LatinFinance - May/June 2014 - 26

6.2

5.9

5.9

5.9

5.6

5.2

5
4
3
2
1

Un'ployment

Marine

Liability

Rural

Business

Property

Pers'l accident

Travel

Transport

Auto

Health

Micro

Loan/credit

Infra/constr'n

0

Source: Bradesco Seguros Investor Survey on the 2014 Outlook for the Brazilian
Non-Life Insurance Sector

6.8% over the next six years, according to the survey.
Still, the industry is growing more slowly than in other parts of
latin america. non-life premiums rose 7.1% in Brazil between 2010
and 2011, on an inflation-adjusted basis in US dollar terms. in mexico
they grew by 12.3% over the same period and in argentina, by 20.4%.
in addition, growth of the industry slowed in Brazil last year.
Brazilian insurance premiums are estimated to have grown 13%
in 2013, missing the 18% expansion forecast. Brazil's insurers
association says they should rebound this year, going up 17%,
however.
the survey was conducted by management & excellence for
Bradesco Seguros, in cooperation with LatinFinance, between mid
September and late December 2013. it garnered responses from 32
investors, analysts and specialists. most were real money investors.
around a third were from hedge funds, while some insurance agents
and private equity investors also participated. almost all specialized
in both Brazil and the insurance sector.
Demographic opportunity
Respondents ranked low rates of coverage as the primary
opportunity for the non-life insurance industry for 2014. the survey
points to plenty of quantitative support: Brazil's insurance market
sat in 44th place globally by penetration rates, and around 70% of
the country has no coverage. munich Re reckons Brazil will be the
world's 8th largest market by 2020 - overtaking india, italy, canada
and australia to get there.
Vehicle insurance offers a particularly stark example of the
growth possibilities: only one in three cars driven in Brazil are
insured, leaving over 30 million without insurance.
"auto insurance is [also] expected to grow because of the growing
auto market," says William cox, chief executive of management &
excellence. "there's great potential."

26 l atinfina nce.com - May/June 2014

Building blocks
Brazil's demographic shift offers scope for growth in non-life
insurance as a whole, but investors were clear that some areas of
coverage are set to benefit more than others. infrastructure and
construction insurance is the most likely to grow quickly this year,
the survey indicated.
"infrastructure insurance is the smallest in terms of volume, but
it's likely to be the largest in terms of volume growth," says cox.

Investment vehicles
Responses to: How would you invest in the Brazilian non-life insurance
sector in 2014?
7

6.7

6.5

6.5

6.3

6

6.1

6

5.7

5.6

5.5

5.5

Re'ance equities

6.2

6

Country funds

6.3

FIPs

6.4

Ins'nce mid-caps

Sc
6.5

5
4
3
2
1
0

FIG bonds (int')

6.6

Ins'nce bonds

6.6

FIG equities (int'l)

6.6

FIG equities

7.4

7

FIG bonds

8

the growing middle class and the expansion of the internet were
also important opportunities for the industry, respondents said.
the rise of a consumer class across much of latin america has been
well-documented. combine that with a rapidly expanding, cheap
distribution network like the web, and the opportunities are clear.
indeed, distribution channels were judged the principal value
driver for non-life insurance - respondents awarded the item a
score of 6.8 on a scale of 1 to 10, where the higher number represents
greater importance. this was 20bp above the next contender,
corporate strategy. around 74 million Brazilians are active internet
users, and 25 million have internet-capable phones.
Use of the internet has the power to disrupt established
hierarchies, notes cox. While the largest companies may find it
easiest to set up product websites that operate smoothly, they also
face threats from low-cost, internet-only start-ups. "it's a logical step
that's happened elsewhere," he says.
meanwhile, a stronger insurance culture in Brazil, low interest
rates or inflation, tax incentives, and legal simplifications did not
represent much opportunity to the non-life insurance industry,
said respondents. all scored below five points in terms of main
opportunities for the non-life sector.

Ins'nce equities

Growth potential
Responses to: How well will these non-life insurance types develop
in Brazil in 2014?

Source: Bradesco Seguros Investor Survey on the 2014 Outlook for the Brazilian
Non-Life Insurance Sector
http://www.latinfinance.com
LatinFinance - May/June 2014

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