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Santander 13th Santander 13th Annual Latam CEO C fConference
January, 2009a ua y, 009
SulAmérica at a glance
Largest independent insurance group in Brazil, with multiple growth opportunities
Core business segments | Sept 08
Health1 7 million members
Total insurance premiums | R$ million
CAGR: 4.3%+12.4%
1.7 million members39% market share (rank #2)*
Auto1 9 million insured vehicles1.9 million insured vehicles15% market share (rank #2)
Other Property & CasualtyMajor lines: cargo and fire
Life2 8 million individuals covered
Major lines: cargo and fire
Insurance premiums breakdown | R$ million9M08
Total | R$ 5 7 billion2.8 million individuals covered3rd largest independent player
Pension2nd largest independent institution by
Life & personal accidentR$370
Other property & casualty
R$551
Total | R$ 5.7 billion
10%7%
2 d largest independent institution by reserves
Asset ManagementR$11 6 billion in AUM
R$551
HealthR$3,035
AutoR$1,736
53%31%
10%
R$11.6 billion in AUM2nd largest independent asset manager
* December 2007
$ ,R$1,736
3
Why SulAmérica?
Industry growth with attractive opportunities1
Financial highlights2
Outlook3
Industry growth
Insurance industry greatly benefited from Brazilian economic growth
Insurance industry concentration Insurance premiums % of Brazilian GDP
Other 73 insurance groups
43%
15%
42%
Top 4 insurance groups 58%
43%
Sources: SUSEP and ANS (2006) Sources: Sigma, SUSEP, ANS and Bacen
Insurance premiums % of GDP | 2007Brazilian GDP growth
groups - 58%
Top three
6
#13 #39 #47 #55 #62
Source: Sigma report #3/2008Source: Bacen
Healthcare industry
(1)l |
Stricter regulation to favor consolidation
32 33 35 37 39
Total membership(1)
40
Total revenue | R$47.0 billion (2007)
28% 29% 30% 32% 33% 34%14% 13%
12%11% 11% 12%
20% 19%19%
18%17% 17%
Cooperatives(2)
36%
HMO32%
Insurance
Jun08
38% 39% 39% 39% 38% 38%
Insurance18%
Other(1)
13%
Jun08
Source: ANS1) Other: ASO, Self-managed operators, Dental, Non profit institutions2) Medical and Dental Cooperatives
Source: ANS Sept 2008 | (1) in million
Healthcare regulator to adopt restricter rules for MCO’s
H lth i d t t d lid ti d t i d l t t i t
Highlights
Healthcare industry to undergo consolidation due to increased regulatory constraints
Industry trend: focus on group plans
New opportunities in the growing segment of SME’s
7
New opportunities in the growing segment of SME s
Auto insurance
Growth boosted by credit expansion
New cars licensed | millionAuto insurance premiums industry | R$ billion
CAGR 03 07: +11 0%
8.910.5
12.113.3 13.5
10.011.3
CAGR 03-07: +11.0%+13.2%
1 4 1.6 1.71.9
2.5
1.7
2.1
+26.9%CAGR 03-07: +14.5%
1.4 6
Hi hli ht
2003 2004 2005 2006 2007 9M07 9M08 2003 2004 2005 2006 2007 9M07 9M08
Market highly underinsured: only 30% of vehicles insured
Credit feeding sales: 70% of total sales based on credit
Highlights
Credit feeding sales: 70% of total sales based on credit
2.8 million new vehicles to be licensed in 2008
8
Attractive distribution model
New perspectives of partnerships with alternative distribution network
Auto and Health insurance JVs with Banco do Nationwide operations
Sales structure Joint ventures
Brasil
One of the largest financial institutions in Brazil
24.4 million clients and 15,000 points of
More than 100 points of presence
Network of 26,500 presenceindependent insurance
brokers
Total revenue by distribution channel | 9M08
Distribution partnerships with leading financial institutions
Bancassurance19%
HSBC
Santander
Safra
InsuranceBrokers
Safra
BV Financeira
Banco do Nordeste
9
Brokers81%
Why SulAmérica?
Industry growth with attractive opportunities1
Financial highlights2
Outlook3
SulAmérica: 9M08 earnings highlights
Net income R$293.8 million 34.9%
O 8 % 9 2ROAE 18.5% 9.2 p.p.
Insurance premiums R$5 6 billion 12 4%Insurance premiums R$5.6 billion 12.4%
Combined ratio 98 4% 0 5 p pCombined ratio 98.4% 0.5 p.p.
Return on investment R$458.6 millionReturn on investment R$458.6 million
Average yield 99.6% of the CDI rateg y
12
Health insurance premiums moved up by 9.4%, reaching R$3.1 billion in 9M08.9.4%, reaching R$3.1 billion in 9M08.
Insurance premiums | R$ million Covered individuals 9M08
+9.4%
+8.8% Total | 1.7 million covered individuals
Individual19.0%
Group56.3%
SME ASO16.4%
SME8.3%
-0.8p.p.-3.0p.p.
Loss ratio| % Gross margin| %
0 23 1 +0.2p.p+3.1p.p.
14
Auto insurance premiums recorded a significant growth, closing 9M08 with an increase of 19.7%.
Insurance premiums | R$ million Auto insurance fleet| vehicles in million
-4.2%
+19.7% +11.2 %
-0 5p p +3.0p.p.
Loss ratio| % Gross margin| %
0.5p.p.
-0.3p.p. 2 4p p0.3p.p. -2.4p.p.
