lower its prices this year and assume the impact of the rise in inflation and the hike in the valued-added tax rate. Mutua Madrileña is aiming to add 1,000 employees to its workforce this year.
Question. Internet or direct sales? Where do you think the real battle in the insurance sector is taking place?
Answer. We compete in all sales channels. At the Mutua, we are experienced in direct sales, although through La Caixa we are also working in bancassurance. The internet has acquired increasingly more importance. Some 48 percent of new policies are initiated through this channel, although half of these are closed through other channels.
Q. Do you think the price war in auto insurance will continue?
A. I think the drop in auto premiums has touched bottom. Margins are stretched to the limit, and if they continue to fall, this could affect the sustainability of the sector. It's in everybody's interest to put a halt to these reckless cuts in prices, which could affect the service provided and solvency levels.
Europe will not allow us to continue with this system of universal and free public healthcare"
Q. Mutua controls the health insurer Adeslas. How do you see the future for the private health sector in this country given the cutbacks in the public system?
A. It will be difficult for Europe to allow us to continue with this system of universal and completely free public healthcare. Sooner or later limitations will be imposed. What's important is that the greater role the private sector will play in the health sector does not come about by suppressing the rights of the public, but rather through tax incentives for people to take out private insurance.
Q. It's been a year since you finalized the tie-up with La Caixa. How are things between a company as rooted in Madrid as Mutua Madrileña and a savings bank at the heart of Catalonia?
A. It's a magnificent relationship. All of the political problems there have been since the end of the summer concerning Catalonia have not made themselves felt; not in our tie-up nor the bancassurance channel with have through La Caixa's branch network. The business community is on the margin of this, although I hope this political problem is resolved within the parameters of the law.
Q. You have just sold the 0.8-percent stake you had in Repsol and no longer have an interest in any listed companies. Is there no turning back on this policy?
A. Since I assumed the chairmanship, I understood that the purchase of significant stakes in the stock market didn't make sense for our company. It would be very difficult now for us to take such a stake. We will continue to invest but in the insurance business.
It seems reasonable for us to go abroad and diversify given Spain's growth prospects"
Q. Mutua has an enormous portfolio of office buildings for rent. Do you want to sell them?
A. We have the best buildings in the Castellana
[the main street that runs through the Madrid business district], and the crisis has affected us less than other real estate investors. In fact, we have very high occupancy and rental rates. That said, we have a portfolio worth 1.4 billion euros and that seems to be a high concentration of assets. It would seem reasonable, therefore, to reduce it or to diversify.
Q. You have taken a stake in the asset management fund Sareb, the so-called bad bank. Is this out of obligation or because you see it as profitable?
A. We have invested 30 million euros in Sareb. This is a long-term investment that fits in with the insurance sector, and we are a patient company. We also believe that its establishment is a critical part of the financial system and in lowering Spain's risk premium. These reasons justify the investment.
Q. Mutua is growing but is it also creating jobs?
A. Despite the crisis, we are creating employment. We have increased our workforce over the past three years at a rate of between 2 and 3 percent annually. In addition, this year the group will create 1,000 new jobs, in large part due to the opening of 70 new dental clinics by Adeslas at an investment of 30 million euros.
Q. Have you got your eye on any acquisitions in Spain?
A. We're looking out for investment both in Spain and outside the country. After acquiring 59 percent of Adeslas and the bancassurance deal with La Caixa, which we sealed in 2011 for 1.075 billion euros, we're looking for new opportunities to grow and guarantee sustainable development through diversification. We have the interest and the funds. We will keep a sharp eye out for opportunities such as the possible sale of the state's stake in CESCE (export credit insurer).
Q. You have flagged your intention of investing up to 500 million euros in Latin America. Why overseas?
A. We have shown our commitment to Spain. We have made big investments and we want to carry on doing so. But it seems reasonable to go abroad in order to diversify our revenues, particularly if you bear in mind that in the best case scenario Spain will have a growth rate of 2 percent in the future. The fact there are international markets with annual growth rates of between 8 to 9 percent is an invitation to go there. Latin America is our natural area of expansion.
Q. You are looking at going into Mexico, Colombia and Peru. What are the strong and weak points of these three countries?
A. Peru and Colombia have in their favor very strong GDP growth and a good critical mass of clients. Colombia, for example, has a population similar to that of Spain. Mexico has the advantage of a bigger population but is also more institutionally complex. Any of these three countries could be of interest to us in the two branches of the business where we are strong: auto and health insurance.
Q. Are you worried about the political and economic scandals in Spain?
A. Nobody likes this corruption situation that has cropped up of late. People are having a hard time; and when you're having a bad time you ask for more from those who govern you and from companies. The government has a magnificent opportunity to show that it is taking this grave problem seriously. It has a silver bullet in the shape of the Transparency Law, which is going through parliament. If this law is done well, it will lift the spirits of the public.
Q. How do you see Mutua in five years' time?
A. We will be an even more diversified company, both in terms of products and geographically. We will also have bigger revenues as I am hoping we can grow organically at a rate above the sector average in order to gain market share.