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>> URUGUAY


Mauricio Castellanos, CEO of Asociación Uruguaya de Empresas Aseguradoras (AUDEA) (Uruguayan Insurance Carriers' Association) The Uruguayan Insurance Market



Mauricio Castellanos, CEO of Asociación Uruguaya de Empresas Aseguradoras (AUDEA) (Uruguayan Insurance Carriers’ Association) shares his views on the sector’s current situation in Uruguay.


Uruguay: Economic Situation at the Close of 2009

Figures for the end of 2009 reveal major growth for the year in Uruguay, marking a rise of 2.9% in the country’s GDP, so Uruguay overcomes the economic crisis that affected most economies in the world and this was seventh straight year of growth.
The data on GDP development during 1Q 2009, which recorded a seasonally adjusted drop, clearly evidenced the possibility of the global crisis seriously impacting the Uruguayan economy. However, the recovery process throughout 2009 led to economic expansion towards year-end. Along this vein, it is worth noting that in 4Q the seasonally adjusted GDP increased by 2.1% from 3Q and 4.5% y-o-y.
It is worthwhile noting that the growth experienced by our country in recent years has far outdistanced the historical average GDP growth rate of 2.9%. Except for the manufacturing industry, which recorded a 3.7% fall, the growth was widespread, particularly in the areas of Transportation, Storage and Communications (steady growth in mobile telephony); Power, Gas and Water Supply (more electric power generation) and Other Activities (Financial Brokerage, General Management and Other Services).
The agricultural & livestock sector and the manufacturing industry, which performed poorly during the first months of the year, started showing some recovery in 2Q thanks to a more favorable international scenario that encouraged the following: Production of various crops (especially grains), increased slaughtering operations and a higher activity level in several agribusiness activities (beef, rice, barley) .
The growth in the economic activity translated into a lower unemployment rate, the lowest in the last 10 years. At the close of 2009, the jobless rate stood at 7.3% (yearly average), with the December rate coming in at 6.6% .
Also, the reduction of unemployment rate in a context of increased employment rate increasing from 57.7% at the end of 2008 to 58.5%. Seen in this way, the economic recovery has had a favorable impact by increasing employment levels, reducing the unemployment rate and making it possible to increase the general real wage level in both the public and private sectors. On the other hand also continues to grow in real wages3.
In 2009 the inflation rate was 5.9%, remaining within the target range (3 to 7%) specified by the Comité de Coordinación Macroeconómica (Uruguayan Macroeconomic Coordination Committee). Regarding taxes, the fiscal year ended with a financial loss for the Government which accounted for 2.2% of GDP. This evidences a rising trend in the fiscal deficit which has been recorded since the 2007 year-end surplus.
The Insurance Market They are allowed to operate in the market 15 private companies and one public insurer.
It is worth mentioning that our country does not require companies to be specialized, so they can concurrently engage in the Life and Non-Life businesses. Although there are 6 companies licensed to operate in Pension Life Insurance, only the Banco de Seguros del Estado (BSE) (Government-run insurer) is actively engaged in this line of business. The insurance business is supervised and controlled by the Superintendencia de Servicios Financieros (Financial Services Authority) of the Central Bank of Uruguay, which is responsible for supervising the whole financial sector.
Premium Issuance

Issued premiums as at the close of fiscal 2009 amounted to UYU 12,693,044,996, i.e. USD 646,384,122 (FX exchange rate= 19,637). The above figures include Workers’ Compensation insurance, which is still monopolized by the BSE.
Measured in current US dollars, the insurance market grew by 46% if compared to fiscal 2008. Though part of such increase may be partly put down to the depreciation of the US dollar vis-à-vis the local currency (19%), it is worth noting that it takes place in a growth scenario that started back in 2004 and which has recorded record-high production figures.
Compared to fiscal 2008, the Auto, Workers’ Compensation and Life were the largest contributors to this growth; together with Crop & Livestock Insurance, they have been the pillars of the insurance market’s growth during this five-year period.
Motor Insurance has performed particularly well in fiscal 2009 following the implementation of the Mandatory Motor Insurance (SOA, as per its Spanish acronym). This resulted in the placement of some 300,000 new SOA policies and other insurances with wider coverages.
Market Share

Regarding each company’s market share, as of the close of fiscal 2009 the BSE holds the lead in policy issuance, amounting to 52% and 63.7% of the competitive market and of the whole market, respectively.
BSE’s whole market share has remained stable during the last 9 years (between 68% and 64%), while in the competitive market it fell from 60.7 to 52% in the same period.
As to the private sector, Royal & Sunalliance has the largest market share (9.9%) out of all the companies that have been licensed to operate by the Financial Services Authority of the Central Bank of Uruguay.
It is worth noting that Mapfre has two companies in Uruguay: Mapfre Seguros (Property Insurance) and Mapfre la Uruguaya (Life Insurance), the latter resulting from the acquisition of Real Seguros. Both companies are currently being merged and hold an 11.4% share in the competitive market if taken as a whole.
Major Indicators

Insurance penetration in the economy (premium/GDP ratio) accounted for 1.8% and has remained relatively steady since the market opened up. The density of insurance (premiums per capita) increased significantly, amounting to USD 192.6.
Although the insurance market grew at a faster pace than the economy, its share as a percentage of GDP has only grown by 0.1% since the insurance industry is very small vis-à-vis other industries.
The insurance sector performed very favorably at the close of fiscal 2009, totaling USD 37.4 M. This figure is particularly significant if compared to the USD 6.3 M loss recorded in fiscal 2008.
The insurance sector’s ROE (12.2%) was substantially better than the fiscal 2008 figure (- 2.82%). This growth was driven by improved financial gains, which increased ninefold vis-à-vis the previous fiscal year thanks to the appreciation of the Government debt securities held by insurance companies.
In turn, technical results were significantly impaired vis-à-vis those of the previous fiscal year. As at the end of fiscal 2009, a technical loss was booked which accounted for 13.5% of Net Retained Premiums Accrued (NRPA), whereas in fiscal 2008 said loss accounted for 2% of NRPA.
Considering the different insurance lines, the technical loss booked by Workers’ Compensation insurance (USD 47 M or 30.2% of NRPA) stands out, with Pension Life following suit (USD 32 M loss, i.e. 62.7% of NRPA).
Source: BCU (Central Bank of Uruguay) Monetary Policy Report for March 2010.
Source: INE, unemployment as % in relation to economically active population.
Source: BCU.
Source: BCU (Central Bank of Uruguay).

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