The upcoming insurance joint venture between Tokio Marine Holdings Inc. subsidiary Tokio Marine Seguradora SA and Caixa Econômica Federal's insurance arm, Caixa Seguridade Participações SA, is credit positive for both companies, according to Moody's.

The contract is expected to boost Caixa's fee income origination, specifically from the sale of home and mortgage insurance policies, Moody's said. The agreement is part of the restructuring of Caixa's insurance operations, in which it has sought partnerships for several of its insurance businesses.

In Moody's view, the partnerships will allow the Brazilian state-owned bank to raise fee-based revenues and boost its insurance unit's operation, which is expected to launch its IPO in April.

For Tokio Marine, the joint venture is in line with its strategy of installing franchises in faster-growing markets in Latin America, where it already has relatively strong footing in Brazil and Mexico. The company's experience in retail insurance should enable it to benefit from rising insurance demand specifically in Brazil, the rating agency said.

The resulting company from the venture should have more granular claims exposure, a less intrinsically volatile profitability profile and higher profit margins than Brazil's auto insurance and commercial business lines, Moody's said. Caixa will also be able to use its dominant market position in mortgages in its insurance sales, the rating agency noted.