Latin America's Business Information Leader
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Insurance Perspectives - a weekly summary
January 9 - January 15 2010
Click to read the online version:
http://www.bnamericas.com/perspectives_home.jsp?idioma=I§or=11&id_email=170280604
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In this issue:
* Weekly Wrap
* Q & A:Aiming to become one of the top five foreign players in the region
Fernando Concha
Latin America CEO
RSA
Regional
* Coming Up
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
** WEEKLY WRAP **
This week's biggest story in insurance came from Haiti, where the government will receive the maximum US$8mn payout from its coverage with the Caribbean Catastrophe Risk Insurance Facility (CCRIF), but overall the country is "horribly underinsured," said Matthew Pragnell, CEO of Caribbean insurance brokerage services group CGM Gallagher.
A 7.0 magnitude earthquake that struck close to capital Port-au-Prince on Tuesday evening caused untold damage and still unknown loss of life, although the number of fatalities is expected to run into the tens of thousands.
CCRIF, which is managed by CGM Gallagher unit CaribRM and offers parametrically triggered coverage for natural catastrophes to 16 Caribbean countries, will make the largest possible payout - which is just over 20 times the US$385,500 Haiti pays in annual premiums - after a 14-day period, the group said in a statement.
In other news, UK insurer RSA said it 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.
"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," RSA's regional CEO Fernando Concha told BNamericas this week. See this week's Q&A for more.
Also this week in Insurance:
Argentina
- Central bank president Martín Redrado returned to the monetary entity after federal judge María José Sarmiento ordered his reinstatement. Redrado had been fired from his post on January 7 through a presidential decree that would allow the government to tap US$6.57bn in reserves to pay debt due this year.
Brazil
- The government has set aside as much as 451mn reais (US$258mn) for agricultural insurance subsidies in 2010, 66% more than in 2009. The agriculture ministry's budget also calls for 570mn reais in such spending in 2011 and as much as 680mn reais in 2012. These are estimates for the ministry's three-year budget plan and will be subject to congressional approval.
- Federally controlled Banco do Brasil (BB) is trying to conclude a deal to get management control of former monopolist and still leading reinsurer IRB-Brasil Re. The bank hopes to avoid political outcry over the deal, which would transfer control between two state-controlled enterprises, in the campaign season preceding the presidential election in October.
Caribbean
- Barbados-based financial services company Sagicor came out to calm fears over its financial health following a private placement of B$39mn (US$19.5mn) in December with the country's National Insurance Board that diluted the stock of its shareholders.
Chile
- The supreme court unanimously confirmed a ruling rejecting a request for an injunction filed by private pension fund manager AFP Habitat against pension regulator SP regarding the rules for this year's tender for the approximately 600,000 new affiliates entering Chile's private pension system in 2010 and 2011.
- US financial services company Principal Financial Group is looking to double its size in the Chilean mutual fund business by 2012 to reach US$1.2bn in assets under management, the group's VP for Latin America Luis Valdés said this week.
"My perception is that the industry will have a very good 2010, growing at double digit rates. Not including the money market business, which is mainly treasury, the industry should not grow below 20-25%," he said.
- The insurance brokerage of state bank BancoEstado is looking to repeat last year's strong growth in 2010. 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% rise in the company's clients to 1.85mn.
- Chile became the Organization for Economic Co-operation and Development's (OECD) 31st member and its first in South America under an accession agreement signed on Monday in Santiago by OECD secretary general Angel Gurría and Chilean finance minister Andrés Velasco.
Honduras
- Fitch has changed its outlook on Honduran financial institutions and insurance companies to stable from negative, and raised some ratings. The agency raised the outlook, which was listed at negative solely based on potential effects of the volatile political situation following the country's coup in June, because of recent improvements in the political and business environment in the country.
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.
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.
- US supplier of on-demand software and e-commerce services to the insurance industry, Ebix, has acquired Brazilian IT firm MCN Technology & 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.
Venezuela
- Venezuela's legislative and executive branches are discussing changes to financial sector laws and regulations that permit the country's transition towards socialism, legislators were reported as saying on the national assembly's website.
The intention is to regulate the country's financial sector in an integrated fashion, treating the activities of banks, insurers, the capital markets and securities regulator CNV as a single system that supports socialism, according to finance committee president Ricardo Sanguino.
RESULTS & FIGURES
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 by industry regulator SP.
Overall, AFPs' total assets under management increased 31% to US$118bn last year, SP said.
