New Market Research Report: Brazil Insurance Report Q1 2011

Dec. 8, 2010 - PRLog -- Writing in November 2010, we have been able to ensure that the report includes actual data for 2010. The industry regulator, Superintendencia de Seguros Privados (SUSEP), identifies three life lines in its data: VGBL products, retirement savings schemes (of which PGBL products are an important subset) and capitalisation schemes. We have also included health insurance premiums. Details are sourced from Agencia Nacional de Saude Suplementar (ANS), the health insurance regulator. At the time of writing, SUSEP has published data for the first seven months of 2010, which we have incorporated into our estimates for the year as a whole.

For BMI's purposes, the non-life segment includes the consolidated insurance figures published by SUSEP except for VGBL products, which are a sub-set of personal lines that belong to the life segment. We consider that the Brazilian non-life segment also includes the health insurance premiums disclosed by ANS.

We consider the life segment to consist of three elements: VGBL premiums, private pension contributions (which are dominated by premiums for PGBL products) and contributions to capitalizacao savings bonds.

Taking this approach, and assuming that the growth rates in the first seven months of 2010 prevailed for the year as a whole, we estimate total premiums of BRL178,671mn in 2010. This includes non-life premiums of BRL121,462mn and life premiums of BRL57,209mn. In 2015, the corresponding figures are forecast to be BRL301,043mn, BRL205,938mn and BRL95,105mn respectively. In terms of the key drivers that underpin our forecasts, we expect non-life penetration to rise from 3.61% of GDP in 2010 to 3.86% in 2015. We forecast life density to grow from US$159 per capita in 2010 to US$260 by 2015. BMI's proprietary Insurance Business Environment Rating for Brazil is 67.5.

Brazil's insurance sector continues to be the beneficiary of several major trends. Perhaps the most important is the general improvement in investors' perceptions of risks associated with the country. The overall tendency towards lower long-term interest rates and stronger currency helps in several ways. Greater economic stability is conducive to the development of non-life insurance, 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 Brazil's financial infrastructure over the last two years. As reported by international securities services magazine Global Custodian in 2008, changes have included the merger of the Sao Paulo Stock Exchange (Bovespa) with the Brazilian Mercantile Futures & Derivatives Exchange (BM&F), following IPOs of both; the lifting of regulations that previously hindered foreign investment by Brazilians; and a project undertaken by Associacao Nacional dos Bancos de Investimento (ANBID) to adopt the ISO 2022 standard in domestic securities transactions.

A key development in the last two years was the purchase by Itau Holding Financiera of the smaller Uniao de Bancos Brasileiros (Unibanco) to form the largest bank in the southern hemisphere in terms of assets. Even before the Itau/Unibanco merger, Brazil's financial services sector was dominated by organisations that are by global standards easily large enough to achieve substantial economies of scale. This is one of the reasons Brazil is one of the most exciting of any of the countries whose insurance sectors are profiled by 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 venture with Unibanco back to the Brazilian bank. The deal is noteworthy because despite AIG's need to raise cash to repay funds borrowed from the US Treasury, relatively few of its many insurance businesses have actually been sold. AIG's Nan Shan operation in Taiwan is the other large insurer that has been disposed of.

The Itau/Unibanco deal is also noteworthy because it combines the now fully owned insurance operations of Unibanco with those of Itau within a huge financial services empire that has an extensive branch network in Brazil. Time will tell the extent to which Unibanco and Itau are able to achieve substantial rationalisation benefits within their insurance operations and whether these gains flow mainly to shareholders or customers.

Bancassurance is one of several distribution options that are exploited by the major insurers. Bradesco's insurance arm is, by some measures, 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 and SulAmerica, are independent insurers, what they all have in common is that they are essentially composite insurers. Through a variety of subsidiaries, they offer voluntary auto insurance (CASCO, but typically including roadside assistance as well), property insurance, life/savings products and capitalizacao savings bonds. Life/savings products include private pension (previdencia aberta) plans as well as Vida Gerador de Beneficio Libre (VGBL) and Plano Gerador de Beneficio Libre (PGBL) products. The VGBL and PGBL products are flexible premium deferred annuity schemes that differ mainly in the way they are taxed. VGBL contributions are not tax deductable and the benefits are only partially deductable. PGBL contributions are, subject to limits, tax deductable but the benefits are fully taxable. Capitalizacao savings bonds are fixed income securities that, usually, have a maturity of one year. In addition, they enable the holder to participate in lotteries.

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.