IRB - BRASIL RESSEGUROS S.A. Performance analysis
First quarter of 2024 05/13/2024
(A free translation of the original report in Portuguese as published in Brazil)
EARNINGS PRESENTATION
Tuesday, May 14, 2024.
At 11 a.m. (São Paulo) / 10 a.m. (New York).
Casted in Portuguese with simultaneous translation into English
Link to join the virtual meeting:
https://tenmeetings.com.br/ten-events/#/webinar?evento=IRB1T24_423
1Q24 Performance analysis | ri.irbre.com | 2 |
The analyses contained in this report, except as stated otherwise, are made according to the Business View standard, based on the technical pronouncement CPC 11 (IFRS 4), where some accounting records of the statements of profit or loss are grouped differently than as initially provided in the accounting practices adopted in Brazil for reinsurers.
The CVM Resolution 42/2021 requires that beginning on January 1st, 2023 the Brazilian public companies comply with the Technical Pronouncement CPC 50, which establishes the principles for recognition, measurement, presentation and disclosure of reinsurance contracts, in line with IFRS17 issued by the International Accounting Standards Board (IASB), which superseded IFRS 4.
Since the first quarter of 2023, the financial information has been restated according to the new accounting standards established by CPC 50 (IFRS 17).
The information contained in the Revised Interim Financial Information (ITR), disclosed in the CVM/B3 as at this reporting date, consider the initial application of CPC 50 (IFRS 17) and CPC 48 (IFRS 9).
The analyses contained in this report are based on managerial information, in accordance with the CPC 11 (IFRS 4), and adjusted to reflect the perspective of the Business View. The reconciliation of the Business View model is included in Note 3 to the Financial Statements - Information by operating segment.
At the end of the MD&A section, we included an additional item with the highlights of the result in IFRS 17.
1Q24 Performance analysis | ri.irbre.com | 3 |
1Q24 Highlights - Business View
- Net income reached R$ 79.1 million for the 1Q24, as compared to R$ 8.6 million for the same period in the previous year.
- Underwriting profit amounted to R$ 122.4 million for the 1Q24 as compared to R$ 3.7million for the 1Q23.
- In the 1Q24, the loss ratio stood at 58.2%, up 19.1 p.p. from the 1Q23.
- Combined ratio stood at 99.0% for the 1Q24, up by 11.9 p.p. from the 1Q23.
- Achievement of the target for the share of Brazilian business set at 70% of the portfolio. In the 1Q24, Brazil accounted for 74% of written premiums, while in the 1Q23 domestic premiums accounted for 64%, demonstrating the focus on the local market. For the future, we envision opportunities in Latin America, and we plan on having the Latin American share to account for approximately 20% of our total business. In the 1Q24, Latin America accounts for 6% of our portfolio. We will select risks in Europe that could generate profitability and diversification to our portfolio, limiting the share of this market to approximately 10%.
R$ 79 million
Net income
R$ 122 million
Underwriting profit or loss
58.2%
Loss ratio
99.0%
Combined ratio
Rains in the state of Rio Grande do Sul
IRB(Re) expresses solidarity with the population of Rio Grande do Sul, who continues to suffer the impact of floods. Paying claims is the primary responsibility of the insurance market. We are in contact with our customers and are committed to conducting analyses and making payments as quickly as possible.
It is not yet possible to estimate the impact of the claims arising from this region, as this situation continues and the priority is to save lives and find shelter for the affected community.
IRB(Re) has business lines that may be impacted, such as property, agriculture, homeowners, among others, provided that such contracts have coverage for floods.
Acknowledgement
IRB(Re) achieved the GPTW (Great Place to Work) seal, a recognition of its purpose of providing an open, transparent, and inspiring workplace.
Debentures
On April 15, 2024, IRB(Re) carried out the early redemption of the totality of the third debenture issue of the Company. The redemption comprised 100,000 debentures, which total payment amounted to R$ 91.9 million.
On May 2nd, 2024, IRB(Re) received from the federal government the net amount of R$ 277.4 million for the court-ordered payment arising from tax proceedings, which had been assigned to back the third debenture issue.
