Split

We decided to split LEAD2000's blog into LEAD2000, a generic blog and LEAD2000 Life Insurance that is dedicated to issues of Life Insurance and Pensions (or Annuities).

The Funny Thing in Life Insurance 1- The Mayonnaise, Yuck

By Mely Lerman, October 31, 2009
In Holland instead of ketchup they put mayonnaise on the french fries, in France they have PERP, in Israel they have Adif and in Brazil they have lottery...
The funny thing in Life Insurance and Pensios are the little differences. Vincent in Pulp Fiction should be an insurance broker: according to him the funniest thing about Europe is the little differences. (see the whole excerpt at the end of this blog). It is exciting to learn the little differences in the different retirement and life insurance plans. It crosses countries and companies in the same countries. Even in those days of globalization, even in face of the efforts for standartization of the Europen Union from one side and the OECD from another, every Life Insurance company is a whole culture in itself.
The basis for everything is one: the actuarial mathematics. What actuaries and regulators do with this is another thing.
There are some products that gain popularity all over th World - the American IRA, Universal Life, the Chilean Pension Model, Unit Link and other.
However, most of the time companies are lauching completely different products almost every day and even the similar products receive a local color.
In Europe, for example, there is a real need for some standard in life insurance and pensions in order to facilitate the mobility of workers from one country to the other. But if somebody compares the employers savings of England to the one in Greece it will be very difficult to find something in common. In Brussels they are trying to put some order on things but, in fact, every country develops its own products completely with no synchronization with the others. The PERP in France (2005) has absolutely no similar product in Europe. The same is possible to say about the Riester pension in Germany.

In those blogs - The Little Differences in Life Insurance - I am going to describe some of those little differences that I know. I would be grateful if anybody out there wants to contribute.
I have no intent to criticize, nor to analyse the social implications or any other second intentions.
Like Vincent I just thing those little differences are funny.

Brazilian Bancassurance Incredible Numbers

By Mely Lerman, October 23, 2009

Even a superficial glimpse at the Brazilian insurance market will expose the incredible development of the sector – the volumes are increasingly growing at unbelievable rates. The insurance market grew 17% in 2007, 18% in 2008 and despite the world crisis the expected growth in 2009 is 15%. 

The volume of Life Insurance premium is today more than 10 times the volume in 2000. Based on the numbers of Swiss Re I draw a comparison graph between the premium volumes of Brazil (in red and the US (in blue). The index of both is 100 for 1999.

The US volume for 2008 is still 25 times the Brazilian but is even so there is something impressive on the Brazilian market development. The main reason is, of course, the growth of the whole Brazilian economy and the improvement of the purchasing power of the poor.

But there is another reason for this development: bancassurance.

Bancassurance in Brazil succeeded to bring insurance to places and people that never saw a broker in their lives. The atmosphere was favorable: there was no regulations limitation to cross ownership between banks and insurance companies and the banks possess a great number of low income customers and proved to be excellent channels for insurance.

Recently the Brazilian Magazine EXAME published an interesting reportage about the competitive bancassurance market in Brazil. There was a lot of interesting numbers in the article - some of them left me really astonished:

• Insurance is the responsible for 34 % of the invoicing volumes of Bradesco (one of the largest private banks in Brazil)
• According to the American Bank Insurance Market Research Group (BIMRG), 80% of the profit of the Brazilian banks came from their insurance companies
• The share of bancassurance in the market share is 55 % (lower than Italy, Spain and France but greater than any other American country – Columbia is 15% and the US is 2 %)
• The administration cost for bancassurance is 16% of the premium and 19 % for the others

Rio 2016

By Mely Lerman, October 17, 2009

Rio de Janeiro was chosen to be the site of the World Cup in 2014 and the Olympiad in 2016. Those choices are not disconnected to the increasing economic and political influence of Brazil. Brazil is in a positive roll for years. The last economic crisis brought this new Brazil to the attention of the World and the International Olympic Committee choice was, in fact, the recognition of the continuous strengthening of the country.
Those events will also be a major factor in the Brazilian economy from now on and the fade out will take years. It is not only the infrastructural investment in the pre-Games period and even not the revenues the events will bring.
It will brand Brazil as an economic superpower.
The consequences will be a huge push to the Brazilians' self esteem and to the economy of their country.

Spain (Barcelona 1992) and South Korea (Seoul 1998) got out of the Olympic Games as completely different countries in the eyes of the World and in the eyes of themselves. In 1964 the Olympics helped Japan to arise from the wrecks of the World War II into economic prosperity. Beijing 2008 caused China to finish 5000 years of isolationism.
This is not automatic.
On the other side, Greece lost a great opportunity with the Athens games in 2004.
The main difference is that Spain, Japan and China were ready for the challenge. It reflected in the attitude of the government and the people. They wanted to succeed.
Brazil, too, will do everything to make those events unforgettable experiences. The Carnival we saw in Copacabana and the tears in the eyes of Lula brought a new meaning to the selection of Brazil.

