Samy Hazan - Yasuda & Maríitma Seguros
Life Insurance Market in Brazil
BTG Pactual Investor’s Meeting – April 14
Samy Hazan – Head of Life Insurance
Agenda
Insurance Market in emerging economies – overview
Life Insurance Market in Brazil
Main opportunities and Growth Drivers in the Life Insurance Segment
Financial Performance of relevant product lines (Life)
Market agenda and key challenges for Life and Pension
Q&A
Agenda
Insurance Market in emerging economies – overview
Life Insurance Market in Brazil
Main opportunities and Drivers in the Life Insurance Segment
Financial Performance of relevant product lines (Life)
Market agenda and key challenges for Life and Pension
Q&A
S O M P O J A P A N
Global market size overview [USD trillion]
Insurance in emerging markets has grown by 17% in the last years, gaining significant share in the global market
Source: Swiss Re, Ernst & Young Terco
CAGR
2005-2011
3,8%
17%
• Insurance in emerging markets is experiencing
rapid growth, due to a combination of
macroeconomic and social circumstances:
– High GDP and GDP per capita growth
– Current low penetration of insurance (high
potential to grow further)
– New customers entering the market due to a
process of social inclusion
– Consumer confidence has risen significantly
in most emerging markets in the last decade –
stimulating consumption
– Changes in the demographic profile of
populations (e.g.: aging)
• Insurance market in many developed countries is
slowing down, mainly due to 2 factors:
– Developed economies were heavily affected
by the 2008 global crisis
– Demographic factors in developed
countries are limiting growth - such as the
Life insurance market in Europe
1) North America, Western Europe, Japan and newly industrialized Asian economies, Australia and
New Zealand
9% 10% 12% 13% 15% 15%8%
87%
4,2
90%
3,7
2011 2010
100% 4,1
Developed
countries1)
2005 2007 2006
Emerging
countries
88%
2008
92%
3,4
91%
2009
4,1
85%
4,3
85%
4,6 4,9%
Samy Hazan - Yasuda Seguros
S O M P O J A P A N
Brazilian market size overview
0 10.000 20.000 30.000 40.000 50.000 60.000
Russia
Italy
Germany
France
UK
Mexico
Brazil
United States
14
India
10
8
6
4
2
Australia
South Africa
UAE
Malaysia Singapore
Hong Kong South Korea
China
Japan
Turkey
Poland
12
Insurance
Penetration [%GDP]
GDP per Capita
[Nominal U$ Dollars]
Market maturity Insurance penetration vs GDP per Capita [2010]
Brazil
2020?
Brazil shows one of the highest insurance market growth rates, but what do we need to boost insurance penetration in the economy?
Source: Sigma Report 2011, Swiss Re, IMF, Ernst & Young Terco
UK
France
Germany Italy
4
2 27
14
11
India
South Korea
China
Turkey
Japan 10
26
UAE
0 1 -1
South Africa
-3 -2
Australia Singapore
12
Malaysia
3
Mexico
Brazil
United States
2
4 9
Poland
5 10
8
6 7 8
6
Russia
Hong Kong
Brasil
2020?