And life insurers in Chile issued a combined 111bn pesos (US$224mn) in consumer loans in January-November 2009, up 26.5% on the same period 2008.
By Jorge Porter
Related Companies
* IRB Brasil Resseguros S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=11278§or=0
* Banco del Estado de Chile - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=11368§or=0
* Principal Financial Group Inc. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12854§or=0
* RSA Group - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=13258§or=0
* Federación Internacional de Administradoras de Fondos de Pensiones - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=13711§or=0
* Administradora de Fondos de Pensiones Habitat S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=13746§or=0
* Superintendencia de Pensiones - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=13877§or=0
* Fitch Centroamérica S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=14560§or=0
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
** Q & A **
* Aiming to become one of the top five foreign players in the region
Fernando Concha
Latin America CEO
RSA
Regional
RSA, or Royal Sun Alliance, is seeking to become one of the top five foreign players in Latin America. To do so, the UK company is actively seeking acquisitions or alliances to bolster growth within the Latin American markets in which it currently operates.
To learn more about the insurer's plans, BNamericas spoke with the firm's regional manager, Fernando Concha.
BNamericas: How much of RSA's emerging market operations does Latin America make up?
Concha: Latin America represents 54% of RSA's emerging market operations, which is a division that reports directly to the world CEO. Latin America holds a very strong position within the organization. As our CEO Andy Haste has defined, emerging markets are 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.
BNamericas: RSA Latin America set a goal of reaching US$1bn in gross written premiums by 2010. How is this coming along?
Concha: At this point, we're well on our way. We plan to exceed the original US$1bn goal in 2010.
BNamericas: P&C insurance is significantly tied to growth in economic activity. How did the company deal with the crisis last year in Latin America? Do you think insurance activity in the region will pick up this year?
Concha: We expect the economy to help insurance activity in the region return to normal this year. Infrastructure investment margins should become important once again and auto sales throughout the region should recover as well, which will provide plenty of growth opportunities. We also expect trade and transport to recover, and this will help us grow as well. While it's true that our growth depends on economic activity, we think the Latin American economy will recover, and so we anticipate double-digit growth.
BNamericas: What are your development plans for the region?
Concha: We are focusing on three strategic pillars in the region. First is our affinity sector, which covers all banking and retailer insurance as well as mass market insurance distribution. There are a lot of opportunities in this area, especially in Mexico, Brazil and Colombia, where the sector grew significantly during 2009. We're also focusing heavily on infrastructure projects throughout Latin America, and forming a new team that will focus on industrial risks and - since we see that investment in the region is going to pick up again - we expect that this segment will be vital to our growth. Finally, we'll be paying very special attention to medium and small brokers, where we want to use a value proposition based on technology and simple products to tap the growth potential there, particularly in Mexico and Argentina.
BNamericas: What is the main challenge RSA faces in Latin America today?
Concha: Our primary challenge is to take advantage of the proposed economic recovery to increase our sales, and secondly, to use our services and products or the relationship that we maintain with brokers to differentiate ourselves from our competitors. Insurance is a highly standardized product and so it's key to somehow differentiate a clients' options. Finally, we need to nail down strategic alliances and acquisitions in Latin America that will increase our scale significantly and make Latin America even more significant for the group.
BNamericas: Is it possible that these acquisitions will take place this year?
Concha: Yes, we're very focused on solidifying some of these opportunities, but of course we're not the only parties involved so it will be a challenge to turn these acquisition opportunities in the region into reality.
BNamericas: Is there a certain market that appeals most to these plans?
Concha: Naturally the most interesting markets are Brazil and Mexico, but there are also some attractive, although not quite as big, opportunities in Colombia, Chile and Argentina. We're looking at all our countries and analyzing every market to see exactly what is and what isn't up for sale.
BNamericas: Is the company considering opening up shop in other countries, and if so, would it be via purchases or from the ground up?
Concha: We're happy with where we are and I'd say we're already established in the most important countries in the region. That said, we're very interested in Peru and Panama, but there are no set plans for entering those countries in the near future.
BNamericas: Do you plan to continue investing in the region?
Concha: Yes, as our CEO has said, emerging markets are the company's growth engine, and we plan to invest in opportunities that are right for the company. There's no set amount of money that we'll be investing; rather, when we find the right opportunity we'll also find the financing to support it.
BNamericas: In what countries is the company interested in increasing market participation, and how do you plan on achieving this?
Concha: We're actively looking out for what kind of alliances or purchases we can make in all the countries where we're already established, with the main focus being in Brazil, Mexico and Colombia.
