BTG Pactual, Caixa considering Brazil insurance deal, sources say

Fri May 2, 2014 4:18pm EDT

SAO PAULO May 2 (Reuters) - Brazilian state-run Caixa Econômica Federal is considering becoming a partner in investment bank Grupo BTG Pactual SA's corporate insurance business, two sources with knowledge of the situation said on Friday, as they seek to strengthen existing business ties.

Caixa, Brazil's largest mortgage lender, is studying how to team up with BTG Pactual in the high risk and corporate insurance business, although no terms have been decided, one of the sources said.

BTG Pactual is negotiating the purchase of the insurance unit of Banco PanAmericano SA, a consumer lender in which both BTG and Caixa are partners, said the two sources, who requested anonymity because the deal is in the works. BTG Pactual could merge PanAmericano's insurer into its own division, one of the sources noted.

The deals could help Caixa gain a foothold in corporate and high risk insurance as it ventures into credit for infrastructure under the instruction of the federal government, its largest shareholder. BTG Pactual began its insurance operations last year, focused on products such as performance bonds for engineering and oil projects, and civil liability in construction works.

PanAmericano could use proceeds from the sale of its insurer, which could fetch as much as 600 million reais ($270 million), return to profitability following its emergence from bankruptcy in recent years.

BTG Pactual and Caixa are also finalizing the terms of a 1.5 billion real capital injection into PanAmericano, part of efforts to help the lender return to profitability, the sources said. Both the insurance deal and the PanAmericano capitalization "go hand in hand" and could be announced together, the first source added.

PanAmericano, which on Friday announced that it will change its name to Banco Pan SA, is 63 percent owned by BTG Pactual, with Caixa retaining a 37 percent stake.

The potential sale of the PanAmericano insurance unit to BTG Pactual was reported by O Estado de S. Paulo newspaper earlier on Friday.

($1 = 2.22 Brazilian reais)

(Reporting by Guillermo Parra-Bernal and Aluísio Alves; Editing by Richard Chang)

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