Insurance
Penetration [%GDP]
Real Growth in 2010 [%]
What made other markets/geographies grow ? 1. Economic stability and per capita income growth 2. Clear and stable regulation 3. Product innovation and segmentation 4. Alternatives distribution channel 5. Reinsurance
S O M P O J A P A N
LatAm - Brazil has posted the largest growth rate in US dollars since 2007 (average 18%), above Colombia 15% and Chile 14%
BR/USD Exchange rate as Dec 31 each year
Source: Ernst & Young Terco
YoY change % Life and Non Life Insurance in selected LatAm markets
28 25 26 29 36
43
54
65 67 74
81 90
101
115
130
16 15 16 20 23 29
36 42 43 47
51 57
64 71
80
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11E '12E '13E '14E '15E
Life Non-life
Latin America insurance market size (GPW US$bn)
CAGR ’01-’15E: 12.0% 45
11
3
6
3 1
37
13 12
4 6
2
Life Non-life
Selected countries (2012 GPW US$bn)
CAGR ’01-’15E: 11.6%
Source: Mindpower Solutions–Latin America insurance market outlook to 2015 Source: Swiss Re (2012)–"World Insurance in 2012“, latest available report
Agenda
Insurance Market in emerging economies – overview
Life Insurance Market in Brazil
Main opportunities and Drivers in the Life Insurance Segment
Financial Performance of relevant product lines (Life)
Market agenda and key challenges for Life and Pension
Q&A
S O M P O J A P A N
7
Total Premium in Brazil reached R$ 173 billion in 2013, driven by personal lines segment
1) Não considera saúde Nota: Seguros Gerais considera: Automóveis, Patrimoniais, DPVAT, Transportes, Habitacional, Responsabilidades, Riscos Financeiros, Marítimos, Rural, Aeronáuticos, Riscos Especiais Fonte: FENASEG, SUSEP, Análises Booz & Company
* 2013 Dados de JAN A NOV anualizados
Inrurance Market in Brazil (excluding Health)1
Total – R$ billion
CAGR (08-13)
%
11% 11% 11% 11% 11% 12% 10% 9% 8% 8% 7% 4% 42%
46% 47%
48%
52% 52% 38% 34%
34%
33%
31% 32%
2008 2009 2010 2011 2012 2013
85 95
111
129
157
173,5
General Insurance ((P&C)
Life Insurance (VGBL, Life, PA)
Pension (PGBL)
Capitalização
11%
20%
-4%
17%
+ 15%
*
S O M P O J A P A N
Brazilian market size overview
The Brazilian insurance market will grow ~15% per year until 2020, both life and non-life insurance show solid growth
Source: Cnseg, IMF, Ernst & Young Terco
14,5%
CAGR
2011-2020
14,9%
13,3%
1) VGBL, PGBL, Pension, Life and Health 2) Auto, Property, Others
69,1130,2
42,537,7Non - Life 2)
Life 1)
2020f
677,6
547,4
2015f
353,6
284,6
2011
199,9
157,4
2010
172,1
134,5
2009
150,9
32,9
118,0
CAGR: 15%
CAGR:
15%
CAGR:
14%
MAIN GROWTH DRIVERS
Life & Health
• Fast rates of population aging
• Deficiencies/restrictions of Public Social Security
System
• Increase in corporate plans as employee benefits
• Increase in the formalization of the economy –
increasing penetration in small and medium
companies
• Increase in average premiums, with the addition of
extra services and assistances
Non-Life
• Growth of the automotive fleet
• Growth of consumption levels
• Government and private investments (infrastructure
and productive investments)
• New products (e.g.: extended warranty)
Additionally to macroeconomic and demographic drivers, Brazilian customers have been educated to be more concerned
about risks through cultural references and advertising in the last years
Agenda
Insurance Market in emerging economies – overview
Life Insurance Market in Brazil
Main opportunities and Growth Drivers in the Life Insurance Segment
Financial Performance of relevant product lines (Life)
Market agenda and key challenges for Life and Pension
Q&A
S O M P O J A P A N
The sharp rise in Brazil’s per capita income has been shifting consumer habits towards more sophisticated products
Source: Ernst & Young Terco
Brazilian per nominal capita income and customer habits [USD]
2.611 3.696
19.0041)
10.993
1990 2000 2010 2020f
1) Forecast 2) Foreign Direct Investments
• The Real Plan succeeded in drastically
reducing inflation
• Unemployment rates still high after the
plan
• Lack of positive economic perspectives,
despite the recently achieved stability
•Low insurance consumption
•Insurance bought on a “need basis”
•Predominance of auto, health and other
traditional products
•Predominance of high income
consumers
• Consumer confidence grew during the
decade, despite a confidence crisis
triggered by Lula’s election
• Decreased unemployment
• Increased per capita income
• Good economic perspectives and
Investment grade, boosted FDI2)
•Rise in insurance consumption
•Increase in the demand for family
protection insurance, such as life
insurance and unemployment insurance
•Rise in middle class consumption
• Announced public investments generate good
growth perspectives
• Low unemployment rates
• Increased purchasing power
• Interest rates cuts and government incentives
softening the effects of the global crisis
•Increase in demand for more segmented
products among high and middle class
consumers
•Rise in low cost basic insurance demand for
lower classes
Stabilization Period Strengthening the Economy Promising future
S O M P O J A P A N
-2
0
2
4
6
8
10
12
14
16
18
20
2005 2006 2007 2008 2009 2010 2011 2012 2013
GDP
Life
Auto
Real GDP growth X Real Life Premiums Growth X Real Auto Premiums Growth (%) Life and Auto premiums growth rates % deflated by IPCA
