HDI forges ahead in Brazil and wider Latin American market

Following the acquisition of select Liberty Mutual Insurance businesses in Brazil, Chile, Colombia, and Ecuador earlier this year, Talanx Group moves up to third place in the property and casualty insurance market in Latin America, and reaches pro forma rank two in the region’s biggest market, Brazil. This is no flash in the pan. It is the culmination of a long game played by the German insurance and reinsurance group, which is part of the Hannover-based Talanx Group. HDI first entered the Latin American market back in 1979. The internationalisation of the group accelerated after its acquisition of the troubled Gerling group of companies in 2006 and after parent company Talanx went public in 2012. The modern Latin American adventure for HDI really got underway with the acquisition of the property/casualty insurer ISE in Chile, subsequently re-named HDI Seguros Generales, in 2008. A year later HDI-Gerling International took over Genworth Seguros México. The big move in Brazil came in the summer of 2014 when Talanx opened an industrial lines unit alongside its existing retail international and reinsurance units. “Brazil is the largest and most populous country in Latin America and the fifth largest in the world in terms both of size and of population. At the same time, it is the largest insurance market in Latin America. Many up-and-coming companies in this country have a big requirement for high-quality industrial insurance”, said David Hullin, member of the HDI Global SE executive board, responsible for business in Latin America. “There is therefore a very sound rationale for us to be represented by our own subsidiary company in this very important market in Latin America,” he added. The tempo was really stepped up more recently in May 2022 when HDI International acquired the retail business of Brazilian firm Sompo Seguros, part of the Japanese owned insurance group. HDI said that it would enable it to gain scale in motor while diversifying into non-motor property and casualty as well as life protection business. This strengthened its market position in Brazil to be the seventh-bigger carrier in the P&C market and fourth in the motor insurance market. Talanx board member Wilm Langenbach said at the time: “In a consolidating market, scale and diversification become more and more important. This acquisition enables us to continue our success story in Brazil, which is the largest insurance market in Latin America, with significant profitable growth potential in the mid and long term.” The acquisition of the Liberty Mutual business in Brazil and Latin America earlier this year was the latest big step forward in the country and region. Under the deal, the Retail International division of the Talanx Group acquired the Liberty Seguros personal and small commercial business in Brazil, Chile, Colombia and Ecuador. By this move ,HDI is expected to increase its gross written premiums (IFRS 4) in Latin America by around E1.7bn. With this transaction, HDI reaches pro forma rank two in Brazil, rank one in Chile, and rank seven in Colombia, it said. “Furthermore, the division’s overall portfolio will be significantly better diversified as a result of the increase in Latin American business to approximately 45%,” added HDI. The purchase price was expected to be approximately €1.38bn at the signing date of the transaction, subject to customary purchase price adjustment mechanisms. The transaction included Liberty Specialty Markets direct insurance business in Brazil, Chile and Colombia. The transaction did not include Liberty Specialty Markets facultative reinsurance, Liberty Mutual Reinsurance treaty reinsurance and Liberty Mutual Surety businesses which continues to operate in Brazil, Chile and Colombia. HDI Seguros generated a gross premium volume of around BRL4.5bn (€789m) in Brazil in 2022. HDI Seguros in Chile generated a gross premium volume of 488bn Chilean pesos (€533m) and HDI Seguros in Colombia 425bn Colombian pesos (€82m). “With the acquisition of these Liberty Mutual operations, we are continuing our success story in Latin America,” said Torsten Leue, chairman of the board of management of Talanx. “The acquisition fits seamlessly into our strategy of achieving market-leading positions in our core markets through organic and inorganic growth. Alongside Europe, Latin America is one of our core regions in the retail business. We are therefore pleased to be among the top three in Latin America with this acquisition. It will improve our group net income and our return on equity already in the first year after the expected closing in 2024. The acquisition will further strengthen our primary insurance business and our diversification across business lines.” Langenbach added: “The acquisition is an important milestone in the implementation of our strategy to reach a top five position in our core markets across the property/casualty business by 2025, to further diversify our portfolio and to strengthen our technical excellence. In addition, the acquisitions will allow us to achieve significant opportunities with our existing business in Brazil, Chile, and Colombia. I am very pleased that our future Liberty colleagues will strengthen us with their outstanding expertise and experience in Latin America.” The attraction of the Brazilian and wider Latin American market for a global player such as HDI is obvious when you look at the growth potential, particularly in Brazil, which remains relatively underinsured despite recent impressive growth rates. In 2022, the country accounted for 41% of the region’s insurance revenue and it ranked 17th in the global insurance market. Insurance premiums (life and non-life) were BRL619.3bn (€116.98bn), equivalent to 6.3% of Brazil’s GDP, while claims amounted to BRL452.1bn (€85.40bn). Last year, revenues increased 11.8%. According to data and analytics firm GlobalData, Brazil’s non-life industry is set to grow at a compound annual growth rate (CAGR) of 7.3% from BRL242.6bn (€45.84) in 2022 to BRL344.9bin (€65.15bn) in 2027, in terms of direct written premiums. According to the firm, the non-life insurance industry in Brazil is projected to grow by 8% in 2023 and 6.7% in 2024, supported by growth in the economy, investment in new infrastructure projects, and increasing health awareness. HDI is now well placed to take advantage of these impressive forecasts after successfully playing its long-term game.

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