International Perspective Brazil by dtUV4Lx


									Brazilian HealthCare &
 Reinsurance Markets

     August, 2012

• 2010, Brazilian Private Health Care premium - US$ 48 b

• Largest health care market Latin America’s & – 6th in
  the world ranking

• Health Care is the second most desired product for the
  growing middle class

• BTG Pactual project a CAGR (Compund Annual
  Growth Rate) between 9% to 12%
•   HeathCare is a heavily regulated market by government agency
    (ANS – Agência Nacional de Saúde Suplementar)

•   ANS defines minimum coverage, plan rules, general policies,
    transfer of plan members rights between Health Care plans

• Brazilian regulation prohibits lifetime annual aggregate limits. Also
  Individual policyholders and senior citizens rights are protected

    Quick overview

•     23% of the population (46 million people) have private Health Care

•     There are more than 1 thousand providers but 37 companies have
      50% of market share. Corprate plans dominate.

    Health Care market growing, but still concentrated (in 000’s).   Corporate Health Care plans reached 75% of total market in 2009
                          Source: ANS                                                      Source: ANS, 2010
    Capital Markets

•   Health Care companies have impressive growth compared with
    the local stock market (Ibovespa) index

                        Health Care companies and Ibovespa.
                             Source: Bloomberg and BTG.

•   There’s a 93% correlation between formal job creation with Health
    Care plan membership

                      Formal jobs: a key factor to growth in HC plan members
                                 Source: Caged and BTG Pactual.
    Socio-Economic driver

•   Growth of middle class consumers

                          Emerging middle class consumers
                             Source: Raymond James

•       Aditional 2% contribution on CAGR Health Care premium in real

         The over 60s represents 10% of the population. This group is
         projected to rise 14% by 2020

         Improvement of life expectancy from 73 to 81 years by 2050

    Increasing share of elderly people in total population   Brazilian population growth expectation
                         Source: IBGE                                 Source: Raymond James
    Market is not saturated
•   Percentage of population with Health Care coverage:
     • Brazil – 23%
     • Mexico – 60%
     • US – 77%
•   Potential growth in the interior

                        Distribution per Brazilian region. Source: ANS, 2010.
•   Underreserved in comparison with
    international standards

•   Simplistic technical pricing models and
    undocumented underwriting standards

•   Large players has preferential discounts with
    Health Care providers

•   “Vertically integrated” Health Care plans
    suffer from lacks of maintenance investment
    and professional management.

•   ANS stifles creativity in product
    development and limits cost-reduction by
    minimum coverages

•   High costs in Brazil
Final thoughts
 •   Brazil presents opportunities greatly outweigh the challenges

 •   Investment Opportunities include:

                 •   Health Care Providers, Health Insurance
                     Companies, HMOs and specialized dental

                 •   Distribution Channels

                 •   Service Providers

                 •   Pharmaceuticals

                 •   Hospitals
Reinsurance Market Overview

• 1939, the Brazilian Reinsurance market was closed to
  direct access by international reinsurers.

• Instituto de Resseguros do Brasil (IRB Re) was

• Officially reopened in April 2008

• Now home to 87 multinational reinsurers including the
  State Reinsurer, Instituto de Resseguros do Brasil (IRB
    Market Volume and Potential

•   2009 reinsurance market US$2.1b

•   Total ‘insurance’ market of US$29.7b

•   3 P&C projects at least US$2.5b (next 6 years)

       World Cup 2014, US$29m,

       Olympics 2016 US$324m,

       “Growth Acceleration Program” R$2 billion
Quick facts
• 87 reinsurers authorized by SUSEP

• 33 Reinsurance brokers

• IRB still has almost 25% market share. By far the
  most profitable
             Brazilian Reinsurance Market (US$ millions)

                            16%                Misc P&C
                                   7%          Marine Aviation Transport
              57%                              Life
 Who’s here

       Ace                Eurasia                     J. Malucelli              Patria
  Agrinational            Ev erest                 Kölnische Rück        Royal & Sun Alliance
      Allianz        Factory Mutual                   Korean Re               Samsung
  Allied World           Federal                    Liberty Mutual               Scor
American Home               Fm                             Lig                   Sirius
       Amlin    General Corporation of India             Lloyd's                 Solen
       Arch              Generali                       Mapfre                 Swiss Re
       Ariel              Glacier                  Mitsui Sumitomo          Tokio Marine
      Aspen             Hannov er                     Munich Re             Transatlantic
   Atradius                HCC                 National Liability & Fire      Trav elers
       Axa                  HDI                       Nav igators            W.R. Berkley
        Axis        Houston Casualty           Nouv elle Compagnie        White Mountains
      Baloise            Hyundai                       Odessey                    XL
     Coface                  IF              Office National Du Ducroire        Zurich
 Ecclesiastical           Inbursa                        Paris Re
 Euler Hermes            IRB-Brasil                     Partner
Market Share
Show me the $
What’s the attraction

• Part of booming BRIC
• Mature market; all lines of business
• 8th largest economy . Ranked 18th in terms of insurance
• Low risk of earthquakes and hurricanes
• Lots of potential to innovate
• The guy to beat is still the state reinsurer.
•The entire health market is up for grabs
• Potential to earn very high rates of investment return.
Interest rates are 8% percent
Main Challenges

•Brazil is not really an open market. It is kind of like a three-ring circus

•Brazilian government keeps changing its mind regarding the
regulation of reinsurers.

•Low level of Brazilian underwriting standards and the scarcity of
claims data.

•Brazil is a very expensive place to do business
Main Challenges

•Brazil is not really an open market. It is kind of like a three-ring circus

•Brazilian government keeps changing its mind regarding the
regulation of reinsurers.

•Low level of Brazilian underwriting standards and the scarcity of
claims data.

•Brazil is a very expensive place to do business
Final thoughts
 • Need to consider Capital injection as investment and not
   cost of capital
 • Lobby Lobby Lobby the government
 • Offer Actuarial analyses (reserving, pricing, capital models)
   in exchange for claims data
 • Recruit local ‘technical’ talent
 • Get to know your clients’ underwriter
Ronald Poon Affat FSA FIA CFA MAAA
Ronald Poon Affat FSA FIA CFA MAAA

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