1. Brazilian HealthCare & Reinsurance Markets August, 2012

2. Introduction 2010, Brazilian Private Health Care premium - US$ 48 b Largest health care market Latin America’s & – 6 th in the world ranking Health Care is the second most desired product for the growing middle class BTG Pactual project a CAGR (Compund Annual Growth Rate) between 9% to 12%

3. HeathCare is a heavily regulated market by government agency (ANS – Agência Nacional de Saúde Suplementar) ANS defines minimum coverage, plan rules, general policies, transfer of plan members rights between Health Care plans Brazilian regulation prohibits lifetime annual aggregate limits. Also Individual policyholders and senior citizens rights are protected

4. Quick overview 23% of the population (46 million people) have private Health Care insurance There are more than 1 thousand providers but 37 companies have 50% of market share. Corprate plans dominate. Health Care market growing, but still concentrated (in 000’s). Source: ANS Corporate Health Care plans reached 75% of total market in 2009 Source: ANS, 2010

5. Capital Markets Health Care companies have impressive growth compared with the local stock market (Ibovespa) index Health Care companies and Ibovespa. Source: Bloomberg and BTG.

6. Employment There’s a 93% correlation between formal job creation with Health Care plan membership Formal jobs: a key factor to growth in HC plan members Source: Caged and BTG Pactual..

7. Socio-Economic driver Growth of middle class consumers Emerging middle class consumers Source: Raymond James

8. Demography Aditional 2% contribution on CAGR Health Care premium in real terms The over 60s represents 10% of the population. This group is projected to rise 14% by 2020 Improvement of life expectancy from 73 to 81 years by 2050 Increasing share of elderly people in total population Source: IBGE Brazilian population growth expectation Source: Raymond James

9. Market is not saturated Percentage of population with Health Care coverage: Brazil – 23% Mexico – 60% US – 77% Potential growth in the interior Distribution per Brazilian region. Source: ANS, 2010.

10. Underreserved in comparison with international standards Simplistic technical pricing models and undocumented underwriting standards Large players has preferential discounts with Health Care providers “Vertically integrated” Health Care plans suffer from lacks of maintenance investment and professional management. ANS stifles creativity in product development and limits cost-reduction by minimum coverages High costs in Brazil

11. Final thoughts Brazil presents opportunities greatly outweigh the challenges Investment Opportunities include: Health Care Providers, Health Insurance Companies, HMOs and specialized dental companies Distribution Channels Service Providers Pharmaceuticals Hospitals

12. Reinsurance Market Overview

13. History 1939, the Brazilian Reinsurance market was closed to direct access by international reinsurers. Instituto de Resseguros do Brasil (IRB Re) was established Officially reopened in April 2008 Now home to 87 multinational reinsurers including the State Reinsurer, Instituto de Resseguros do Brasil (IRB Re).

14. Market Volume and Potential 2009 reinsurance market US$2.1b Total ‘insurance’ market of US$29.7b 3 P&C projects at least US$2.5b (next 6 years)  World Cup 2014, US$29m,  Olympics 2016 US$324m,  “Growth Acceleration Program” R$2 billion

15. Quick facts 87 reinsurers authorized by SUSEP 33 Reinsurance brokers IRB still has almost 25% market share. By far the most profitable

16. Who’s here

17. Market Share

18. Show me the $

19. What’s the attraction Part of booming BRIC Mature market; all lines of business 8th largest economy. Ranked 18th in terms of insurance Low risk of earthquakes and hurricanes Lots of potential to innovate The guy to beat is still the state reinsurer. The entire health market is up for grabs Potential to earn very high rates of investment return. Interest rates are 8% percent

20. Main Challenges Brazil is not really an open market. It is kind of like a three-ring circus Brazilian government keeps changing its mind regarding the regulation of reinsurers. Low level of Brazilian underwriting standards and the scarcity of claims data. Brazil is a very expensive place to do business

21. Main Challenges Brazil is not really an open market. It is kind of like a three-ring circus Brazilian government keeps changing its mind regarding the regulation of reinsurers. Low level of Brazilian underwriting standards and the scarcity of claims data. Brazil is a very expensive place to do business

22. Final thoughts Need to consider Capital injection as investment and not cost of capital Lobby Lobby Lobby the government Offer Actuarial analyses (reserving, pricing, capital models) in exchange for claims data Recruit local ‘technical’ talent Get to know your clients’ underwriter

23. Ronald Poon Affat FSA FIA CFA MAAA ronald.poon@tempoassist.com.br

24. Ronald Poon Affat FSA FIA CFA MAAA ronald.poon@tempoassist.com.br