1Q24 Performance analysis | ri.irbre.com | 4 |
The balance outstanding of debentures as at March 31, 2024 is as follows:
1st Issue | 2nd Issue | 3rd Issue (settled on 4/15) |
2nd series | Sole series | 1st series |
R$ 147,000,000.00 | R$ 229,193,000.00 | R$ 100,000,000.00 |
Index | ||
IPCA + 6.6579% p.a | IPCA + 6.6579% p.a | 100% DI rate + 4.00% p.a. |
Maturity | ||
10/15/2026 | 12/15/2026 | 06/09/2027 |
Coupon rate | ||
Six-month periods | Six-month periods | Six-month periods |
Amortization | ||
5th and 6th years | 5th and 6th years | Six-month periods |
2. Corporate governance
Shareholding Composition
On March 21, 2024, IRB(Re) received a mail from BlackRock, Inc., informing that the latter made the disposal of the common shares issued by IRB(Re), and on March 19, 2024, their aggregate ownership interest changed to 3,784,166 common shares, representing approximately 4.6% in total common shares issued by the Company, and 55,633 derivative financial instruments tied to common shares with financial settlement, representing approximately 0.067% in total common shares issued by the Company.
As at March 31, 2024, shareholding is as follows:
1Q24 Performance analysis | ri.irbre.com | 5 |
Free Float1 | |||||
99.5% | |||||
Shareholders with relevant stake | Offices | ||||
Bradesco Seguros | 15.9% | ||||
Itaú Seguros | 11.6% | ||||
100%
IRB Uso
Empreendimentos
100%
IRB Santos
Dumont
100%
IRB Asset
Management S.A.
100%
IRB Renda
Empreendimentos
100%
IRB Chile
Empreendimentos
Management
We deeply regret to inform that Mr. Willy Otto Jordan Neto, Statutory Director on medical leave, passed away on May 12, 2024. Mr. Willy was elected Chief Financial Officer and Investor Relations Officer in November 2021 and stepped down in March 2023. IRB(Re) expresses its condolences to the family and thanks Mr. Willy for his contribution to the company's recovery.
On April 1st, 2024, the Company's Board of Directors elected Mr. Marcos Falcão as Chief Financial Officer, who accumulates the position of Chief Executive and Investor Relations Officer of the Company. On April 2nd, 2024, Mr. Falcão assumed the position to which he was elected, succeeding Mr. Rodrigo de Souza Lobo Botti, who remains in the Company in the statutory position of Innovation and Technology VP.
The organizational structure of the Statutory Board after April 2 is as follows:
CEO,
VP of Finance
and IRO
Marcos Falcão
Officer of | Legal and | ||
VP Reinsurance | VP of Innovation and IT | Internal Controls, | |
Governance Officer | |||
Daniel Castillo | Rodrigo Botti | Risks and Compliance | |
Bernardo Arruda | |||
Thais Peters | |||
Underwriting Officer
Daniel Volpe
3. Rating
The discontinuance of the rating of the third debenture issue of IRB by S&P was made after the early redemption of the debentures.
1Q24 Performance analysis | ri.irbre.com | 6 |
4.Scenario in the industry
Insurance and reinsurance market
According to the IRB+Inteligência platform, the insurance market began 2024 with a 10.3% growth over January 2023. In the middle of the covid-19 pandemic, the insurance sector started to ramp up. Last year, some segments showed the smoothing of the growth curve, but with the interannual changes still at high levels.
Insurers purchased R$ 2.8 billion in reinsurance in the first month of the year, up by 3.6% from January 2023. The amount is the highest recorded in the time series, which begun in 2014.
In January 2024, the loss ratio fell 1.5 p.p. from January 2023. The recovery of loss ratio was mainly promoted by the Credit and Surety and Corporate P&C segments.
Outlook
According to an article of Valor Econômico, the underwriting margins of reinsurers will probably hit the peak in 2024, with significant price increase and stricter terms and conditions in 2023 and in the renewals in the beginning of January 2024, according to Fitch Ratings' report. The reinsurance market conditions should start to alleviate in 2025, once the strong return estimates will attract a growing amount of new capital. The January 2024 renewals had price increases mostly keeping pace with claim inflation, which totaled between 5% to 10% in most business lines.
In the past three years, the Brazilian insurance market has recorded a growth above 10%, according to CNseg (National Confederation of Insurers).
This growth rate is expected to remain steady during 2024, stimulated by technological advancements, regulatory changes, and the growing demand for tailored services.
