Moody's might downgrade Itauseg debt

Moody's Investors Service has placed on review for possible downgrade the Baa1 global local-currency subordinated debt ratings of Itauseg Participacoes SA and affirmed the Aaa.br national scale ratings of the company and Itau Seguros SA with stable outlooks.

The rating action follows the announcement of Itau Unibanco Holding SA's intent to divest Itau Seguros' automobile and homeowners insurance into a separate company, Itaś Unibanco Seguro de Automovel e Residencial SA, and to transfer the direct management and ownership of this new company to Porto Seguro SA, one of the largest local insurance companies and the largest automobile insurer in Brazil. In exchange, Itau Unibanco will receive 30% ownership of Porto Seguro through a newly created holding company, Porto Seguro Itau Unibanco Participacoes SA.

Moody's views the divestiture of Itau Seguros' underperforming automobile insurance line as a positive because it demonstrates the commitment of Itau Unibanco's and Itau Seguros' management to sustain strong profitability.

However, the structural and organizational outcome of the divestiture could have negative implications on Itau Seguros' and Itauseg Participacoes' credit risk profile, the agency said. The auto and homeowners lines account for about 25% of Itau Seguros' gross premiums, and the divestiture of these lines of business will likely reduce the company's overall market penetration and could result in an increase in the company's product risk, Moody's said.

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