Life 6,7X real GDP on average
Auto 5,6X real GDP on average
Real GDP growth rates %
Life insurance real growth rates have shown no correlation with real GDP growth, raising > 6X GDP since 2005
Auto growth rates tend to be more inverse to GDP, as GDP goes up, auto growth rates tend to go down and vice versa
%
Source: SUSEP
S O M P O J A P A N
4%
6%
8%
10%
12%
14%
'01 '02 '03 '04 '05 '06 '07 '07 '08 '09 '10 '11 '12 '13 '14
Life Insurance Key Growth Drivers
Real regular average income Consumer Credit Outstanding growth and Credit Life Growth %
Source: Central Bank and SUSEP
45 51 70 108 150 218 290 318 442
561 567 585
84 83 101 141
187 262
378 390
527
650 640 673
129 134 171 249
337
481
668 708
970
1.212 1.207 1.258
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Consumer Corporate
Total credit outstanding (US$bn)
Source: Brazilian Central Bank
Note: Largest range of data available
Lowest historical
unemployment rate
recorded by IBGE
Jan-14
4.8%
Source: IPEA, IBGE
Unemployment rate
Source: IBGE and Brazilian Central Bank; 1 Spot annual rate, 2 LTM inflation rate
1
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2006 2007 2008 2009 2010 2011 2012 2012
Consumer Credit
Credit Life
Low unemployment rate, credit expansion and higher consumption power and
disposable income have been driving Life insurance growth in Brazil
3,2% growth Dec/13 x Dec/12
S O M P O J A P A N
Low unemployment and real earnings gains increased the confidence of families in the period.
However, the high level of debt, rising interest rates on consumer credit and inflation persistence
kept the intention of consumption at a lower pace compared to last year
Household Consumption Intension
ICF below 100 points: indicates a sense of dissatisfaction
ICF above 100 (with a limit of 200 points): indicates the degree of satisfaction in terms of employment, income and consumption capacity
Source: CONFEDERAÇÃO NACIONAL DO COMÉRCIO – CNC.
S O M P O J A P A N
The Brazilian insurance market is poised for growth
Sustained personal disposable income growth… …with room for growth as per capita spending catches up
9.840 8.100
6.770 5.760 4.960 4.320
37.800
19.840
5,3% 5,2%
4,0% 3,9% 3,7%
3,0%
1,6%
(0,1)%
Life Insurance Key Growth Drivers
EU Peru Mexico Colombia Brazil US Chile
2014E private consumption per capita (US$)
Col. Brazil
Average difference
of $31,175
Average = 6,625
Mexico Peru US EU Argentina Chile
CAGR 10–14E real growth in personal disposable income
Average = 4.2%
Sources: EIU, Individual country central banks Sources: EIU, Individual country central banks
Income to
maintain
living
standard
Mortality
Protection
GAP
US$ 2,5 bn
Savings
Life Insurance
The large mortality protection gap presents a
sizeable opportunity in life insurance
Source: Swiss Re (2013)–“Global insurance review 2013 and outlook 2014/15”, latest available report, EIU
Agenda
Insurance Market in emerging economies – overview
Life Insurance Market in Brazil
Main opportunities and Growth Drivers in the Life Insurance Segment
Financial Performance of relevant product lines (Life)
Market agenda and key challenges for Life and Pension
Q&A
S O M P O J A P A N
Stock price performance since 2012 (January = 100%)
70%
80%
90%
100%
110%
120%
130%
140%
150%
160%
Jan-12 Mar-12 May-12 Jul-12 Oct-12 Dec-12 Feb-13 May-13 Jul-13 Sep-13 Dec-13 Feb-14
Source: Factset, as of March 3rd, 2014
Brazilian insurers have continued to outperform the market in recent months
Banks Brokers / Insurers- ex BB Seguridade
+41% BB Seguridade
+34% Brokers /
Insurers ex-
BB Seguridade
(7%) Banks
(18%) Ibovespa
The Brazilian insurance market continues to present profitable growth opportunities, reflected in the public valuations of traded insurance companies, despite short term macro volatility
S O M P O J A P A N
Industry analysis
Performance of relevant product lines Premiums written
Claims expenses
Selling expenses
• Strong premium growth in all these categories
• Claims ratios dropping and/or very low
• Underwriting gains increasing and very high on credit life
Life – group (billions)
0
2
4
6
8
10
PA – group (billions)
Credit life (billions)
Individual Life (billions)
PA Individual (billions)
0
1
2
3
4
5
0
2
4
6
8
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
S O M P O J A P A N
Industry analysis – Premium breakdown - High potential for underwriting gains
Source: SUSEP database (year ending 2013)
Except for Group Life, which has posted 26% gross margin (more competition), all other lines have posted more than 45% gross margin being Individual Life the most profitable
Sales expenses
Net claims
Underwriting surpluses before G&A (DA)
Investment income
35% 37% 25%
16%
16% 16% 49%
18%
49% 47%
26%
66%
n/a n/a n/a n/a
Group PA Credit Life Group Life Individual Life
Commissions tend to be high in Credit Life and other lines because of market concentration
S O M P O J A P A N
18,8 19,5 22,9
28,1 31,8
38,8
46,1 53,6
70,5 73,7
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Pension Contributions R$ Billion VGBL + PGBL
Deficiencies/restrictions of public Social Security system in Brazil has driven private pension demand, contributions have quadrupled in the last 10 years.
