Fitch Affirms Bradesco Seguros S.A.'s Ratings; Outlook Stable
RIO DE JANEIRO & NEW YORK -- July 23, 2013
Fitch Ratings has affirmed the International and National Insurer Financial
Strength (IFS) ratings for Bradesco Seguros S.A. (Bradesco Seguros) as
--International IFS at 'A-'; Outlook Stable;
--National IFS at 'AAA(bra)'; Outlook Stable.
KEY RATING DRIVERS
The IFS ratings of Bradesco Seguros are linked to the ratings of its parent,
Banco Bradesco S.A. (Bradesco, long-term local currency [LT LC] Issuer Default
Rating (IDR) of 'A-'; Outlook Stable). Fitch believes the probability of
support by Bradesco would be high, should it be required.
Fitch considers Bradesco Seguros as a 'core subsidiary' of Bradesco and hence
its ratings are equalized to those of its parent. This is based on the
strategic importance of the insurance operations, which are a key and integral
part of the group's business, common branding, and high contribution of
Bradesco Seguros to group profits (31% in 2012, and 29% in both 2011 and
Ratings also reflect the company's leading position in the insurance market,
consistent performance, diversified revenue base, strong distribution capacity
underpinned by the wide agency network of Bradesco, and comfortable liquidity
and capitalization ratios.
Bradesco Seguros registered premium and contribution growth of 18% in 2012
(21% in 2011), which allowed it to maintain its overall market share (24.8% in
2012 and 25.5% in 2011). At year-end 2012, the life and pension segments
continued to be the largest contributors to its earnings (57%), followed by
health (17%), capitalization plans (which are a type of savings plan with a
lottery feature) (11%), and others including auto and property/casualty (15%).
In the third quarter of 2012, Bradesco Seguros set BRL2.1 billion (USD1
billion) of additional technical reserves (1.7% of total at year-end 2012) in
its health, life, and pension segments to align its technical reserves with
the reduction in local interest rates. Bradesco Seguros' net income was not
affected by this as it realized a gain of equal size in the 'available for
sale' securities book. In the meantime, Bradesco Seguros took the opportunity
to extend the average maturity of its investment portfolio.
In 2012, there was some deterioration in net loss and combined ratios driven
by the technical reserve adjustment, which depressed the growth of the net
earned premiums. Fitch expects the loss and operating ratios to return to
2011-2010 levels in the short term, as already observed in the first quarter
of 2013. In 2013, financial income is likely to be lower than in 2012.
Leverage, as measured by the liabilities-to-capital ratio, at 7.2x, remains
relatively high because of the company's significant life and pension
technical reserves, which made up 87% of the total at year-end 2012.
Bradesco Seguros' regulatory capital remains high, despite the tightening of
requirements in the first quarter of 2013. Operating insurance subsidiaries
will also be able to comply comfortably with the requirement to extend capital
allocation to underwriting risks to all segments except health and to
Bradesco Seguros' ratings are linked to those of Bradesco. Therefore, any
change in the bank's ratings would affect the insurer's ratings, as would a
change in its willingness to provide support, which Fitch considers highly
Additional information available at 'www.fitchratings.com' or
Applicable Criteria and Related Research:
-- Insurance Rating Methodology (January 2013),
-- Rating FI Subsidiaries and Holding Companies (August 2012),
-- National Ratings Methodology (January 2011).
Applicable Criteria and Related Research:
National Ratings Criteria
Rating FI Subsidiaries and Holding Companies
Insurance Rating Methodology - Amended
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