Insurance Mergers and Acquisitions on the Rise in Brazil

Insurance is a sector to watch in terms of M&A activity in Brazil. According to KPMG, transactions in the sector grew by 66.7% in the first half of this year compared with the same period last year. The sector moved up from twelfth position to eighth, beating out important Brazilian industry sectors such as oil and gas, mining, sugar and alcohol in terms of number of transactions.

Fifteen insurance mergers and acquisitions were completed in the first six months of the year, compared to only nine during the first half of 2010. Of the 15 deals, 11 were domestic transactions, or acquisitions of Brazilian companies by Brazilian companies. Of note among the foreign transactions was The Travelers Companies, Inc’s purchase of a 43% stake in Brazil’s market leader in the surety insurance business, JMalucelli Participações em Seguros e Resseguros S.A.

Continuing deregulation since Brazil opened up its insurance industry to foreign participation in 1996 has spurred industry growth. The increased activity in M&A deals, however, is mostly owing to Brazil’s economic boom. As more and more disposable income becomes available to purchase insurance products, Brazil’s insurance sector is consolidating to capture market share.

Increase in M&A activity is not limited to the insurance industry, however. KPMG reports that between January and June of this year, 379 mergers and acquisitions were completed in Brazil – 8% more than the same period of 2010. KPMG says it expects to see a record number of M&A transactions this year in Brazil, climbing above the 726 transactions for 2010.