Source: FENAPREVI – National Federation of Life Insurance Companies - www.fenaprevi.org.br
4,5%
CAGR: 18%
Resolução do governo obrigou os gestores a iniciar a substituição, a partir de maio/13, de aplicações de curto prazo e indexadas à Selic por títulos mais longos, como as NTN-Bs, atreladas ao IPCA
Agenda
Insurance Market in emerging economies – overview
Life Insurance Market in Brazil
Main opportunities and Growth Drivers in the Life Insurance Segment
Financial Performance of relevant product lines (Life)
Market agenda and key challenges for Life and Pension
Q&A
S O M P O J A P A N
Private Pension Market – Challenging times ahead …
Redução na taxa de juros vem pressionando receita de carregamento
Driver de valor: coberturas de risco e escala
Pressão ROE longo prazo
S O M P O J A P A N
Private Pension Market – Challenging times ahead …
Solvência II
Capital regulatório para VGBL e PGBL – pressão ROE das
empresas
Risco de Mercado
Taxa contratual Previdência (annuities)
LAT – Teste adequação passivo Previdência
S O M P O J A P A N
TEMAS “STATUS”
DISTRIBUIÇÃO / UTILIZAÇÃO DE MEIOS ELETRÔNICOS / SIMPLIFICAÇÃO
EDITADA A RESOLUÇÃO CNSP Nº 294/2013 - UTILIZAÇÃO DE MEIOS REMOTOS
NAS OPERAÇÕES RELACIONADAS A PLANOS DE SEGURO E DE PREVIDÊNCIA
COMPLEMENTAR ABERTA .
VGBL SAÚDE AGUARDANDO VOTAÇÃO DO PL Nº 7.052/2014 NO CONGRESSO NACIONAL.
SEGUROS DE PESSOAS EM REGIME DE CAPITALIZAÇÃO PROJETO DE REGULAMENTAÇÃO SENDO ELABORADO PELA FENAPREVI PARA
ENVIO E APRECIAÇÃO PELA SUSEP.
PATRIMÔNIO DE AFETAÇÃO ENCAMINHADA AO GOVERNO PROPOSTA PARA APRESENTAÇÃO DE PROJETO DE
LEI.
COMERCIALIZAÇÃO DE PRODUTOS LEVANDO EM CONTA TODA A SITUAÇÃO
FINANCEIRA DO CLIENTE – “SUITABILITY” / PRODUTOS PARA PROPENENTES
QUALIFICADOS
EM DISCUSSÃO ONO ÂMBITO DA COMISSÃO DE INVESTIMENTOS DA SUSEP.
EMPRÉSTIMOS: UTILIZAÇÃO DE RECURSOS DE PROVISÕES COMO GARANTIA
ACESSÓRIA, PARA MELHORIA DOS INDICADORES DE RESGATES
PL Nº 6.723/2013 (DEP. ONOFRE SANTO AGOSTINI. AGUARDANDO
APRESENTAÇÃO DE EMENDAS NA COMISSÃO DE FINANÇAS E TRIBUTAÇÃO DA
CÂMARA DOS DEPUTADOS.
ORIENTAÇÃO E EDUCAÇÃO FINANCEIRA / SECURITÁRIA E PREVIDENCIÁRIA UTILIZAÇÃO PELA FENAPREVI DE MÍDIAS SOCIAIS (FACEBOOK) E
IMPLEMENTAÇÃO DE “GAME” EDUCATIVO.
