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Tuesday, January 12, 2010
Today's News Headlines
* RSA actively seeking acquisitions to grow in Latin America - Regional
* BancoEstado brokerage looks to repeat strong 2009 growth this year - Chile
* Private pension funds' overseas assets more than double in 2009 - Chile
* Afore Profuturo GNP completes acquisition of Scotia Afore - Mexico
* QBE unit ups January-September profits 91% - Colombia
* Central bank crisis is another example of weak institutions: Moody's Economy.com - Argentina
* Regional pension assets up 13.7% in 12 months through Sep, says FIAP - Regional
* Country accepts OECD invitation - Chile
* Ebix targets Latin America through MCN Technology acquisition - Brazil, Regional
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* RSA actively seeking acquisitions to grow in Latin America - Regional
UK insurer RSA is seeking acquisitions or alliances to bolster growth in Latin America with the aim of becoming one of the five top foreign players in the region, RSA's regional CEO Fernando Concha told BNamericas.
"We're actively looking out for what kind of alliances or purchases we can make in all the countries in which we already have presence, with the main focus on Brazil, Mexico and Colombia."
"We're looking in all our countries and analyzing every market to see exactly what is and what is not up for sale," said Concha.
In Latin America, RSA also has operations in Argentina, Chile and Uruguay, where it focuses on P&C and short-term life insurance.
At current growth rates, RSA will this year surpass its previously set US$1bn-premium goal for its Latin American units, Concha said.
"Our commitment is for emerging markets to grow at double digits every year, and I think we're well positioned to accomplish that in 2010."
Latin America represents 54% of RSA's emerging market operations, which also include units in the Baltic states, Asia and the Middle East.
"As our CEO Andy Haste has defined, emerging markets is the company's growth engine, so with us being half of that division it's obvious we'll grow significantly both organically and through acquisitions," said the executive.
The full interview with Fernando Concha will be published in this Friday's Insurance Perspectives, for subscribers only.
By Jorge Porter
Business News Americas
* BancoEstado brokerage looks to repeat strong 2009 growth this year - Chile
The insurance brokerage of Chilean state bank BancoEstado is looking to repeat last year's strong growth in 2010, the brokerage's general manager Fernando Silva told BNamericas.
Despite the global crisis and economic downturn, in 2009 BancoEstado Corredores de Seguros increased new sales of insurance policies by 27% as well as its total number of policies by 12% to approximately 4.2mn.
Last year also saw a 15% increase in the company's clients to 1.85mn.
Silva said 2009 was a very difficult year that turned into a very good year for the company he is heading. The executive highlighted the fact that the customer base, which consists mainly of low-income clients, now has more than two policies per customer.
Growth last year was driven by a new segmentation strategy which the company implemented. In addition, particularly strong demand was seen among non-mandatory insurance policies linked to mortgage loans, said Silva.
BancoEstado Corredores de Seguros was founded in 1999 and is the second largest among Chile's bank-controlled brokerages, ranking third in the overall standing for insurance brokerages.
BancoEstado is Chile's only state bank and the country's third biggest lender.
By Ulric Rindebro
Business News Americas
* Private pension funds' overseas assets more than double in 2009 - Chile
Chile's five private pension fund managers (AFPs) saw their overseas investments jump 102% to US$51.8bn in 2009, representing 43.8% of the AFPs' total investment portfolio, according to the figures unveiled Monday (Jan 11) by industry regulator SP.
Of the total, 52.9% went to emerging markets such as developing Asian and European markets as well as Latin America, the Middle East and Africa. Assets allocated in North America, Asia Pacific and Europe totaled 43.3% of the US$51.8bn figure, with other countries accounting for the remaining 3.8%.
According to William Baeza, analyst at Chilean financial group EuroAmérica's studies department, the AFP's investment strategy is explained by the significant recovery in foreign assets as well as the strong sales of local stocks by the AFPs in 2009.
Overall, AFPs' total assets under management increased 31% to US$118bn last year, SP said.
Each AFP offers a family of five funds with different risk profiles, with fund A having the highest ceiling of variable income investments.
Assets by fund type as of December 31 were: fund A, US$25.2bn; fund B, US$24.4bn; fund C, US$49.7bn; fund D, US$14.4bn; and fund E, US$4.34bn.
AFP Provida (NYSE: PVD) - owned by Spain's BBVA (NYSE: BBVA) - was the largest player with a 30.3% market share in terms of assets under management as of December 31. Second came AFP Habitat - in which Citi (NYSE: C) has a 40% stake - with a 24.7% market share.
Third was AFP Capital - owned by Dutch group ING (NYSE: ING) - with 22.6% of total assets under management, followed by local financial services group Penta's AFP Cuprum with 19.4% of the market. Last came AFP Planvital - owned by Switzerland's Banca della Svizzera Italiana (BSI) - with a 3.0% market share.
