New Financial Services market report from Business Monitor International: "Mexico Insurance Report Q4 2012"

Boston, MA -- (SBWire) -- 10/08/2012 --Key Insights And Key Risks

The Mexico Insurance Report considers the prospects for both life and non-life insurers in the country. Recent developments continue to highlight both strengths and weaknesses. Premiums in calendar 2011 were boosted by the multi-annual renegotiation of PEMEX's omnibus policy, but particular non-life lines have demonstrated very strong growth in Q112 compared to Q111. The expansion of premiums in the important auto insurance sub-segment has also been in low double-digit figures. Thanks in part to anaemic growth in group life premiums, life density is rising slowly, and from a low level.

We doubt that there will be radical changes in the life segment unless and until: a) a sustained education programme effectively promotes life insurance and long term savings; b) shifts in the distribution of household incomes mean that there is a dramatic increase in the number of households that can afford to buy the offerings of the life insurance companies; and c) at least one of the major players develops an innovative product that captures the imagination of the masses. The rapid rise in micro-insurance in Brazil over the last 18 months or so provides an indication of what could be achieved.

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In some markets, development of insurance is hampered by desperate competition for business - regardless of profitability - from large numbers of undersized companies. This is emphatically not the case in Mexico. Compared to other emerging markets, both the main segments stand out for the importance of companies that are substantial by most standards and backed by well-capitalised financial institutions.

Various deals in the last year highlight how Mexico is still seen as a key opportunity by many multinational players. The first is the formation of the bancassurance joint venture across all of Latin America between Zurich Insurance Group and Santander. This deal takes advantage of three trends: rising demand for non-life insurance in economies that are developing relatively fast, the growth in organised savings and the further development of bancassurance as a very important distribution channel. Although Mexico's life segment remains in competition with its vastly larger counterpart in the US, all three trends are present in the country (Zurich is underwriting non-life risks as well).

A second deal is GrupoSura's purchase of the pension and asset management business of ING across South America and its life insurance businesses in Peru and Chile. This transaction is unusual in that it produces a regional player that is not a multinational based in North America or Europe. One aspect that has not been emphasised is that ING's pension operations in Mexico made up a substantial part of the business that was sold.

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