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Brazilian HealthCare & Reinsurance Markets
August, 2012
Introduction
• 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 insurance
• 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). Source: ANS
Corporate Health Care plans reached 75% of total market in 2009Source: 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.
Employment
• There’s a 93% correlation between formal job creation with Health Care plan membership
Formal jobs: a key factor to growth in HC plan membersSource: Caged and BTG Pactual.
.
Socio-Economic driver
• Growth of middle class consumers
Emerging middle class consumersSource: Raymond James
Demography
• Aditional 2% contribution on CAGR Health Care premium in real terms
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 populationSource: IBGE
Brazilian population growth expectationSource: 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 companies
• Distribution Channels
• Service Providers
• Pharmaceuticals
• Hospitals
Reinsurance Market Overview
History
• 1939, the Brazilian Reinsurance market was closed to direct access by international reinsurers.
• Instituto de Resseguros do Brasil (IRB Re) was established
• Officially reopened in April 2008
• Now home to 87 multinational reinsurers including the State Reinsurer, Instituto de Resseguros do Brasil (IRB Re).
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$2 billion
Quick facts• 87 reinsurers authorized by SUSEP
• 33 Reinsurance brokers
• IRB still has almost 25% market share. By far the most profitable
16%
7%
10%
5%57%
5%
Brazilian Reinsurance Market (US$ millions)
Misc P&C
Motor
Marine Aviation Transport
Liability
Property
Life
Health
Who’s here
Ace Eurasia J . Malucelli PatriaAgrinational Everest 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 SolenArch Generali Mapfre Swiss ReAriel Glacier Mitsui Sumitomo Tokio Marine
Aspen Hannover Munich Re Transatlantic Atradius HCC National Liability & Fire Travelers
Axa HDI Navigators W.R. BerkleyAxis Houston Casualty Nouvelle Compagnie White Mountains
Baloise Hyundai Odessey XL Coface IF Office National Du Ducroire Zurich
Ecclesiastical Inbursa Paris ReEuler 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