BNamericas: What do you think will be the motor for growth in RSA in Latin America over the coming years, and what kind of growth in premiums do you expect for this year?
Concha: 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. Using non-traditional channels, such as public service companies, we can access a huge opportunity in mass-market insurance distribution. We also see a niche that would be well accommodated by our expertise in the industrial risk area since it requires high reinsurance capacity, technological capacity and just a large capacity in general. And, as I said before, a major part of the driving force behind growth is medium-to-small sized brokers, and so we've created new products and technological solutions that are making us their preferred choice.
BNamericas: How do you see the company in Latin America in three to five years, as far as premiums and market participation in the relevant segments goes?
Concha: We want to be the preferred option for mass-market insurance, the industrial risk market and small to medium sized brokers. In Latin America we want to be among the five largest international companies in the region.
About the company
Latin America represents 54% of RSA's emerging market operations, which also include units in the Baltic states, Asia and the Middle East.
Across all emerging market countries, RSA posted net written premiums of 575mn British pounds (US$955mn) in January-September 2009, which was up 7% from the same period last year, but was down 4% in constant exchange rates.
RSA premiums in Latin America increased 5% in January-September over the same period in 2008, and growth was led by Brazil, Colombia and Uruguay.
In Latin America, RSA has operations in Argentina, Brazil, Colombia, Chile, Mexico and Uruguay, where it focuses on P&C and short-term life insurance.
By Jorge Porter
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
** COMING UP **
January 17, 2010:Second round of presidential election.
Chile
January 18, 2010:Martin Luther King, Jr. Day, US markets closed.
Regional
January 27, 2010:New president Porfirio Lobo to be sworn in.
Honduras
February 01, 2010:New rules starts under which all foreign-contracted derivative products must be registered in the country with an approved clearinghouse.
Brazil
February 07, 2010:Presidential and congressional elections.
Costa Rica
February 15, 2010:Washington's Birthday/Presidents' Day, US markets closed.
Regional
February 17, 2010:Dutch financial services group ING to release financial results for the fourth quarter of 2009.
Regional
ING Group
March 13-17, 2010:The World Federation of Insurance Intermediaries (WFII) to hold its world council in Buenos Aires.
Regional
April 02, 2010:Good Friday, most markets closed.
Regional
May 31, 2010:Memorial Day, US markets closed.
Regional
July 05, 2010:US holiday marking Independence Day.
Regional
September06, 2010:Labor Day, US markets closed.
Regional
October 03, 2010:Presidential elections.
Brazil
November 01, 2010:All Saints Day, most Latin American markets closed.
Regional
November 25, 2010:Thanksgiving Day, US markets closed.
Regional
December 24, 2010:Christmas holiday (observed), US markets closed.
Regional
Click here to view the most important conferences and events in your sector of interest. http://www.bnamericas.com/conferences_home.jsp?idioma=I§or=11
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Featured Reports
* Fitch CentAm: Administradora de Fondo de Pensiones Crecer (AFP Crecer) - http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=1000874§or=0
* Fitch CentAm - Sector Seguros en Centroamérica: Desempeño Primer Semestre 2009 y Perspectivas 2010 - http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=1007275§or=0
* CEPAL: Brazil's emergence as the regional export leader in services: A case of specialization in business services - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1009574§or=0
* Celfin: Asset Allocation - Pension Funds (November 2009): trending abroad - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1002614§or=0
* CEPAL - Arbitraje internacional basado en cláusulas de solución de controversias entre los inversionistas y el Estado en acuerdos internacionales de inversión:desafíos para América Latina y el Caribe. - http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=1005351§or=0
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
TO UNSUBSCRIBE
To take yourself off this email list please reply to this email to mailto:info@BNamericas.com and write "UNSUBSCRIBE" in the subject line of the email.
CUSTOMER SERVICE
Please contact BNamericas at mailto:info@BNamericas.com or at the address below if you have any questions/comments about changing your email format, subscriptions, additional copies, corporate discounts, advertising, media monitoring or require information about other Business News Americas services.
FOR YOUR EYES ONLY
Reproducing, forwarding, faxing or electronically transmitting this newsletter in whole or in part in any form or medium without the expressed written permission of Business News Americas is prohibited. If you would like other colleagues, regional offices or a partner company to receive the BNamericas news service or would like more details about publishing BNamericas content on your intranet or internet site, please contact us at mailto:info@BNamericas.com or call us on (56-2) 941-0300.