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Brasil Insurance sees fewer acquisitions in 2014 as economy sags

By Natalia Gomez

SAO PAULO, Oct 25 (Reuters) - Brasil Insurance expects a slowdown in acquisitions next year, as family businesses are more hesitant to sell with a weaker economy hurting valuations.

The Brazilian holding company has bought 23 brokerages since it went public in 2010, nearly doubling its portfolio to 50 businesses. The values of its acquisitions are usually based on a multiple of brokerages' net income over the prior 12 months.

"Knowing that rule, owners don't want to sell their assets now, in the hopes that their results will improve," said Fabio Franchini, vice chairman of the board of Brasil Insurance, in an interview in Sao Paulo.

Brokerages serving small and medium-sized businesses have been especially affected by the shaky economy, Franchini said. Brasil Insurance is in talks with dozens of brokerages, all of which have expressed some caution, he added.

Still, Franchini said there is room for consolidation in the promising Brazilian insurance industry.

Brazilians spend less than a tenth of the amount Britons or Americans do on insurance products. As the country's middle class grows, insurers are luring new clients by transforming traditional, costlier policies into cheaper products.

In April, BB Seguridade Participações SA sealed the world's biggest initial public offering in seven months, as state-controlled Banco do Brasil SA tapped strong investor appetite in its pension, annuity and insurance unit.

Lower interest rates, stable household income and a strong job market have boosted Brazilian demand for retirement packages and health and auto insurance.