Fitch Affirms Bradesco Seguros S.A.'s Ratings; Outlook Stable
RIO DE JANEIRO -- December 10, 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, therefore
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 (30% and 31% in September 2013 and 2012,
The ratings also reflect the company's leading position in the Brazilian
insurance market, consistent performance, diversified revenue base, strong
distribution capacity underpinned by the wide agency network of Bradesco, and
comfortable liquidity and capitalization ratios.
Fitch expects Bradesco Seguros' premiums and contributions to continue to grow
solidly in 2014, even though there was a slight deceleration as of September
2013 (13% year on year and 18% in 2012). The slowdown was in the pension
segment, which was affected by the capital market volatility in the third
quarter, which has also been the case for its peers. Bradesco Seguros' market
share remained broadly stable until September 2013, when life and pension
segment continued to be the largest contributor to net earnings (61%),
followed by health (17%), capitalization plans (saving bonds with a lottery
feature) (12%), and others (10%).
Fitch expects Bradesco Seguros' profitability to remain sound. In line with
Fitch's expectations, Bradesco Seguros' net loss and combined ratios returned
to historical levels (68% and 91% in June 2013), after having peaked in 2012
due to a one-off adjustment to technical reserves. Similar to its competitors,
its financial income fell significantly in the first half 2013, although it is
likely to recover given the rise in interest rates since April 2013.
In June 2013, there was a significant decline in Bradesco Seguros' equity
(BRL15.0 billion and BRL18.5 billion, in June 2013 and 2012, respectively),
due to negative mark-to-market (MTM) adjustments to its available for sale
securities, which fully reversed the positive MTM adjustments of 2012. In the
short term, recoveries will be limited given the expectations of further
interest rate rises. Volatility in equity is likely to continue, but Fitch
expects liquidity to remain adequate.
Bradesco Seguros and its subsidiaries continue to comfortably meet minimum
capital requirements, despite the fall in equity and higher leverage (in June
2013, liabilities-to-equity rose to a high 9.2 times from 7.2x and 8.6x, in
2012 and 2011, respectively). The large share of life and pensions technical
reserves, which drives leverage upwards, remained unchanged at 87% of total
technical reserves, in June 2013.
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 (November 2013),
--National Scale Ratings Criteria (October 2013),
--Rating FI Subsidiaries and Holding Companies (August 2012).
Applicable Criteria and Related Research:
Insurance Rating Methodology -- Amended
National Scale Ratings Criteria
Rating FI Subsidiaries and Holding Companies
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