Nevertheless, Brazil

By Mely Lerman, March 28, 2009

Brazil and the Crisis
The B of the BRIC, Brazil was supposed to be one of the strongest economies of the World.
Suddenly, the Crisis teetered all prophecies. In one year, Bovespa went down more than thirty percent and all the analysts revised their predictions for 2009 Brazilian economic growth.
Some analysts (such as Morgan Stanley) are even talking about the shrinking of the Brazilian economy.
Right now the Brazilian Central Bank works under the assumption of 3.2 percent growth in 2009, Lula and the Brazilian government are talking about 4 % growth and Economist's prediction is of 0.6 %.

Veja
The Brazilian magazine Veja published some reasons to be confident in Brazil's future:
1. 200 billion untouched dollars reserve
2. Competent and regulated banks with low risk policies
3. No real state bubble
4. Strong internal market and increasing buying power of the population
5. Green power
6. Political stability
7. Economic stability
8. Largest exporter of food of the world, which ensures large external sales
9. Diversified external market
10. The same forecasts predicting World stagnation are estimating growth for Brazil
They touched important issues and the whole article is very well founded and interesting. Even so, Brazil is not the only country in the World with political and economy stability in the World. Neither is the only one with serious bank policies. So what makes Brazil unique? What causes this country to be an Oasis in the current World crisis?
Brazil also has serious problems to solve: government expenses, the well known problems of political corruption and the very organized, fearless and arrogant organized crime.

What makes Brazil Unique?

The points of Veja are important but there is more: Brazilians know how to manage a crisis.
The experience has teached them. Brazil has been in and out crisis for the last sixty years. It is dificult to explain but a crisis does not really affect the daily routines in Brazil. Some people get fired, some get richer, other die from cold and faim and life continues (or not).
In 1999, I was in Rio on January 15th. In one day the dollar went from 1 point something to more than two reais. For some time the governement has insisted on a policy of strong real but on this day they decided not contain the currency anymore and let it go free, with no governamental intervensions. In any other country people would go mad. I have been interacting with people the whole day, working and shopping and nobody mentioned anything. I was surprised that I received a very good rate for my dollars and the Visa did not work at one shop.
That was it. Nobody even talked about it. Only at the end of the day I heard it on the news.
It is not that the Brazilians are calm – from time to time they have proved they can rebel and put fire on things. They look at crisis in general as a problem to solve.
Today, the whole state of mind found throughout the World is in total contrast with the business as usual attitude in the streets of Brazil.
The crisis also did not impact their lives so much. Ask any taxi driver in Tel Aviv they will tell you that business is down to half of the volume. I asked Brazilian taxi drivers the same question last week and they all told me that they are not affected by the crisis.

The attitude is very important confronting a crisis, but Brazil's strongest point is the internal market.

Increasing Buying Power of the Population
No doubt the development of China brought Brazil a lot of benefits and export of goods increased in the last years and contributed to the Brazilian success. But the external market is only 14 percent of the Brazilian GDP. The price of commodities and the volume of export affect the economy but that is the proportion - 14 percent.
The internal market is the the main reason of the Brazilian growth.
The politics of the economy brought wealth to the people. It caused an incredible development and will continue to be the main factor of the continuation of this process.
In 1992, I was in Belo Horizonte and saw real misery in the faces of the people. My cousin told me she was afraid to live there – "I was born here and I lived here all my life but I am afraid to go to the center of the city".
Today in the same place you can see people well dressed and healthy faces. It is not Zurich and they are not wearing Prada but it is a completely different scene.
It started with the Plano Real. Fernando Henrique Cardoso, as the minister of the treasure, pratically stopped the inflation. In the subsequent years the poor layers of the population more than triplicate their buying power. It not only helped their situation – it brought a revival for the whole economy.
Fernando Henrique Cardoso was elected president and after him Lula. He continued Fernando Henrique's policy but emphacized the strengthening of the working class.
They are political adversaries but in a conversation in the Tel Aviv University Fernando Henrique told the audience that "Lula continued my policies. He hates when somebody says it. But he was more successful than me spreading wealth. I am impressed with his success".
The Brazilian governement is fighting poverty and using the event as a tool of developing the whole economy. The increasing number of people joining the middle class and the continuous improvement of their lives is the core of Brazil's success. This process had not stopped. On the contrary, not only projects such as Bolsa Familia and the Growth Acceleration Program (started on 2007) continue but also the governement started investing on infrastructure programs and accelarating the housing building.

Concluding
The crisis has slowed Brazil, but it has not stopped its growth. Only time will tell us if the economy will shrink or it will growth 4 % like Lula says.
I and more than 80% of the Brazilians are betting on Lula.