All funds posted positive returns on assets in the month of December due to rising foreign stock markets, especially among emerging countries, as well as in local stocks, SP said. Returns in that month were as follows: Fund A, 4.77%; fund B, 3.92%; fund C, 2.99%; and fund D 1.83%
Lower interest rates in Chile led to capital gains of 0.58% in the month for fund E, which invests 95% of its portfolio in fixed income instruments.
In 2009, profitability by fund type in real terms was: Fund A, 43.5%; fund B, 33.4%; fund C, 22.5%; fund D, 15.3%; and fund E, 8.34%, marking the best year in terms of fund returns since the multifund system was created in 2002.
But, according to Baeza, in 2010 AFPs will not see returns on assets under management as high as in 2009.
"What we saw in 2009 for variable income was a recovery in prices after the historical drop in 2008, which was especially hard in September and October," he said.
In the latter alone, AFPs lost US$25.2bn and fell below the US$70bn mark at that time.
Baeza said that now there is a widespread perception that assets are fairly priced, so gains in stocks this year could only come from substantial improvements in corporate earnings, which is unlikely to happen amid a paused global economic recovery.
"Furthermore, the withdrawal of monetary stimulus packages - mainly through benchmark interest hikes - will have a negative impact on bond prices. That is why we may even see that the fixed income component will lower profitability for AFPs in 2010," Baeza said.
Investments in local fixed income and stocks made up 39.1% and 16.2% of total investments, respectively, as of December 31, SP said.
By Jorge Porter
Business News Americas
* Afore Profuturo GNP completes acquisition of Scotia Afore - Mexico
Mexican private pension manager Afore Profuturo GNP has concluded the acquisition of the clients and pension assets of Scotia Afore, after receiving regulatory authorization, the former said in a statement on Monday (Jan 11).
Profuturo GNP, of Mexico's Grupo Profuturo, now administers the 92,201 clients and 3.98bn pesos (US$312mn) in assets under management formerly held by what was the Mexican pension unit of Canada's Scotiabank (NYSE: BNS).
Scotia Afore was the second smallest of 16 pension players by assets and clients as of end-September, while Afore Profuturo GNP came in fourth in assets and sixth in clients, according to figures from pension watchdog Consar.
By Business News Americas staff reporters
* QBE unit ups January-September profits 91% - Colombia
Colombia's fifth largest P&C insurer, the local unit of Australia's QBE Insurance Group, booked a 26.5bn-peso (US$13.5mn) profit in the first nine months of last year, up 91% compared to the same period 2008.
QBE Colombia's underwriting profit improved 258% to 24.8bn pesos, with net paid claims rising 23.5% to 157bn pesos, according to figures provided by financial regulator Superfinanciera.
QBE Colombia's net written premiums rose 36.2% to 314bn pesos in January-September, equivalent to a 7.01% market share.
The QBE unit had 420bn pesos in assets and 97.2bn pesos in equity at end-September.
QBE entered the Colombian insurance market in 2005 by purchasing state-controlled insurers Central de Seguros and Central de Seguros de Vida for US$21mn.
By Business News Americas staff reporters
* Central bank crisis is another example of weak institutions: Moody's Economy.com - Argentina
The crisis surrounding Argentina's central bank is another example of weak institutions among low-rated countries, Moody's Economy.com said in a report.
President Cristina Fernández de Kirchner last Thursday (Jan 7) fired the head of the country's central bank, Martín Redrado.
This institutional crisis has led to a legal stand-off, and is yet another indication of Argentina's weak policy framework, the report reads.
But it is not a sign of worsening credit quality. Argentina's B3 rating is already one of the lowest of all rated sovereigns and incorporates expectations of continued political turmoil. But the potential impact of the crisis on other policy measures, such as the government's proposal to resolve its current debt in default, could lead to credit worries in the future.
Last December, the Argentine government proposed tapping US$6.57bn in reserves to pay off public debt due in 2010. This was resisted by the head of the central bank, and led to threats of legal challenges by members of the opposition.
Last week the crisis reached a boiling point, when the country's president first asked for the central bank president's resignation. Redrado refused, and a day later he was fired by presidential decree. The courts have since reversed the decree, and it's likely the judiciary will continue to be involved.
According to Moody's Economy.com, weak institutions are common among low-rated countries, and in Argentina's case political and policy implementation concerns are a key ratings constraint.
"So today, the major concern is not the intended use of the reserves (meant, after all, to pay back debt) or even the political theater resulting from all of this. But Argentina does need to resolve outstanding issues, such as its debt in default, that continue to raise concerns about its willingness to pay," the report reads.
"If that is derailed by the current political crisis, financing options may become problematic later this year."
By Business News Americas staff reporters
* Regional pension assets up 13.7% in 12 months through Sep, says FIAP - Regional
Fund managers in Latin America's mandatory private pension systems had US$266bn in assets under management as of September 30, up 13.7% on the same time in 2008, according to figures released by international pension fund association FIAP.
Funds were also up 8.57% and 29.1% compared to end-June and end-March respectively.
Chile had the largest share of total funds at end-September with US$106bn, followed by Mexico with US$79.3bn, the figures show.
