Swiss Re Targets Brazil, Mexico Reinsurance For High Growth

The Brazilian reinsurance market is “very competitive” and pricing is lower than in other countries, in part because Brazil doesn’t usually face natural or climate disasters, Ms. Black said in an interview.

Elsewhere in Latin America, Swiss Re already has established a solid presence in Mexico from its acquisition of Reaseguros Alianza SA in the late 1990s. The business there has seen steady low growth, but Ms. Black said that the plans are now to ramp up activity at a faster pace. Swiss Re has also won approval to set up an office in Colombia.

The Brazilian reinsurance market is growing faster than insurance, which is in turn growing faster than the economy, Ms. Black said. “There’s enough business for everybody,” said Ms. Black, who joined Swiss Re in May 2012 from rival Willis Group Holdings PLC.

The local market for reinsurance premiums was BRL2.85 billion in 2012, down 13% from 2011, according to industry regulator the Superintendence of Private Insurance, or Susep. The number of players in the market increased to 13 from eight, with Brazilian government-controlled reinsurer IRB-Brasil Resseguros SA’s market share slipping to 61% from 63%

Swiss Re reported premiums of BRL15.4 million since it set up its offices in Brazil in June of last year following regulatory changes.

Brazil offers two key opportunities for growth in infrastructure investments and its expanding middle class, Ms. Black said.

Brazil will host the 2014 soccer World Cup and 2016 Summer Olympics, which Ms. Black said are driving infrastructure projects, although opportunities go “way beyond” those events.

The government recently presented a portfolio of projects that require some $235 billion in infrastructure improvements considered vital for Brazil’s economy, which slowed to growth of 0.9% last year from 7.5% in 2010.

Economic stability over the last 15 years has lifted millions of Brazilians out of poverty, and consumer demand has been an important driver of economic growth.

Ms. Black said that once people have bought material goods, then they start to look for other products, such as life assurance and household insurance.

The executive also expects the privatization of government-owned IRB to go ahead after a couple of failed attempts in the past decade. However unlike in 2001, when Swiss Re was a potential candidate to bid, Ms. Black now expects Brazilians to lead that effort and sees Swiss Re participation unlikely.

Brazil’s reinsurance industry was finally opened to competition in 2008 after a number of false starts, although, IRB remained under firm state control. There was an additional upheaval in 2010, when the government imposed rules that effectively required firms to set up local subsidiaries with their own capital in order to operate properly in the Brazilian market.

Swiss Re now believes that the market should start to settle down. “I would like to think there will be no more big surprises,” Ms. Black said.



Votorantim Cimentos Pushes Brazil IPO Plans to $12.7 Billion

Votorantim Cimentos SA, Brazil’s top cement producer, announced plans to raise as much as $5.4 billion in an initial public offering as the benchmark Bovespa stock index posts its worst start to the year since 2000.

Votorantim will list shares in Brazil and American depositary receipts on the New York Stock Exchange, according to a U.S. regulatory filing yesterday, pushing the total amount of pending IPOs in Brazil to $12.7 billion. Banco do Brasil S.A.’s insurance unit filed to issue 12.2 billion reais ($6.1 billion) in shares, while the frequent-flyer unit of Gol Linhas Aereas Inteligentes SA is seeking 1.35 billion reais. Alupar Investimento SA plans to raise 1.16 billion reais.

Votorantim Cimentos, founded in 1933 and now the world’s eighth-largest cement producer, will use the proceeds to fund expansion outside of Brazil and for potential acquisitions. It announced the sale plans after the Bovespa (IBOV) dropped 13 percent this year amid slowing growth and government intervention in industries including energy, utilities and banking that crimped earnings. Commodities producers, which account for about 41 percent of the index’s weighting, were among the worst performers.

“If you’re issuing equity in a sector that’s in favor, there wouldn’t be any problem raising capital,” Gabriel Wallach, who manages about $2.5 billion in assets as chief investment officer of global emerging-market equities at BNP Paribas Investment Partners in Boston, said in a telephone interview. “The Bovespa is too focused on resource stocks, and would actually welcome more equity issuance in other sectors.”

The Bovespa is the worst-performing stock index among major emerging markets this year.

Second Half

Votorantim Cimentos’s IPO will probably take place in the second half of this year, people familiar with the matter said last month. Morgan Stanley, JPMorgan Chase & Co., Banco Itau BBA SA, Credit Suisse Group AG and BTG Pactual SA are managing the sale.

Each ADR is equal to one common share and two preferred shares, according to the filing yesterday. The amount is a placeholder that may change.

Votorantim’s press office didn’t reply to a phone call and e-mailed request for additional comment after regular business hours.

Banco do Brasil, Latin America’s biggest bank by assets, said earlier this month its insurance unit BB Seguridade Participacoes SA planned to sell as much as 675 million of its existing voting shares for 15 reais to 18 reais apiece. The IPO would be the largest in Latin America since July 2009, according to data compiled by Bloomberg. Shares are scheduled to start trading on April 29.

Smiles IPO

Gol, Brazil’s second-biggest air carrier by market share, said on April 8 that General Atlantic LLC agreed to invest as much as 400 million reais in the IPO of its frequent-flier unit, Smiles SA. Smiles plans to sell as many as 52.2 million shares priced in a range of 20.70 reais to 25.80 reais for a total of as much as 1.35 billion reais, according to a prospectus.

Alupar, an electric utility, said April 1 it plans to raise as much as 1.16 billion reais in its initial public offering, selling shares for as much as 21.50 reais each. Trading is expected to start on April 24.

Biosev SA, a Louis Dreyfus Holding BV unit in Brazil, raised as much as 814.4 million reais in an initial public offering this month to fund expansion.

In February, Linx SA, a Brazilian information technology company, raised as much as 527.9 million reais in an IPO.


AP: Court decision is victory for media

ORLANDO, Fla. — A recent court ruling that an Internet news clipping service infringed on the use of Associated Press content is a victory not only for the media but for the public, the news cooperative’s CEO said Monday at the AP’s annual meeting.

A federal judge in New York ruled last month that Meltwater News had infringed on AP’s copyright by using unlicensed AP content verbatim to produce a service for paying customers. The judge granted AP’s motion for summary judgment. Meltwater has vowed to file an appeal.

“The judge’s decision in Meltwater vindicated our position that what all of us here do has value, and deserves protection from free-riders and those who take our hard-earned content without compensating us for it,” Gary Pruitt said at the AP meeting in Orlando.

In her decision, U.S. District Judge Denise Cote said that news reporting is expensive and that copyright law is what allows journalists to support their work.

“That is what we do,” Pruitt said. “And what we must continue to do for a public faced with so much misinformation in this age of information overload.”

Mary Junck, chairman of AP’s board of directors and CEO of Lee Enterprises Inc., reported that AP strengthened its financial health in 2012, growing operating cash flow for the first time in five years.

“Although revenue declined in 2012, the AP team reduced expenses much more,” Junck said. “We have tackled costs the same way you have â(EURO)” with a sharp pencil and an ongoing process of transforming the way we do business, including dramatically reduced rates for members.”

“At the same time, AP is working harder to provide you with a stronger, more relevant news report, including in-depth coverage of significant issues, such as our extensive examination of the Affordable Care Act,” she said.

The annual meeting included a live appearance by Seoul Bureau Chief Jean Lee via satellite from the North Korean capital of Pyongyang and an in-person presentation from West Africa Bureau Chief Rukmini Callimachi and West Africa chief photographer Rebecca Blackwell.

The luncheon speaker was Erskine Bowles, a former chief of staff under President Clinton who co-founded The Campaign to Fix the Debt with former U.S. Sen. Alan Simpson. Bowles urged the publishers and editors in the audience to recognize the risks of the U.S. maintaining its budget deficit.

Bowles said he would announce with Simpson on Friday a new plan to reduce the deficit by an additional $2.5 trillion over the next decade, in addition to the $2.7 trillion in savings already enacted by Congress and the White House. The new plan makes deeper cuts to Medicare and the Pentagon than what President Obama is proposing. Bowles said Obama’s plan doesn’t go far enough to curb the growth of the government’s debt.

“We believe it will also solve our nation’s long-term fiscal problem and do so without disrupting our very fragile economic recovery,” Bowles said. “This plan isn’t perfect. It’s really tough. The problem is real. The solutions are painful. There is no easy way out.”

The AP is owned by 1,400 U.S. newspapers and is largely a wholesaler of news. It sells the content it gathers and produces to newspapers, commercial websites and radio and TV stations.


Brazil’s Pereira: Economic Recovery is Gaining Traction

WASHINGTON–Brazil’s economic recovery is gaining traction, Brazilian Central Bank International Affairs Director Luiz Pereira said Friday, but he would still like to see more “virtuous” growth in the country.

Consumer demand has fueled growth in Brazil in recent years, while investment and industrial production have declined.

That pattern is starting to change, with services growth slowing and industry and investment starting to revive, Mr. Pereira said at a conference in Washington.

“There’s not a collapse in services, it’s just moderating, and you have a slow pick-up of the industrial sector,” he explained. “These movements are showing good prospects for the Brazilian economy in the future.”

There are still risks to growth in Brazil stemming from the global economic situation, Mr. Pereira warned.

Brazil’s central bank voted Wednesday to raise its benchmark interest rate to 7.5% from 7.25% to help fight accelerating price increases. The 12-month inflation rate in March breached the upper limit of the bank’s target range of 2.5% to 6.5%.

Mr. Pereira was one of two members of the monetary-policy committee that voted against raising the rate, though he declined to say why when asked.

There are several factors that are favorable to slower price increases, such as a moderation in credit growth and an expected bumper crops of several foods that had added to price pressures in 2012, Mr. Pereira said.

Nevertheless, the dynamics for inflation are still unfavorable, and the increase in interest rates should help slow price increases, he said. Policy action on inflation was required, and the discussion at the central bank over interest rates was more focused on the timing of an increase rather than whether to raise rates, he said.


In World Of Falling Interest Rates, Brazil Starts To Tighten

As expected, Brazil’s Central Bank hiked interest rates on Wednesday evening to 7.5% from 7.25%.

That’s the overnight interest rate and nowhere near what actual Brazilians pay for credit. But the rate is important to bond investors in a yield hungry world, where Brazilian local currency debt is some of the most attractive investment grade bonds in the world.

Central Bank president Alexandre Tombini hinted several times over the last week that the monetary policy committee was “attentive” to rising interest rates. The 12 month rolling IPCA-15 inflation rate is around 6.4%, on the high end of the Bank’s tolerance band.

Earlier in the week, Nomura Securities’ head of emerging markets Americas, Tony Volpon, clued in on Tombini’s choice of words and said that whenever Tombini used the word “attentive” in relation to inflation, the committee raised interest rates.


Brazil will remain on F1 calendar

Formula One boss Bernie Ecclestone insists the Brazilian Grand Prix will remain at Interlagos, saying he has received assurances from the mayor of Sao Paulo that long-demanded upgrades to the circuit will take place.

Ecclestone, in Sakhir for the Bahrain GP, also says F1 is “talking to quite a few countries” about being added to the calendar. Among them are Thailand, Mexico and Turkey.

Ecclestone says it is worth examining Bahrain’s request to return to the season-opening slot, which returned to Australia when the Bahrain race was cancelled in 2011.

Ecclestone also reaffirmed his opposition to the turbocharged 1.6-liter V6 engines from 2014, which will replace the 2.4-liter V8s. He says he’s concerned the switch would prompt a “fuel economy run.”