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Brazil Insurance Report Q2 2009Published by: Business Monitor International Published: May. 21, 2009 - 87 Pages Table of Contents
AbstractAs the Brazilian economy moves further into 2009, it seems to us that the much-praised resilience of theconsumer sector has been left behind in 2008. Although signs of a decelerating economy had alreadystarted to surface during the last two months of the year, our outlook for 2009 has turned markedly morebearish in January, as a series of negative economic indicators started to appear. Industrial outputnumbers are showing worrying signs of a prolonged contraction; sales figures too are pointing toretrenching domestic demand. This comes against the backdrop of the global economic recession and theongoing financial crisis, leading to yet another bout of weakness for global stocks. Such a backdrop willhardly soothe the ongoing decline in confidence levels (both consumer and economic), suggesting to usthat borrowing appetite in Brazil this year will be kept to a minimum.Latest data show that industrial production took a decisive turn for the worse back in November, whenoutput contracted by a staggering 11.5% month-on-month (m-o-m), marking a fall of 6.2% year-on-year(y-o-y) that month. This was the largest y-o-y drop in industrial output in Brazil since December 2001.A key barometer of Brazilian economic activity, in our view, has traditionally been the auto industry.Here too, the alarm bells are ringing. Vehicle output during December collapsed to 102,053 units, from193,062 units a month earlier. Infrastructure development projects will be supportive of economic growth over the coming years, whenwe expect a moderate recovery in real GDP growth to 2.6% in 2010 and 4.4% in 2011. The global financial crisis is likely to affect the various segments of the global insurance industry indifferent ways. In many countries, especially in Europe, the coming recession points to softness in the nonlifesegment. In many cases, the numbers of policies may fall and there should be downwards pressure onpremiums. By contrast, the main problem for the life segment in almost all countries is the extreme volatilityof financial markets. Over the longer term, however, the fortunes of life insurance will likely recover thanksto the secular growth of organised savings in most countries. China - where the larger insurance companiescontinue to achieve double-digit growth in premium income - is a good example of this. Some particularniches should also do well in the current environment, such as legal liability insurance. In Latin America, we profile 21 companies. These are AEGON, AGF, AIG, Allianz, AXA, Cardif,CNP, Generali, HDI-Talanx, HSBC Insurance, ING, Liberty Mutual, MAPFRE, MetLife, NewYork Life, Prudential Financial, QBE, RSA, the Hartford, Principal Financial and Zurich.We also look at various local firms that are active. In general, these are small to medium-sized operationsby world standards. However, several of the leading Brazilian insurers would rank as extremely largeeven in a major market. Over the course of 2008, estimated total premiums in Brazil rose by 19% to BRL171,912mn. Non-lifepremiums rose by 19% to BRL126,530mn, while life premiums rose 19% to BRL45,382mn. Between now and the end of the forecast period, we expect that annual non-life premiums will grow byBRL69,760mn, while annual life premiums should grow by BRL22,878mn. Growth in non-life premiums during 2009 should be driven by the general growth of nominal GDP plus arise in non-life penetration from the current level of 3.48% to 5.00%. Growth in life premiums during 2009 should be driven by the change in the overall population and a risein life density from US $120.10 to US $200.00 per capita. BMI's Insurance Business Environment Rating is 67.4. Get Full Details About This Report >> |
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