Market Agenda
Source: FENAPREVI
S O M P O J A P A N
APPENDIX – MARKET DATA
S O M P O J A P A N
26
ESTATÍSTICAS – PLANOS DE CARÁTER PREVIDENCIÁRIO
2013
VGBL VGBL VGBL PGBL PGBL PGBL PLANOS
TRADICIONAIS PLANOS
TRADICIONAIS PLANOS
TRADICIONAIS FAPI FAPI FAPI
2012 2013 % 2012 2013 % 2012 2013 % 2012 2013 %
ARRECADAÇÃO
59.564.914,81 62.152.292,12 4,34% 7.447.157,26 7.825.365,68 5,08% 3.439.660,92 3.680.413,33 7,00% 9.443,95 7.125,45 -24,55%
CAPTAÇÃO LÍQUIDA
36.648.782,39 27.844.656,58 -24,02% 3.707.474,66 3.284.466,54 -11,41% 1.985.098,35 2.381.862,83 19,99% - 11.982,74 - 250,16 -97,91%
RESGATE
22.916.132,42 34.307.635,54 49,71% 3.739.682,60 4.540.899,14 21,42% 1.454.562,57 1.298.550,50 -10,73% 21.426,69 7.375,61 -65,58%
PORTABILIDADE
3.292.516,90 4.717.549,66 43,28% 2.562.124,52 2.463.094,87 -3,87% 4.727,74 92.092,77 1847,92% - - 0,00%
CARTEIRA
209.429.490,00 242.446.733,87 15,77% 75.182.746,00 80.738.752,68 7,39% 53.461.983,12 50.253.096,29 -6,00% 487.577,00 488.955,63 0,28%
PROVISÃO
209.429.352,00 241.384.127,34 15,26% 75.162.038,00 80.288.913,99 6,82% 40.741.727,78 41.216.903,74 1,17% 487.577,00 488.955,63 0,28%
59,56
36,65
22,92
3,29
62,15
27,84 34,31
4,72
- 10,00 20,00 30,00 40,00 50,00 60,00 70,00
Mil
hõ
es
VGBL
2012 x 2013
7,45
3,71 3,74 2,56
7,83
3,28 4,54
2,46
- 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 9,00
Mil
hõ
es
PGBL
2012 x 2013
Source: FENAPREVI
S O M P O J A P A N
27
Prêmio de Seguros (R$)
Ramo Jan/12 -Nov/12 Jan/13 - Nov/13 ∆%
Individual Coletivo Total Individual Coletivo Total Total %
Vida 833.171.659 7.623.688.190 8.456.859.849 1.197.179.201 8.697.126.252 9.894.305.453 17,00%
Prestamista 77.204.219 5.167.792.318 5.244.996.537 73.410.195 6.378.781.434 6.452.191.629 23,02%
Dotal Misto 1.009.359.493 0 1.009.359.493 1.131.919.707 0 1.131.919.707 12,29%
Acidentes Pessoais 392.519.867 3.547.590.105 3.940.109.972 534.534.874 3.876.498.553 4.411.033.427 11,95%
Eventos Aleatórios 162.630.540 396.388.189 559.018.729 197.223.472 466.168.149 663.391.621 18,67%
Doenças Graves ou Terminal 30.597.279 335.736.921 366.334.200 40.279.355 366.705.735 406.985.090 11,10%
Auxílio Funeral 10.607.377 144.771.056 155.378.433 13.596.618 318.187.236 331.783.854 113,53%
Viagem 18.012.961 43.319.189 61.332.150 41.152.988 53.283.466 94.436.454 53,98%
Desemprego/Perda de Renda 71.658.463 28.174.306 99.832.769 49.100.043 17.001.338 66.101.381 -33,79%
Educacional 1.645 24.805.880 24.807.525 2.754 33.805.030 33.807.784 36,28%
Dotal Puro 8.589.739 0 8.589.739 11.088.143 0 11.088.143 29,09%
Microseguro 0 0 0 6.877.111 0 6.877.111 100,00%
PCHV 1.460.267 48.195 1.508.462 1.722.843 45.742 1.768.585 17,24%
TOTAL 2.614.443.463 17.312.314.349 19.928.127.858 3.298.087.304 20.207.602.935 23.505.690.239 17,96%
Database: 11.2013
PRÊMIO DE SEGURO COMPARATIVO JAN A NOV
2013 X 2012
Source: FENAPREVI