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"We're going to end up with 10 major insurers, with the other ones seeking out niches"

Milton Bellizia

CFO/Marítima Seguros

Published  Friday, October 16, 2009

Brazil's insurance scene has been all atwitter about one word: partnerships.

It's been an obsession, as strategic M&A spillovers from the country's banking consolidation have made life more interesting for insurers, but it's been driven by additional factors, including capital requirements being phased in by regulator Susep.

The names - Itaú Unibanco and Porto Seguro, federally controlled Banco do Brasil (BB) and Mapfre, Mongeral and Aegon - have flown fast, while some - SulAmérica and Bradesco, to name two - have yet to pull off deals, but the question of where the market is heading still looms.

BNamericas sat down with Milton Bellizia, CFO of Marítima Seguros, which announced its 336mn-real (US$194mn) partnership deal with Japanese insurance company Sompo in May, to get his take on the future of the market and what role Marítima will play in it.

BNamericas: As the months go on, what are the changes we should expect at the company following your deal with Sompo?

Bellizia: The changes the Brazilian market is seeing are quite large, so everyone is looking at the partnership that Itaú Unibanco is doing with Porto Seguro, Zurich's purchase of Minas Brasil, and BB's restructuring of its insurance businesses and how this will affect the broker channel.

So, our first objective is to begin to strengthen our risk management and our internal controls to achieve the growth we want. Marítima's plan is to grow at the rate of the market, always keeping up profitability.

As we go through with this deal, we will focus on reducing costs, gaining consumers and brokers with high-quality service, increasing our investment in IT and continuing to make gains outside of São Paulo.

BNamericas: How does this compare to your previously announced goal of 20% annual premium growth?

Bellizia: We think this lines up well with the market's true expectation of overall growth, which will be very large and will be above what [regulator] Susep has listed in its market studies. We see a doubling of the market in five years, so this comes in at about 20% growth per year.

In the past, we've generally taken a different strategy than Porto Seguro, for example, which really aims at the final consumer with their products, while we've tended to work more with brokers and their needs. We need to work more with final consumers in order to grow premiums, and an important aspect of that will be segmenting our clients, such as with female customers, which is something that SulAmérica has done very successfully.

Another thing to consider is that brokers have looked at the idea of selling for bank-owned insurance companies with distrust for a number of reasons. They will continue to be an important distribution channel in Brazil for years to come, because it's part of Brazilian culture to go to a broker when examining one's insurance options and people put a lot of stock in what brokers say.

BNamericas: What else does the deal with Sompo add to your business model?

Bellizia: The largest international brokers are now asking us about our product lines in order to start working with us, and this is something they hadn't done before. They feel more secure now that we have a global name behind us.

BNamericas: How do you take on a market increasingly filled with tough insurance companies that have the backing of a large banking group, such as Itaú Unibanco, Porto Seguro or even SulAmérica, if it ends up pulling off a deal with a bank?

Bellizia: Our relationship with brokers is strong and this makes us a tough company to just turn away outright. We also work to compete on quality [rather than price], and our health insurance is a good example of that. We have had several big health service providers as clients, and one recently switched to SulAmérica, but after eight months, the employees demanded that the company switch back to Marítima because of the service.

BNamericas: Can you be more specific as to how the market changes as a result of these deals?

Bellizia: As part of the current consolidation, we're going to end up with 10 major insurers, with the other ones seeking out niche places in the market, or even affinity models. The 10 major insurers will go after four major product lines - auto, property, health and the life and pension segment. [Midsize bank] Paraná Banco's insurance unit, Malucelli, provides a good example of the other niche model, as it focuses on surety bonds.

BNamericas: Let me get into the auto insurance market, which is obviously your biggest product. We've seen the data for several quarters of rising loss ratios across the industry, and Marítima's been no exception to this. How should we be reading this trend?

Bellizia: Auto insurance clients in Brazil have a habit of "selling their cars to their insurers" - so to speak, by having a friend lose your car for you, for example, or parking in an area where you expect it to get stolen. Fraud is a serious problem in the Brazilian market and it makes up as much as up to 30% of the loss ratio, according to some estimates.

The other important factor was the price war brought on by Bradesco and Porto Seguro, which used its [lower-priced, lower-end] Azul line to make this happen and has taken very high loss ratios recently as a result.

BNamericas: I also wanted to follow up on your goal of expanding regionally. Can you put some numbers on what this expansion outside of São Paulo means for the company?

Bellizia: We're now taking in 75% of our premiums from the São Paulo area and 25% from other states, principally in the south and southeast. We want to grow in central Brazil, in cities like Goiânia, and also in Rio Grande do Sul, Rio de Janeiro and Minas Gerais. To put this in context, we were taking 92% of our business in São Paulo in 2003.

ABOUT THE COMPANY:

Marítima, which focuses on auto insurance, business coverage and group life, among other segments, had 465mn reais in gross written premiums in the first eight months of 2009, down 7.3% from the same period in 2008. These figures exclude health insurance, which is regulated by ANS.

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