Travelers Enters Latin America With Joint Venture in Brazil

Travelers Cos. has established a presence in Latin America under a $410 million investment that gives the carrier a 43% stake in Brazil's leading writer of surety insurance, JMalucelli Participacoes em Seguros e Resseguros S.A.

Travelers can increase its ownership to 49.9% within 18 months under the joint venture agreement. More importantly, its sets the stage for a potentially much larger play by Travelers into one of Latin America's largest markets.

Travelers Vice Chairman Alan Schnitzer, head of the carrier's financial, professional and international insurance business segment, said in a statement that JMalucelli's distribution network and customer base provides an excellent platform to expand into that market's growing property/casualty segment. JMalucelli began to focus exclusively on surety in 1994. The insurer surpassed 100,000 policyholders in 2001 and holds a leading 30% share of Brazil's surety market, according to its website.

Travelers was the leading writer of U.S. surety business in 2010, garnering a 17% market share on $857.3 million in premium, according to BestLink, which provides online access to A.M. Best's database of insurance information. The second-largest writer was Liberty Mutual Insurance Cos. with a 15% market share based on $743 million in surety premium.

Travelers also moved from sixth-largest property/casualty writer in 2009 to the fifth slot in 2010, according to the recent A.M. Best Statistical Study "Top 200 Property/Casualty Writers" (BestWire, June 16, 2011).

The integral role that surety markets play in guaranteeing construction and development projects should increase the segment's profile in Brazil given it will host two international events this decade. A dozen cities in the country are preparing to host 64 soccer matches as part of the 2014 FIFA World Cup, marking the event's first return to Brazil since 1950. Rio de Janeiro is also scheduled to host the summer Olympic Games in 2016.

When Zurich Financial Services Group announced plans to open a local reinsurance office last week in Sao Paolo, the company said it expected Brazil's economy to grow by 5% in 2011 and keep pace for the next several years (BestWire, June 16, 2011). Zurich also stated that it expects the insurance market to grow between 10% and 15%.

The various pooled insurance units of Travelers have a current Best's Financial Strength Rating of A+ (Superior).

In late-day trading on June 20, shares of Travelers Cos. (NYSE: TRV) were priced at $57.53, down 0.68% from their previous close.

(By Al Slavin, senior associate editor, BestWeek)