Fitch Affirms Bradesco Seguros S.A.'s Ratings, Outlook Stable
RIO DE JANEIRO & NEW YORK -- November 16, 2012
Fitch Ratings has today affirmed the International and National Insurer
Financial Strength (IFS) ratings for Bradesco Seguros S.A. (Bradesco Seguros)
--International IFS at 'A-'; Outlook Stable;
--National IFS at 'AAA(bra)'; Outlook Stable.
The affirmation of the IFS ratings of Bradesco Seguros reflect the continued
strong support of its parent, Banco Bradesco S.A. (Bradesco; long-term local
currency Issuer Default Rating [IDR] 'A-'/Outlook Stable), given the strategic
importance of the insurance operations and the high contribution of Bradesco
Seguros to the profits of the group (31% in the third quarter of 2012 [3Q'12],
29% in 2011 and 2010).
Bradesco Seguros is considered by Fitch a 'core' subsidiary of Bradesco and
hence its ratings are equalized to those of its parent. The ratings also
reflect the company's leading position in the insurance market, consistent
performance throughout economic cycles, prudence in constituting technical
reserves, and comfortable liquidity and capitalization ratios.
As Bradesco Seguros' ratings are tied to those of Bradesco, an improvement in
the bank's international ratings could positively affect Bradesco Seguros'
ratings. On the other hand, deterioration in the parent's risk profile could
negatively affect its ratings, as would a change in willingness to provide
support, which Fitch considers highly unlikely.
Bradesco Seguros' performance is supported by its market leadership in a range
of segments and the wide distribution network of Bradesco. At September 2012,
life and pension segments continued to be the largest contributors to net
results (56%); followed by health (16%); capitalization plans (savings plans
with a lottery feature) (11%); and others including autos and
Despite heavy competition, Bradesco Seguros has maintained its market share
across all segments. Until September 2012, total premiums and contributions
grew in line with the market, by 17% in comparison to the same period in 2011.
Notwithstanding a drop in financial income as of 3Q'12, performance ratios
have remained favourable. Unlike most of its competitors, Bradesco Seguros has
managed to maintain its loss ratios under control, reflecting its good control
systems and mass market product focus. The company aims to compensate the fall
in financial income, which is a trend observed in the whole market, through
continued focus on cost reduction efforts. Given its good capitalization and
liquidity, Fitch does not view the recent fall in financial income as material
to the ratings.
In 3Q'12 Bradesco Seguros constituted BRL2.1 billion of additional technical
reserves (1.9% of total) in its pension and health segments to adjust its
reserves to the current lower interest rates in the country. This was fully
compensated by the realization of a gain of an equal amount in the 'available
for sale' securities book, and therefore has not had an impact on earnings.
Fitch notes that the regulatory requirements regarding the calculation of the
addition reserves are yet to be confirmed by the regulators, Superintendencia
de Seguros Privados (SUSEP) and Agencia Nacional de Saude Suplementar (ANS),
and Bradesco Seguros has been one of the first companies to take action. Fitch
believes that any further need to constitute additional reserves will be
In Fitch's view, Bradesco Seguros' technical reserves have historically been
adequate. The fact that Bradesco Seguros has moved ahead of most of its
competitors with regards to the additional technical provisions is a
reflection of its conservative posture.
Operating leverage, as measured by the liabilities-to-capital ratio at 7.3x,
remains relatively high, despite a drop in the first half of 2012 (1H'12).
This is explained by the large share of the life and pension segments in the
total portfolio, whose technical reserves made up 91% of gross reserves at
3Q'12. These reserves are constituted up-front and correspond to 100% of the
net present value of the future payments.
The adjusted capital remains high in relation to the minimum capital
requirement (5.9x at 1H'12). Furthermore, during the same period, liquid
assets corresponded to an adequate 1.13x of net technical reserves.
Bradesco Seguros, 100% controlled by Bradesco, is an operational holding
company active in all segments of insurance, complementary pensions, and
capitalization products, with an overall market share of 25% in total industry
premiums and contributions in September 2012.
Additional information available at 'www.fitchratings.com' or
'www.fitchratings.com.br'. The ratings above were solicited by, or on behalf
of, the issuer, and therefore, Fitch has been compensated for the provision of
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Oct. 18, 2012).
Applicable Criteria and Related Research:
Insurance Rating Methodology ￢ﾀﾔ Amended
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