OREANDA-NEWS. Fitch Ratings has affirmed the International and National Insurer Financial Strength (IFS) ratings for Bradesco Seguros S.A. (Bradesco Seguros) as follows:

--International IFS at 'A-'; Outlook Stable;
--National IFS at 'AAA(bra)'; Outlook Stable.

KEY RATING DRIVERS

The IFS ratings of Bradesco Seguros are linked to the ratings of its parent, Banco Bradesco S.A. (Bradesco; long-term local currency Issuer Default Rating [IDR] of 'A-', Outlook Stable). Fitch believes the probability of support by Bradesco would be high, should it be required.

Fitch considers Bradesco Seguros as a 'core subsidiary' of Bradesco, therefore its ratings are equalized to those of its parent. This is based on the strategic importance of the insurance operations, which are a key and integral part of the group's business, common branding, and high contribution of Bradesco Seguros to group profits (29% in 2014 and 31% in both 2013 and 2012).

The ratings also reflect the company's leading position in the Brazilian insurance market, consistent performance, diversified revenue base, strong distribution capacity underpinned by the wide agency network of Bradesco, and comfortable liquidity and capitalization ratios.

In 2014, total premiums and contributions, excluding the DPVAT segment, grew almost 14%, which allowed the company to maintain its leading position and overall market share unchanged at close to 25%. The insurer's target for premium growth in 2015 is 12% to 15%. In 2014, life and pension segments continued to be the largest contributors to net earnings (59%), followed by health (17%), capitalization plans (which are a type of savings plans with a lottery feature [10%]), and others including auto and property/casualty (14%).

In the second half of 2014, Bradesco Seguros underwent an organizational restructuring, whereby its unregulated subsidiaries were transferred to Bradseg Participacoes S.A., Bradesco Seguros' parent holding company. The restructuring was part of Bradesco's efforts to optimize capital allocation among its subsidiaries under the Basel III compliant regulatory framework in place in Brazil since end-2013.

According to Bradesco Seguros, as of December 2014, following the reorganization and after dividend payout, there was a reduction of approximately BRL1 billion in the equity of the company, compared to December 2013. According to Fitch's calculations, considering the 13% growth in Bradesco Seguros' gross written premiums and contributions in 2014, the insurer's operating leverage (net earned premiums/equity) will go up to about 2.0x at December 2014 from 1.5x at June 2014. The leverage ratio (net liabilities/equity), which stood at 8.45x at June 2014, will also increase in a meaningful way. Bradesco Seguros' leverage ratio is well above the average of the insurance entities rated by Fitch in Brazil and the region. However, potential risks arising from high leverage are mitigated by the fact that leverage is largely driven by its significant technical reserves for the VGBL and PGBL pension products that do not constitute reinvestment risk for the company. The technical reserves of these products corresponded to 71% of the total technical reserves and 59% of liabilities, at June 2014.

Bradesco Seguros' profitability remains sound and technical results remain good. As of June 2014, return on assets (ROA), combined and operating ratios, as calculated by Fitch, remained stable at 2.6%, 89.6% and 75.6%, respectively. According to management figures, end-2014 results were solid, with the continued support from strong financial income driven by the increase in the local interest rates.

RATING SENSITIVITIES

Bradesco Seguros' ratings are linked to those of Bradesco. Therefore, any change in the bank's ratings would affect the insurer's ratings, as would a change in its willingness to provide support, which Fitch considers highly unlikely.