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Bain-Backed Brazil Health Care Firm Wins Fans in Covid-19 Era

Bain-Backed Brazil Health Care Firm Wins Fans in Covid-19 Era

(Bloomberg) -- Notre Dame Intermedica Participacoes SA, the Brazilian health-care provider backed by Bain Capital, has a fan in one of the country’s oldest independent asset managers.

FAMA Investimentos Ltda, which has about 1.9 billion reais ($360 million) in assets under management, has added to its stake since the coronavirus crisis wiped out a third of Intermedica’s market value, said co-founder Fabio Alperowitch. Intermedica, an hospital operator that also offers health care insurance, is now tied for top spot in FAMA’s portfolio. Last month, BlackRock Inc. also boosted its stake in the firm to 5.1%.

“When the crisis hit, shares of health insurance companies were penalized too harshly because the market expected medical loss ratios to surge during the epidemic,” Alperowitch said in an interview. What investors didn’t take into account, he added, was that non-urgent surgeries, appointments and procedures would be canceled or postponed. That means the ratio between insurance claims and total premiums will “fall rather than rise,” Alperowitch said.

Bain-Backed Brazil Health Care Firm Wins Fans in Covid-19 Era

FAMA, which also boosted its stake in health insurance provider SulAmerica SA, was already betting on the nation’s health care sector as a growth industry before the crisis, with stakes in diagnostics lab Fleury SA and pharmacy chain Raia Drogasil SA. Only 47 million people, or 22% of Brazil’s population, have access to private health care plans, according to the national health agency. Those that do are likely to have better jobs and live in big cities. As of April 6, there were 12,056 confirmed cases in Brazil, according to the country’s Health Ministry.

Alperowitch also expects the crisis to accelerate the adoption of telemedicine, further easing the burden on the chain of hospitals. The portfolio manager founded FAMA in 1993 with Mauricio Levi.

While the asset-management firm’s flagship fund underperformed the Ibovespa last month, it beat the index in 2019 with a 42% gain. It has returned roughly 1,800% since its inception -- more than twice the benchmark’s return in the period.

Health stocks

Intermedica, in which Bain Capital owns a stake of about 20% through an investment vehicle, is part of a new group of health-care providers gaining ground in Brazil with offerings that span from insurance to hospitals. Intermedica and Bain raised a combined $1.2 billion in a share sale in December.

UBS recently upgraded the stock to buy, saying it’s likely to stand up relatively well in the tough environment as its portfolio offers more accessible products. Virus-related concerns could be overestimated, analysts Vinicius Ribeiro and Gustavo Piras Oliveira wrote in a report on April 1, adding that they see a “unique entry point.”

SulAmerica sold its automobile and other property-casualty insurance operations to Allianz SE last year so that it could focus on its health care business. New FAMA holdings also include retailer Lojas Renner SA and software firm Linx SA, neither of which offered an attractive valuation until recently, Alperowitch said.

“At the end of the day, the world finds its equilibrium,” he said. “Resilient companies may get rattled, but they’ll emerge stronger.”

©2020 Bloomberg L.P.