Brazil Insurance Report Q2 2010


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This report differs from its predecessors in several respects. In our analysis of competitive conditions, we provide a much more comprehensive ranking of insurance companies in the major segments from the point of view of the organisation that is providing the data (almost always the national insurance regulator or the national insurance trade association). In Brazil, for instance, the three largest auto insurance providers in the first eight months of 2009, terms of gross written premiums, were: Porto Seguro Cia de Seguros Gerais, Bradesco Auto/Re Companhia de Seguros, and Sul Am

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Brazil Insurance Report Q2 2010

  1. 1. Find Industry reports, Company profilesReportLinker and Market Statistics >> Get this Report Now by email!Brazil Insurance Report Q2 2010Published on February 2010 Report SummaryThis report differs from its predecessors in several respects. In our analysis of competitive conditions, we provide a much morecomprehensive ranking of insurance companies in the major segments from the point of view of the organisation that is providing thedata (almost always the national insurance regulator or the national insurance trade association). In Brazil, for instance, the threelargest auto insurance providers in the first eight months of 2009, terms of gross written premiums, were: Porto Seguro Cia deSeguros Gerais, Bradesco Auto/Re Companhia de Seguros, and Sul América Cia Nacional de Seguros, with 14.3%, 12.1% and 8.1%market shares respectively. Over time, we hope to derive insights from observing how market shares change. We emphasise though,that a decline in share of gross written premiums is not automatically a bad thing and is often the result of a deliberate corporatedecision to focus on more profitable business lines.Writing in January 2010, we have been able to ensure that the report includes actual data for 2008. The industry regulator, theSuperintendency of Private Insurance Companies (Superintendência de Seguros Privados, SUSEP), identifies three life lines in itsdata: VGBL products, retirement savings schemes (of which PGBL products are an important subset) and capitalisation schemes.BMI data show life premiums rose to BRL40,808mn in 2008 from BRL35,966mn in 2007. Our figures for non-life insurance include theconsolidated insurance figures published by SUSEP, except for premiums for VGBL products, which are a subset of personal linesthat belong to the life segment. The figures include health insurance premiums as disclosed by Agência Nacional de SaúdeSuplementar (ANS). With this approach, we find that non-life premiums rose from BRL67,971mn in 2005 to BRL103,340mn in 2008.We have generally been able to use data published up to January 2010 to adjust our forecasts for the year as a whole. We forecasttotal premiums of for 2009 of BRL167,834mn, which includes non-life premiums of BRL127,062mn and life premiums ofBRL40,772mn.We have extended our forecasts to 2014, when the corresponding figures should be total premiums ofBRL329,354mn, with non-life premiums of BRL239,498mn and life premiums of BRL89,857mn.In terms of the key drivers that underpin our forecasts, we expect for non-life penetration to rise from 4.21% in 2009 to 5.30% in 2014,and for life density to rise from US$102 per capita to US$262. BMIs Insurance Business Environment Rating (IBER) for Brazil is 67.4.This quarter, we include a discussion of developments within regional markets, on the basis of results published by majorcross-border companies in relation to Q209 or Q309 and the latest information provided by regulators and/or trade associations. Thefirst nine months of 2009 were an excellent period for Spains MAPFRE, arguably the leading cross-border insurance group in LatinAmerica. In October 2009, MAPFRE signed a memorandum of understanding with Banco do Brasil to establish a strategic alliance inthe personal, property and motor lines in Brazil.Brazils Insurance Sector In Q210 Brazils insurance sector is the beneficiary of several major trends. Perhaps the most important isthe general improvement in investors perceptions of risks associated with the country. The overall tendency towards lower long-terminterest rates and stronger currency helps in several ways. Greater economic stability is conducive to the development of non-lifeinsurance, and greater availability of long-term local currency assets is helpful for the development of organised savings.As investors, the insurance companies are helped by the substantial if often underappreciated improvements to Brazils financialinfrastructure over the last two years. As reported by international securities services magazine Global Custodian in 2008, changeshave included: the merger of the São Paulo Stock Exchange (Bovespa) with the Brazilian Mercantile Futures & Derivatives Exchange(BM&F) following the IPOs of both; the lifting of regulations that previously hindered foreign investment by Brazilians; and a projectundertaken by the National Association of Investment Banks (Associação Nacional dos Bancos de Investimento, ANBID) to adopt theISO 2022 standard in domestic securities transactions.A key development in early 2009 was the purchase by Itaú Holding Financiera of the smaller União de Bancos Brasileiros (Unibanco)to form the largest bank in the southern hemisphere in terms of assets. Even before the Itaú/Unibanco merger, Brazils financialservices sector was dominated by organisations that are by global standards easily large enough to achieve substantial economiesof scale. This is one of the reasons why Brazil is one of the most exciting of any of the countries whose insurance sectors are profiledBrazil Insurance Report Q2 2010 Page 1/6
