Brazil Said to Consider Stake Sale in $1.3 Billion Reinsurer IPO

Brazil’s government is considering the sale of some of its stake in IRB-Brasil Resseguros SA, the largest reinsurer in Latin America, in a 4 billion-real ($1.3 billion) initial public offering, two people with direct knowledge of the matter said.

In addition to the government, which owns 27 percent of IRB, insurer BB Seguridade Participacoes SA and units of Itau Unibanco Holding SA might sell stakes in an IPO later this year, the people said, asking not to be identified because the discussions are private. BB Seguridade owns about 20 percent of IRB and Sao Paulo-based Itau holds 15 percent. A capital increase is also being considered, the people said.

A deal might help Brazil boost its coffers as policy makers struggle to meet budget goals. The government is also planning an IPO for Caixa Economica Federal’s insurance unit, seeking to raise as much as 10 billion reais, people with knowledge of the matter said last month. BB Seguridade, owned by the government-controlled Banco do Brasil SA, raised 10.2 billion reais in 2013 with a share offering, the world’s biggest IPO that year.

Companies trying to go public in Brazil have faced a difficult market, with the first IPO in the past eight months set for Tuesday for insurance seller Par Corretora de Seguros SA. Demand for stocks has slumped amid predictions the economy will post the worst recession since 1990 and benchmark interest rates will jump to a nine-year high. The nation’s benchmark Ibovespa stock index has dropped 7 percent from this year’s peak on May 5.

A Brazilian official didn’t immediately return e-mails and phone calls. Executives at IRB, Sao Paulo-based Itau and BB Seguridade declined to comment on a potential IPO for Rio de Janeiro-based IRB.

Golden Share

Banco Bradesco SA owns about 20 percent of IRB and pension funds including Previ and Funcef have a combined 10 percent stake. The government also has a “golden share” that gives it veto rights in matters involving the company.

Itau is selling insurance businesses it considers “non-core,” Chief Executive Officer Roberto Setubal said in December. Ace Ltd. agreed to buy Itau’s high-risk insurance business for 1.52 billion reais in July to become the biggest property and casualty insurer in Brazil.

Created in 1930 by the Brazilian government, IRB had a monopoly on the reinsurance business in Brazil until a process of privatization and liberalization started in the 1990s. The firm does business in more than 100 countries and has offices in Sao Paulo, Buenos Aires, London and New York, according to its website.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE