BB Seguridade mulls Itaú's high-risk insurance portfolio

Reuters

SAO PAULO, Feb 12 (Reuters) - BB Seguridade Participações SA

Asked whether BB Seguridade is evaluating a bid for Itaú's unit, Chief Financial Officer Leonardo Mattedi said the company is "taking a look at opportunities in the market." Mattedi, speaking at a Wednesday event in São Paulo, declined to say whether a bid is on the way.

Itaú, Brazil's largest bank by market value, put the unit up for sale late last month in a bid to deploy capital more efficiently in coming years. The bank could fetch about 1 billion reais ($413 million) from the sale, according to Francisco Kops, an analyst at Banco Safra's brokerage unit.

The process to dispose of the high-risk insurance portfolio is in preliminary stages, Itaú executives led by Chief Executive Officer Roberto Setubal said last week. The sale comes after infrastructure projects related to hosting the World Cup in 2014 and the Olympic Games in 2016 got off to a late start, and the government auctioned rights to operate roads, railways and ports a year later than expected.

Mattedi said BB Seguridade, which is controlled by state-run Banco do Brasil SA, plans to enter the global market for reinsurance jointly with reinsurer IRB-Brasil, which until 2007 held a market monopoly in Brazil.

By growing in high-risk corporate insurance, which specializes in offering coverage for giant corporate projects in risky segments such as oil and gas and infrastructure, and reinsurance, BB Seguridade is betting on double-digit growth for underwritten premiums, analysts said.

Reinsurance prices around the world could come under pressure this year as pension funds, seeking higher returns at a time of low interest rates, enter the market to provide backup cover on major risks.

Reinsurers help primary insurers shoulder the risks assumed for clients in the riskiest, most expensive projects - like oil exploration, heavy construction and defense.

Shares of BB Seguridade fell 2.5 percent to 23.90 reais, on top of a 4.5 percent gain on Tuesday, when it released fourth-quarter earnings.

The company posted adjusted net income, or profit excluding one-off items, of 707.4 million reais in the quarter, 50 percent more than in the year-earlier period. Adjusted return on equity, a gauge of how well shareholders' money is being spent, was 35.9 percent at the end of December, compared with a target of 37 percent to 41 percent last year.

For this year, the company targets ROE, as the gauge is known, of between 44 percent and 49 percent.

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