BB looking to increase insurance sales 50% in 2009

Alexandre Corrêa Abreu

Head of insurance/Banco do Brasil (BB)

Published  Friday, August 22, 2008

Banco do Brasil (BB) is Brazil's biggest bank and tops the list for Latin America in terms of assets at 403bn reais (US$244bn) at the end of this year's first half.

But the federal bank's insurance, pension and savings bond operation doesn't hold the market share its management team thinks it should.

While this side of BB contributed 760mn reais in total equity income plus fees and commissions to the bank's overall bottom line in H1, an increase of 21.2% from the same period last year, the group is hungry to expand and take what it feels is its natural place in Brazil: the top spot.

The group has been looking at various strategies to move up the rankings.

Buyouts of partners may be on the way, which is what happened in the case of Aliança do Brasil. BB will pay 670mn reais to take the 30% share local insurer Aliança da Bahia now holds in that unit.

Opening new distribution routes seems to be the other major target, such as sales to brokers, a big change from the branch-driven approach BB had been sticking to.

BNamericas spoke to BB head of insurance Alexandre Corrêa Abreu to find out how the company plans to build its market share.

BNamericas: BB has reached a deal with Aliança da Bahia to take its stake in Aliança do Brasil. Can you give a little background on what BB wants to get out of this purchase?

Abreu: BB is studying how to increase our profile in the insurance business in Brazil. Aliança do Brasil is a very large company that operates in life and other kinds of insurance. Our international strategy led us to some changes we couldn't make with the business the way it was because we have a slightly different way of thinking about our partners. So the best solution, in agreement with our partner [Aliança da Bahia], was to purchase the partner's stake and now we're building a new business model.

BNamericas: How long will the purchase take?

Abreu: We're studying [the details of] the purchase, but we don't know exactly how long it will take.

BNamericas: Once you do take control, what are your specific goals for 2009?

Abreu: First of all, we want to enter into some kinds of insurance that we couldn't sell [before] like mortgage insurance, for example. We have just launched in this market, which we couldn't do before. Now we're going to start this business. We are also going to sell extended warranty insurance outside bank branches in partnership with retail chains.

PrestAmista [credit life insurance] is another kind of insurance we'll be starting through our business with Aliança. This is a very important kind of insurance in Brazil [where] we didn't have a presence and now we'll be able to after taking control of the company. And we expect to see [overall] sales to increase something like 50% in 2009 compared to 2008.

BNamericas: How does the change to broker-based sales change the model for BB?

Abreu: This is a very important change in our sales strategy, how to sell insurance. Before, we only sold insurance in our banks. Our business was defined by [those] clients that had checking accounts [with the bank]. And this has been a very good strategy because it gave us a chance to gain a good share in the market.

But we had a problem: we needed to sell insurance to other people that didn't have a checking account [with us]. To reach this kind of customer, we need to have brokers that specialize in these kinds of sale in the market. We're going to start with car insurance and after that go to general insurance.

BNamericas: You'll be rolling out broker sales in São Paulo, Curitiba, Goiânia and Brasília first. Tell us a little more about this.

Abreu: This new channel of insurance is totally different from [our old model] so we need to learn how. We decided to start in four [Brazilian state] capitals that represent a good part of the market in order to learn how to build up this kind of channel. After we have a good amount of experience, we want to roll this out all over the country.

BNamericas: BB's insurance, pension and saving bond group's H1 earnings just came out and net income looked to be up significantly. What were your impressions of this?

Abreu: We had good results, but we're always looking to improve. When you compare our position in the rankings of market share, we're number three in pensions, number four in life insurance, and number six in car insurance. When you compare this position to other firms, we are a bank with a very large number of accountholders, so we should [be able to get more customers]. This is not a comfortable place for us and we have to change strategy. I think the main problem is we need to gain position in the rankings to improve the bank's results.

BNamericas: How are you going to do this?

Abreu: Launching new products and creating new sales channels like the brokers will help. These are just two examples of how we can improve results.

ABOUT THE COMPANY:Through its investment arm BB Banco de Investimentos, BB holds interest in companies in the lines of insurance, private pensions and savings bonds.

The companies include auto insurer Brasilveículos, life insurer Aliança do Brasil, health insurer Brasilsaúde, private pension plan provider Brasilprev and savings bond company Brasilcap.

BB controls 70% of Brasilveículos and local insurer SulAmérica holds the rest. BB also controls 70% of Aliança do Brasil with Aliança da Bahia holding 30% pending the purchase of this stake. BB owns 49.92% of Brasilsaúde with the majority stake held by SulAmérica, in which Dutch group ING holds 49%.

The bank holds 49.99% of Brasilprev, which includes Principal Financial Group among its shareholders, and 49.99% of market leader Brasilcap with Icatu Hartford, SulAmérica and Aliança da Bahia as partners.