Fitch Assigns BTG Pactual Seguradora and BTG Pactual Resseguradora IFS Ratings; Outlook Stable

  Fitch Assigns BTG Pactual Seguradora and BTG Pactual Resseguradora IFS
  Ratings; Outlook Stable

Business Wire

RIO DE JANEIRO -- August 19, 2013

Fitch Ratings has today assigned the following Insurer Financial Strength
(IFS) ratings to BTG Pactual Seguradora S.A. (BTG Seguradora) and BTG Pactual
Resseguradora S.A. (BTG Resseguradora):

BTG Seguradora:

--National IFS: 'AA-(bra)'; Outlook Stable.

BTG Resseguradora:

--International IFS: 'BB+'; Outlook Stable;

--National IFS: 'AA-(bra)'; Outlook Stable.

KEY RATING DRIVERS

The IFS ratings of BTG Seguradora and BTG Resseguradora are driven by
potential support from their ultimate parent, Banco BTG Pactual S.A. (BTG
Pactual; local currency long-term Issuer Default Rating [IDR] 'BBB-' and
long-term National Rating 'AA(bra)', both with Stable Outlook). Both companies
are wholly owned subsidiaries of BTG Pactual Holding de Seguros S.A., which is
fully owned by BTG Pactual.

As per its rating criteria 'Rating FI Subsidiaries and Holding Companies',
Fitch considers both BTG Seguradora and BTG Resseguradora as strategically
important subsidiaries of BTG Pactual, due to the strong synergies and high
level of management and operational integration, largely fungible capital,
full ownership, and common branding. In assessing support, Fitch views
positively the close alignment of the current and target client base of the
new insurance operations to that of BTG Pactual, and the fact that they are
part of its strategy to provide full range of services to its customer base.

Fitch usually applies a one or two notches of difference between the parent's
IDR and the ratings of strategically important subsidiaries. In the case of
BTG Seguradora and BTG Resseguradora, a one notch difference was applied
because of the very high integration and synergies between the entities,
although their current and expected contributions to consolidated earnings of
BTG Pactual are modest.

BTG Seguradora and BTG Resseguradora operate from BTG's main offices and are
considered a division of the bank. Therefore, they benefit from expense
synergies, the bank's information technology platform, internal controls and
corporate governance structure, as well as its solid local and international
reputation. The ownership structure also provides potential access to the
parent's wide range of clients and cross selling opportunities for the group.

BTG Seguradora

BTG Seguradora started underwriting in February 2013. Its main focus is on
surety (60% of premiums at May 2013), which is complemented by engineering
risks (3%). It also participates in the DPVAT (mandatory third-party liability
for road accidents) consortium (37%). As a result of very fast growth, its
market share in surety premiums reached a relevant 6.4% (ranking sixth), at
May 2013. The insurer plans to underwrite other risks related to
infrastructure (such as hull and petroleum) over the medium term, but the core
focus will remain surety.

BTG Seguradora expects its market share to remain between 7%-8%, with average
annual premium growth of 25% in 2014 and 2015. Fitch considers its business
plan feasible, although the surety market remains highly competitive and
highly correlated with public infrastructure projects, which are often subject
to delays. The insurer plans to grow selectively and originate an important
slice of its premiums internally, through its client base and brokers network.

Fitch expects BTG Seguradora's capital to be sufficient for growth,
considering its low retention (an average of 15% of premiums underwritten) and
the combined capacity with its captive reinsurer. The company does not intend
to distribute dividends in the short and medium term. In June 2013, BTG
injected BRL7 million of capital to compensate for the unrealized losses on
the investment portfolio. Fitch expects its leverage ratio (net
liabilities/equity) to remain in the 150%-200% average range observed in its
local peers.

BTG Resseguradora

BTG Resseguradora is BTG Seguradora's captive reinsurer. It started operations
in May 2013. It has one statutory employee and only reinsures premiums ceded
by BTG Seguradora. As a reinsurer, BTG Resseguradora is not subject to
regulatory maximum retention limits per risk, and therefore offers a
significant growth potential for the group.

BTG Resseguradora has retrocession contracts for surety and engineering risks
with a diversified pool of highly rated local and foreign reinsurers. BTG
Resseguradora's average retention target is 15% of premiums underwritten.
Currently, the reinsurer's regulatory retention limit per risk is very
conservative (5% of equity, in June 2013).

BTG Resseguradora's growth will be directly linked to BTG Seguradora over the
next two years. Thereafter, in the next 2-3 years, the reinsurer plans to
obtain licenses from the authorities in Colombia, Peru, Chile, offering
reinsurance services for Brazilian companies operating in these countries. In
the next step of its business plan, in 4-5 years, it aims to become a full
reinsurance company reinsuring premiums from all segments in Brazil. While
Fitch considers its existing know-how, underwriting practices and investment
policies as sufficient for the local operations in surety and engineering
risks, the agency believes that they would need to evolve and be enhanced in
order for the reinsurer to implement its business plan.

Fitch expects BTG Resseguradora's capital to be sufficient for domestic
growth, considering its low expected retention in the short term. Fitch
believes that BTG Pactual would be likely to provide capital, should the need
arise due to faster than expected growth. Fitch expects its leverage ratio
(net liabilities/equity) to remain below 50% in the short term, unless
retention increases significantly.

RATING SENSITIVITIES

Changes in parent's ratings: Changes in BTG Pactual's ratings or willingness
to support its subsidiaries would affect the ratings of BTG Seguradora and BTG
Resseguradora.

Changes in strategic importance: Changes in Fitch's evaluation of the
strategic importance of BTG Seguradora and BTG Resseguradora could lead to
changes in their ratings.

Additional information available at 'www.fitchratings.com' or
'www.fitchratings.com.br'.

Applicable Criteria and Related Research:

-- Insurance Rating Methodology (August 2013),

-- Rating FI Subsidiaries and Holding Companies (August 2012),

-- National Ratings Criteria (January 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715468

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=799794

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Contact:

Fitch Ratings
Primary Analyst:
Esin Celasun
Associate Director
+55-21-4503-2626
Fitch Ratings Brasil Ltda., Praca XV de Novembro, 20 - 401 B, Rio de Janeiro,
RJ, Brazil
or
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Senior Director
+56 2 499-3300
or
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Managing Director
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or
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or
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