The number of affiliates in Latin American mandatory pension fund systems grew 2.08% to 68,969,769 as of September 30 compared to the same time 2008.
Mexico had the largest share with over 39.3mn affiliates, followed by Colombia with 8.65mn and Chile with 8.54mn respectively.
The countries polled by FIAP were Bolivia, Colombia, Costa Rica, Chile, the Dominican Republic, El Salvador, Mexico, Panama, Peru and Uruguay.
By Business News Americas staff reporters
* Country accepts OECD invitation - Chile
Chile has become the Organization for Economic Co-operation and Development's (OECD) 31st member and the organization's first in South America under an accession agreement signed on Monday (Jan 11) in Santiago by OECD secretary general Angel Gurría and Chilean finance minister Andrés Velasco.
"The 'Chilean way' and its expertise will enrich the OECD on key policy issues," said Gurría during the signing ceremony in Santiago. "Chile has been engaged in a continuous effort to reform its economy. This experience will be an asset for the OECD as we try to address issues such as inequality or sustainable pension systems." The agreement requires ratification by congress.
Since it began talks with the OECD in May 2007, Chile has taken significant steps by introducing new laws to end the banking secrecy that provides a shield for possible tax evasion and enabling prosecutors to pursue companies suspected of bribery and corruption, OECD said in a press release.
"The Chilean economy has been growing at over 5% a year for the last 20 years. Impressive progress has been made in reducing poverty, although more still needs to be done. Chile's groundbreaking pension reforms in the early 1980s have served as a model for many other countries."
The OECD said that Chile's prudent tax policies gave it the necessary financial leeway for stimulus measures to support demand and employment when the financial crisis hit in 2008.
In recent months, and as part of the OECD accession process, competition laws and consumer protection in the country have been strengthened. New legislation has established a clear separation between the state and the board of copper mining company Codelco, Chile's largest state-owned enterprise, OECD noted.
In the private sector, a new law will boost transparency by requiring increased information for financial markets while combating misuse of insider information and reinforcing requirements for external auditors, the OECD said, adding that another major reform has seen the extension of public pension coverage.
The OECD will release its latest economic survey of Chile on January 21 in Santiago. The survey sets out the OECD's assessment and recommendations on the main economic challenges faced by Chile.
With both Chile and Mexico as members, and thanks to increasingly close cooperation with Brazil, the OECD said it will have substantially strengthened its links with Latin America. Four other countries - Estonia, Israel, the Russian Federation and Slovenia - are currently negotiating to become members of the organization, which is also working closely with other major economies, including China, India, Indonesia and South Africa, as well as Brazil.
By Business News Americas staff reporters
* Ebix targets Latin America through MCN Technology acquisition - Brazil, Regional
US supplier of on-demand software and e-commerce services to the insurance industry, Ebix, has acquired Brazilian IT firm MCN Technology & Consulting, the former said in a statement without reporting the pricetag.
The acquisition is expected to be fully completed on January 15, Ebix said.
MCN focuses on the insurance industry through the provision of IT products and services with the flagship product being Exchanges for pension and annuities, besides specialized enterprise integration products, eBusiness transactional portals and specialized consulting.
"The acquisition of MCN provides us with a solid relationship base in the Latin American insurance markets. We see this as an entry point for Ebix to cross-sell its exchanges and back-end systems in Latin America," Ebix president and CEO Robin Raina said.
"Brazil was a natural choice as our Latin American headquarters since it accounts for 40% of the region's insurance revenues. MCN has strong relationships with leading life insurance and P&C companies in Latin America and we intend to develop those relationships further," Raina added.
Ebix provides end-to-end solutions ranging from infrastructure exchanges, carrier systems, agency systems and BPO services to custom software development for all entities involved in the insurance industry. The company has offices in Brazil, Singapore, Australia, the US, New Zealand, India and Canada.
By Business News Americas staff reporters
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In-deph interview
* 2010: Investment returns back down to earth, caution the name of the game
Gonzalo de las Casas
Chief investment officer
AFP Integra
Peru
http://www.bnamericas.com/interviews/insurance/Gonzalo_de_las_Casas_,AFP_Integra,/169479654
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Main companies covered in today's news
* Principal Financial Group Inc.
http://www.bnamericas.com/company-profile/en/Principal_Financial_Group_Inc,-Principal/169479654
* Sagicor Financial Corporation
http://www.bnamericas.com/company-profile/en/Sagicor_Financial_Corporation-Sagicor/169479654
* Zurich Argentina Compañía de Seguros S.A.
http://www.bnamericas.com/company-profile/en/Zurich_Argentina_Compania_de_Seguros_S,A,-Zurich_Argentina/169479654
* Banco Bilbao Vizcaya Argentaria S.A.
http://www.bnamericas.com/company-profile/en/Banco_Bilbao_Vizcaya_Argentaria_S,A,-BBVA/169479654
* Administradora de Fondos de Pensiones Capital S.A.
http://www.bnamericas.com/company-profile/en/Administradora_de_Fondos_de_Pensiones_Capital_S,A,-AFP_Capital/169479654
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