Fitch Affirms Bradesco Seguros S.A.'s Ratings; Outlook Stable

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

--International IFS at 'A-' (A minus); Outlook Stable;

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

The affirmation of the IFS ratings of Bradesco Seguros reflect the continued strong support of its parent, Banco Bradesco S.A. (Bradesco, long-term local currency issuer default rating [IDR] 'A-'/Outlook Stable), given the strategic importance of the insurance operations and the high contribution of Bradesco Seguros to the profits of the group (32% in first quarter 2012, 29% in 2011 and 2010).

Bradesco Seguros is considered by Fitch a 'core' subsidiary of Bradesco and hence its ratings are equalized to those of its parent. Ratings also reflect the company's leading position in the insurance market, consistent performance throughout economic cycles, prudence in constituting technical reserves, and comfortable liquidity and capitalization ratios.

As Bradesco Seguros' ratings are tied to those of Bradesco, an improvement in the bank's international ratings could positively affect ratings. On the other hand, deterioration in the parent's risk profile could negatively affect its ratings, as would a change in willingness to provide support, which Fitch Ratings considers highly unlikely.

Bradesco Seguros' performance benefits from its market leadership position in its core segments and the wide distribution network of Bradesco. Life and pension segments continued to be the largest contributor to net results (60%) in 2011; followed by health (22%); capitalization plans (savings plans with a lottery feature) (11%); and others including autos and property/casualty (7%).

In 2011, Bradesco Seguros maintained its market share in all segments and total premiums, including contributions, grew by a higher than expected 23%. In the first quarter of 2012, premium growth remained solid. Given the expectations for a relatively slow economic recovery, Fitch foresees slightly slower growth in premiums for the remainder of the year while maintaining market share in all segments.

Performance ratios have remained stable and favourable in 2011. Unlike competitors, the company's loss ratios were unchanged, mainly due to good controls and the mass market product focus. This profile is unlikely to change significantly in the medium term and loss ratios should remain under control. Cost reduction efforts are expected to help maintain efficiency indicators in 2012. Given the decline in interest rates, Fitch also expects a slight decrease in financial income.

Operating leverage, as measured by the liabilities-to-capital ratio, at 8.61x, remains relatively high and has gradually increased in the recent years. This is a reflection of the high participation of the life and pension segments in the total portfolio (whose technical reserves corresponded to 88% of gross technical reserves in December 2011) and the conservative reserving practices of the company (net technical reserves to net premium ratio of about 5 times in the last 5 fiscal years). Fitch believes the current operating leverage is adequate for the ratings given the strong support provided by the parent.

The capital base is strong in relation to the minimum capital requirement. Meanwhile, liquid assets correspond to also an adequate 1.1x of net technical reserves.

Bradesco Seguros, 100% controlled by Bradesco, is an operational holding company active in all fields of insurance, complementary pensions, and capitalization products with 25% market share of 2011 industry premiums.

Additional information available at 'www.fitchratings.com' or 'www.fitchratings.com.br'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Sep. 22, 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

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Fitch Ratings
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