* IPO at $2.5 bln could be Brazil's largest this
* Unit is fast-growing division of Brazil's No. 1 bank
SAO PAULO Feb 26 Banco do Brasil SA
filed late on Tuesday to list its insurance and pension unit on
the São Paulo Stock Exchange, seeking to tap expected growth in
an industry where rivals are also building up their presence.
Bankers have told Reuters the transaction, which they expect
to happen by April, could fetch at least 5 billion reais ($2.5
billion) - making it the largest initial public offering planned
for Brazil this year.
Under the proposal, which was unveiled in a filing with
Brazilian securities regulator CVM, Banco do Brasil will sell as
much as 40 percent of its pension, insurance and retirement
company, BB Seguridade. The filing did not give details of the
size of the deal, the number of shares on offer or a timetable
for the transaction.
The decision underscores the growing importance of insurance
for Brazilian banks as record low interest rates, stable
household income and a strong job market boost demand for
retirement packages and health and auto insurance. Currently,
only three out of Brazil's 25 largest insurance companies are
listed on the São Paulo stock exchange.
The move also comes amid increased merger and acquisition
activity in the insurance industry, while the growing appeal of
healthcare providers is helping to reprice a sector that was
largely ignored by investors for years.
Brazilians spend less than a tenth of the amount Britons or
Americans do on insurance products and, as the middle class
grows, insurers are luring new clients by transforming
traditional, costlier policies into cheaper products.
Premiums underwritten represent only 3 percent of Brazil's
gross domestic product -- compared with 14 percent and 12
percent respectively in Britain and the United States.
UnitedHealth Group Inc last year agreed to pay about
$5 billion for all of Amil Participações SA, a leading health
plans provider, and insurers from SulAmerica SA to
Bradesco Seguros, Brazil's biggest, have beefed up their supply
of products and staff to meet rising demand.
BB Seguridade's IPO is still subject to "market conditions,"
the filing said.
The listing will also help Banco do Brasil reduce its
fundraising needs. Under new regulatory rules for banks to be
implemented in coming years, financial conglomerates would have
to deduct the minimum regulatory capital of an insurance
subsidiary to calculate their so called core Tier 1 ratio.
A partial sale would reduce the size of the deduction, and
if BB Seguridade can sell its shares at a price above book
value, Banco do Brasil would be able to lock up capital gains
that could also prop up its capital.
Banco do Brasil's investment-banking unit is handling the
transaction, with co-managers including Banco Bradesco SA
, Itaú Unibanco Holding SA, JPMorgan Chase
& Co. Other investment banks hired to help handle the
deal include BTG Pactual Group, Banco Votorantim SA
, Citigroup Inc and São Paulo-based Brasil
Plural Banco Multiplo.