  2. 2. Find Industry reports, Company profilesReportLinker and Market Statisticsby BMI.In terms of its timing, the merger roughly coincided with the sale by troubled US insurance group AIG of its stake in a joint venturewith Unibanco back to the Brazilian bank. The deal is noteworthy because despite AIGs need to raise cash to repay funds borrowedfrom the US Treasury, relatively few of its many insurance businesses have actually been sold. AIGs Nan Shan operation in Taiwanis the other large insurer that has been disposed of.The Itaú/Unibanco deal is also noteworthy because it combines the now fully owned insurance operations of Unibanco with those ofItaú within a huge financial services empire that has an extensive branch network across Brazil. Time will tell to what extent Unibancoand Itaú are able to achieve substantial rationalisation benefits within their insurance operations and whether these gains flow mainlyto shareholders or customers.Nevertheless, bancassurance is only one of several distribution options that are exploited by the major insurers. Bradescos insurancearm is, by some accounts, the largest insurer in Latin America. It distributes by way of its own branch network and 30,000 brokers.Although some of the large Brazilian insurers are elements of the leading banking groups and others, such as Porto Seguro andSulAmérica, are independent insurers, what they all have in common is that they are essentially composite insurers. Through avariety of subsidiaries, they offer voluntary auto insurance (CASCO, but typically including roadside assistance as well), propertyinsurance, life/savings products and capitalização savings bonds. Life/savings products include private pension (previdência aberta)plans as well as Vida Gerador de Beneficio Libre (VGBL) and Plano Gerador de Beneficio Libre (PGBL) products. The VGBL andPGBL products are flexible premium deferred annuity schemes that differ mainly in the way they are taxed. VGBL contributions arenot tax deductable and the benefits are only partially deductable. PGBL contributions are, subject to limits, tax deductable but thebenefits are fully taxable. Capitalização savings bonds are fixed income securities that, usually, have a maturity of one year. Inaddition, they enable the holder to participate in lotteries.Unsurprisingly, many of the leading global insurance groups have a presence in Brazil. The links between the large local groups andthe banking networks present a challenge to foreign players but not an insurmountable one. INGs minority holding in SulAméricaarguably gives it the strongest position among the foreign players and the broadest spread in terms of product lines. In a similar way,Frances CNP is a partner with Caixa Econômica Federal in Caixa Seguros. Several other foreign groups have focused on particularniches. AEGONs partnership with Mongeral, for instance, reflects a common philosophy, as well as an orientation towards long-termsavings products. Allianzs latest results point to growth outside the major cities, and non-life lines in particular.Issues To Watch: Resumption of growth in life segment: Figures released by SUSEP in mid-2009 showed a slowing of growth in product lines that wehave included in the life segment. Previously, the life segment was growing at double digit rates. We forecast rapid growth to resumefrom 2012. Itaús strategy following the Unibanco merger: The combination of these two large financial services groups should providesubstantial rationalisation benefits and improve the overall competitive advantage. Nevertheless, Itaú and Unibanco do not havecomplete domination of the segments of the insurance market in which they operate and together they represent an attractivepotential distribution partner for other insurers. Macroeconomics: The superior long-term growth of what is already a large and fairly sophisticated insurance sector depends on acontinuation of the virtuous circle of lower long-term interest rates and a stronger currency. Table of ContentExecutive Summary ......5Table: Overview Of Brazils Insurance Sector . 5Key Insights On Brazils Insurance Sector ... 5SWOT Analysis..9Brazil Insurance Industry SWOT ...... 9Brazil Political SWOT . 10Brazil Economic SWOT .... 11Brazil Business Environment SWOT .... 12Global Outlook.13Brazil Insurance Report Q2 2010 Page 2/6
  3. 3. Find Industry reports, Company profilesReportLinker and Market StatisticsRegional Overview ......15Table: MAPFRE AMÉRICA Gross Written Premiums, 2008-2009 (EURmn) ... 16Projections And Forecasts17Table: Premiums, 2006-2014 ... 17Projections And Drivers Of Growth 17Table: Growth Drivers, 2006-2014. 18Country Update ....19Macroeconomic Outlook ... 19Table: Brazil Economic Activity, 2006-2014 . 20Political Outlook 21Insurance Business Environment Rating ....23Table: Brazils Insurance Business Environment . 23Table: Latin America And Caribbean Insurance Business Environment Ratings 24Regional Context ..25Table: Non-Life Premiums In A Regional Context, 2008 .. 25Table: Life Premiums In A Regional Context, 2008 ... 26Key Players In Brazils Insurance Industry .27Table: Principal Insurance Lines Gross Written Premiums, 8M09 (BRLmn) ... 27Table: Insurance Companies By Gross Written Premiums, 8M09 (BRLmn)... 28Analysis Of Regional Competitive Conditions ...30Local Company Profiles ....34Bradesco 34Brasilveiculos .... 36Itaú Seguros 37Porto Seguro...... 38SulAmérica . 40Regional Company Profiles ....42AEGON Mongeral 42Allianz.... 44Cardif..... 46CNP 48Generali. 50HDI-Gerling ...... 52HSBC Insurance 54ING . 57Liberty Mutual ... 59MAPFRE 61MetLife... 64Prudential Financial.... 66QBE 68RSA . 70The Hartford...... 72The Principal ..... 73Zurich .... 74Country Snapshot: Brazil Demographic Data ....76Section 1: Population... 76Table: Demographic Indicators, 2005-2030 .. 76Table: Rural/Urban Breakdown, 2005-2030 . 77Section 2: Education And Healthcare .. 77Table: Education, 2000-2003 .. 77Brazil Insurance Report Q2 2010 Page 3/6
  4. 4. Find Industry reports, Company profilesReportLinker and Market StatisticsTable: Vital Statistics, 2005-2030... 77Section 3: Labour Market And Spending Power ... 78Table: Employment Indicators, 1999-2004. 78Table: Consumer Expenditure, 2000-2012 (US$) . 78Table: Average Annual Wages, 1996-2002. 79BMI Methodology .80Insurance Business Environment Ratings ... 81Table: Insurance Business Environment Indicators And Rationale ...... 82Table: Weighting Of Indicators ...... 83Brazil Insurance Report Q2 2010 Page 4/6
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