Fator: Health, pensions, auto insurance to face pressure in 2009

Bnamericas Published: Thursday, January 22, 2009
While insurance growth has outpaced economic growth in Brazil for several years, some lines could see growth tighten or reverse as the economy slows with health, pensions, and auto insurance facing the greatest pressure, Brazilian brokerage Fator Corretora analysts told BNamericas. Auto insurers will be especially pressured by slower new car sales, lower used car prices and greater competition in the segment, the analysts said. Additionally, these companies' investment portfolios will be weighing on their results. Fator sees niche services such as parking discounts and loaner cars playing a major role in the increasing competition in the segment. ACQUISITIONS, CONSOLIDATION The data on 2008 premiums through November show Brazil's insurance industry continues to be dominated by the big bancassurance players. Insurance companies connected to Bradesco (NYSE: BBD), Itaú (NYSE: ITU), Unibanco (NYSE: UBB) and federally controlled Banco do Brasil ( BB) had 46.6% of premiums over this time, according to the latest figures from insurance regulator Susep. Non-bank insurers have used distribution partnerships with the remaining unaffiliated banks and retailers to make inroads, but bank consolidation is on the rise as several recent deals, including most the yet-to-be approved Itaú Unibanco merger, have shown. Although these banks and consequently their insurers are getting bigger, Fator does not expect any of them to have real pricing power in the near future given the competition among the big bancassurance players and even the smaller ones. One acquisition to be on the lookout for will be whether BB buys out insurer SulAmérica's stakes in auto insurer Brasilveículos and health insurer Brasilsaúde, the Fator analysts said. SulAmérica, in which Dutch financial and insurance group ING (NYSE: ING) is an owner, runs the business side of both companies, holding a 30% stake of the capital in the first and 49.8% in the second.

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