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 'BBB+'; Outlook Negative;
--National IFS at 'AAA(bra)'; Outlook Stable.

KEY RATING DRIVERS
The IFS ratings of Bradesco Seguros are aligned with the ratings of its parent, Banco Bradesco S.A. (Bradesco, long-term local currency Issuer Default Rating (IDR) of 'BBB+'; Outlook Negative). The Negative Outlook on Bradesco Seguros' IFS mirrors that on its parent's long-term local currency IDR, which, in turn, reflects the rating constraint from Brazil's sovereign ratings (LT LC IDR 'BBB'; Outlook Negative). Fitch believes the probability of support by Bradesco to Bradesco Seguros would be high, should it be required.

Fitch considers Bradesco Seguros a 'core subsidiary' of Bradesco, and 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 the first six months of 2015 and 2014, and 31% in 2013).

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

In the third-quarter of 2015, Bradesco announced that it would acquire HSBC Bank Brasil S.A. (HSBC Brasil). Fitch expects the transaction to entrench Bradesco Seguros' position in the Brazilian insurance market further, as it will incorporate HSBC Brasil's three insurance subsidiaries following the conclusion of the acquisition in 1Q2016. These companies operate in VGBL, PGBL and capitalization segments and their premiums were equivalent to 5% of Bradesco Seguros' total premiums, in the first half of 2015.

In the first six months of 2015, total premiums and contributions grew a strong 19% in comparison to the same period of 2014. Growth was driven by the VGBL and health segments, which grew 30% and 22%, respectively. Other segments posted lower growth, reflecting the weak operating environment (saving bonds: 7%, life: 10%, auto and P/C: flat). The insurer maintained its leading position and overall market share unchanged at approximately 24%. At June 2015, life and pension segments continued to be the largest contributors to net earnings (60%), followed by health (12%), capitalization plans (a type of savings plan with a lottery feature) (12%), and others including auto and property/casualty (17%).

Bradesco Seguros' leverage ratio is well above the average of the insurance entities rated by Fitch in Brazil and the region. At June 2015, the company's operating leverage (net earned premiums/equity) and leverage (net liabilities/equity) stood at 1.8x and 10.49x, respectively (1.9x and 11.29x, at end-2014). 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 all pension products corresponded to 84% of the total technical reserves and 79% of liabilities, at June 2015.

Fitch believes Bradesco Seguros' profitability will remain solid, despite the weak economic environment. At June 2015, the company's ROA and operating ratio remained broadly stable, at 2.4% and 75.8%, respectively (average 2.5% and 75.3% from 2012 through 2014). Meanwhile, combined ratio rose to 94.3% (average 90.4% from 2012 through 2014), mainly as a result of higher claims in the health segment. The increase in financial income to 18.5% of net earned premiums at June 2015, from 12.5% at end-2014, partially offset the decrease in technical results.

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.