2013-03-13 17:42:20 - Fast Market Research recommends "Brazil Insurance Report Q2 2013" from Business Monitor International, now available
As of early 2013, the major trends that make Brazil one of the most exciting and dynamic insurance markets globally remain intact. Thanks to the steady fall in interest rates, the general improvement of perceived macro-economic risks and commercial initiatives by the insurance companies themselves, premiums are growing rapidly: this is at a time that leading players in both the non-life and the life segments are achieving high levels of profitability. Over the medium-term the only constraint on growth will be insurers' ability to raise capital to support their businesses.
As of late 2013, the latest data from Brazil's leading insurance companies- in relation to the first three quarters of calendar 2012 - confirm our view that the country is home
to one of the world's most dynamic and rapidly growing insurance sectors. Overall premiums are growing at double-digit rates because of: a) the openness of the market to entry by major multinationals, b) the growth in the number of households that can afford to buy insurance (and/or to save for the long-term) and c) the continuing downward trend in inflation, interest rates and risk premiums attached to investment.
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To a greater extent than their counterparts in other large emerging markets, the Brazilian majors are ready to undertake (very) large scale corporate deals. Bank distribution accounts for about 40% of all insurance sales in the country and, as such, is often a key to success: this explains the strategic partnerships between Zurich and Santander and between MAPFRE and Banco do Brasil, as well as the long-standing commercial links between Porto Seguro and Itau Unibanco. The banks have the imagination to recognise the opportunities that are available from 'open architecture'- the distribution of products that are sourced from unrelated suppliers. However, we also stress the various players are taking active and positive steps to develop their own brands, to invest in platforms and systems, to improve underwriting and profitability and to introduce new products.
The generally upbeat reports that were published in relation to H112 and Q312 confirm our view that prospects for the life segment are more exciting than those for the non-life segment. The details of the results point to strong (i.e. in excess of 30%) returns on capital and improvements to margins thanks to discipline in pricing of risks and claims management. Over the medium-term, the only constraint on growth is the ability of Brazilian insurers to raise new capital to support this business: the insurance sector will remain a major beneficiary of financial stability.
The main challenge for many, but not all, of Brazil's non-life insurers remains the competitive pressures in auto-related lines - a problem in many of the national markets monitored by BMI. Prices are not rising as fast as claims and other expenses. In H112, many auto insurers had to deal with a surge in claims costs arising from thefts. However, the prospects for growth in all other lines remain excellent. The expansion of health insurance, for instance, is being driven by larger numbers of customers, rising prices and the introduction of new products. Micro-insurance and lines which have obvious relevance to Brazil, such as agricultural insurance, are evolving rapidly from small bases. Unsurprisingly, a number of multinationals have indicated an interest in opening or expanding their businesses in Brazil.
Over the last quarter, BMI has made the following changes:
* The analysis incorporates BMI's latest forecasts for Brazil's economy, including details in relation to vehicle sales and trends in the healthcare sector.
* The analysis incorporates a considerable amount of commentary made available by the regulator and leading insurers in relation to conditions in H112 and Q312.
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