16
Other property & casualty ends 9M08 with 16.7% gross margin.with 16.7% gross margin.
Insurance premiums | R$ million Segment breakdown 9M08+7.0%
Oil
DPVAT12% Cargo
18%
-7.6%
Total | R$206.1 million
Oil19 %
Other20 %
Liabilities6%
Fire25%25%
-4.1p.p. +3.4p.p.
Loss ratio| % Gross margin| %
+3.4p.p.
4 9 -4 6p p+4.9p.p. -4.6p.p.
18
Life and personal accident segment presents relevant revenue growth:
Insurance premiums | R$ million Covered individuals | in thousand
51.6% in 9M08.
+19.6%
2,368
2,832-3.6% +51.6%
+19.6%
+20 7 %+20.7 %
+4.3p.p.6 0p p
Loss ratio| % Gross margin| %
-6.0p.p.
+5.0p.p.-1.5p.p.
+5.0p.p.
20
Positive operating results in pension and asset management.
Pension
and asset management.
+11.5%
Pension Contributions | R$ million
+20.7%
Pension plan - reserves | R$ million
Asset management
Investment portfolio | R$ million
8,716
11,604+ 33.1%
+35.0 %
+ 30.8%
22
Source: ANBID
Administrative expenses ends 9M08 representing 12.8% of retained premiums.
+15.1%
Administrative expenses | R$ million Administrative expenses ratio of retained premiums | %
601
692
+0.2p.p601
9M07 9M08
24
Investments income reached R$458.6 million in 9M08 with an average yield of 99.6% of CDI rate.
Investment allocationTotal | R$5.6 billion
Investment strategyTotal | R$5.6 billion
Other9%IGPM
13%Government
securities PGBL/VGBL
19%
Post fixed
IPCA22%
securities fixed income
76%
Corporate fixed income Post fixed
37%fixed income
22%
Variable income 2%
25
Net income reached R$294 million in 9M08 recurring. ROAE ends at 18.5% in h i dthe period.
+34.9%+120.2%
27
Why SulAmérica?
Industry growth with attractive opportunities1
Financial highlights2
Outlook3
Positioned to capture opportunities
Optimization of current operating base
Unexplored potential in strategic regions
Optimization of current operating base
Investing in new opportunities
Consolidation driven
by increased capital
i tImprovement of CRM initiatives
+requirementsImprovement of CRM initiatives
+ Opportunities in Growth with +
Increased investment in marketing
+specific sectors and
regions
profitability
+Projeto Conquista: new value
proposition for distribution structure
++
New perspectives of
partnerships
+End of IRB reinsurance monopoly
+30
Attachment
Foreign partnership
Foreign partnership has combined local experience with international best practicespractices
Current shareholding structure(1)
SULASA
55% 45%
SULASAPAR
MANAGERS AND AFFILIATED
SHAREHOLDERSFREE FLOAT
33% 9% 37%21%33% 9% 37%21%
32
(1) Last Update: Sept, 2008
Research Coverage
Last report Recomendation Target - Price Contact
Nov 11, 2008 BUYR$ 40.00
(12 months)
Juan Partida+52 (55) 5282 7728 [email protected]
Nov 06, 2008 BUYR$ 24.00
(end of 2008)
Henrique Navarro +55 (11) [email protected]
Oct 16, 2008 BUYR$ 34.30
(end of 2009)
Maria Laura Pessoa+55 (11) 3584-1770 [email protected]
Aloisio Villeth Lemos Aug15, 2008 BUY
R$ 42.60
(end of 2008)
Aloisio Villeth Lemos +55 (21) [email protected]
R$ 40 10Iago Whately
Sep 24, 2008 Out-performR$ 40.10
(end of 2009)+55 (21) 3049-9475 [email protected]
Nov 23, 2008 Sector-performR$ 38.90 Victor Mizusaki
+55 (11) 3073 3030Nov 23, 2008 Sector perform(end of 2009) +55 (11) 3073-3030
Dec 11, 2008 Equal-weightR$ 24.53
(end of 2009)
Javier Martinez de Olcoz Cerdan +1 (212) 761-4542
l l
33
(end of 2009) [email protected]
Disclaimer
This material is a presentation of general background information about Sul América S.A.("SulAmérica") as of the date of the presentation or as otherwise indicated. It is information insummary form and does not purport to be complete. It is not intended to be relied upon as advice topotential investors and does not form the basis for an informed investment decision. This presentationi t i tl fid ti l d t b di l d t th N t ti tis strictly confidential and may not be disclosed to any other person. No representation or warranty,express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness, orcompleteness of the information presented herein.
This presentation may contain statements that are forward-looking. Such forward-looking statementsThis presentation may contain statements that are forward looking. Such forward looking statementsare only predictions and are not guarantees of future performance. Investors are cautioned that anysuch forward-looking statements are and will be, as the case may be, subject to many risks,uncertainties and factors relating to the operations and business environments of SulAmérica and itssubsidiaries that may cause the actual results of the companies to be materially different from anyy p y yfuture results expressed or implied in such forward-looking statements. No person has anyresponsibility to update any such information.
This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe foror purchase any securitiesor purchase any securities.
Neither this presentation nor anything contained herein shall form the basis of any contract orcommitment.
Sul América S.A.
IR Department
R d Q it d 86 8th flRua da Quitanda 86, 8th floor
Brazil - 20091-005 - Rio de Janeiro, RJ
55.21.2506-9161
www.sulamerica.com.br/ir
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