The main market players have invested in process robotization and automation, besides intensively using real time data. Other initiatives include the use of data analysis for business insights and product development, as well as the increase in the use of Artificial Intelligence and Machine Learning to improve service quality, build patterns of behavior and risk analysis. Another opportunity arises from the supply of risk management solutions in a scenario with rising volatility and uncertainty in global markets. Insurers that invest in specialized consulting and data analysis to help their customers to manage risks have chance to stand out in the market. Investing in innovation and offering tailored solutions are on the way in the following years.
1Q24 Performance analysis | ri.irbre.com | 7 |
5.Economic and Financial Performance
Main indicators
(R$ in millions) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | ||||||
Written Premiums | 1,583.7 | 1,394.4 | 1,967.5 | 1,575.5 | 1,440.1 | ||||||
Brazil | 1,006.8 | 994.3 | 1,674.2 | 1,305.2 | 1,060.2 | ||||||
Abroad | 576.9 | 400.0 | 293.3 | 270.3 | 379.9 | ||||||
Retained Premiums | 1,248.9 | 1,033.9 | 823.9 | 831.4 | 1,124.4 | ||||||
Earned Premiums | 1,207.3 | 1,021.0 | 852.4 | 1,070,5 | 909.1 | ||||||
Retained Claims | (933.2) | (751.5) | (630.8) | (591.2) | (528.8) | ||||||
PSL | (820.4) | (827.1) | (670.7) | (693.6) | (558.5) | ||||||
IBNR | (112.8) | 75.6 | 39.9 | 102.4 | 29.7 | ||||||
Underwriting Profit or Loss | 3.7 | 35.4 | 10.8 | 105.1 | 122.4 | ||||||
Administrative Expenses | (88.0) | (86.7) | (75.8) | (103.6) | (74.9) | ||||||
Finance income and Share of profit of | 145.5 | 95.7 | 182.9 | 124.6 | 141.6 | ||||||
equity-accounted investees | |||||||||||
Finance Income | 144.9 | 82.8 | 168.7 | 111.4 | 129.7 | ||||||
Share of Profit of Equity- | 0.6 | 12.9 | 14.2 | 13.2 | 11.9 | ||||||
accounted Investees | |||||||||||
Net Income (Loss) | 8.6 | 20.1 | 47.7 | 37.9 | 79.1 | ||||||
Ratios (%) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | ||||||
Retrocession Ratio | 21.1% | 25.9% | 58.1% | 47.2% | 21.9% | ||||||
Loss Ratio | 77.3% | 73.6% | 74.0% | 55.2% | 58.2% | ||||||
Loss ratio PSL | 68.0% | 81.0% | 78.7% | 64.8% | 61.4% | ||||||
Loss ratio IBNR | 9.3% | -7.4% | -4.7% | -9.6% | -3.3% | ||||||
Commission Ratio | 19.3% | 22.8% | 24.2% | 35.0% | 27.8% | ||||||
Ratio of other operating income and | 3.1% | 0.1% | 0.5% | 0.0% | 0.6% | ||||||
expenses | |||||||||||
Adm Exp Ratio | 7.3% | 8.5% | 8.9% | 9.7% | 8.2% | ||||||
Tax Exp Ratio | 3.9% | 3.3% | 3.8% | 4.0% | 4.2% | ||||||
Combined Ratio | 110.9% | 108.3% | 111.4% | 103.9% | 99.0% | ||||||
Combined ratio considering finance | 99.0% | 99.0% | 91.7% | 93.0% | 85.6% | ||||||
income | |||||||||||
1Q24 Performance analysis | ri.irbre.com | 8 |
6.Statement of profit or loss - Business View
To guide the Company's Management in decision making and performance assessment of reinsurance and retrocession transactions, some accounts of the statement of profit or loss - Business View are grouped differently from as established in the accounting practices adopted in Brazil applicable to reinsurers and presented in the financial statements. See Note 3 - Information by operating segment.
(R$ in millions) | 1Q23 | 1Q24 | (1Q24/ | ||||
1Q23) | |||||||
Written Premiums | 1,583.7 | 1,440.1 | -9.1% | ||||
Brazil | 1,006.8 | 1,060.2 | 5.3% | ||||
Abroad | 576.9 | 379.9 | -34.2% | ||||
Retroceded premium | (334.8) | (315.7) | -5.7% | ||||
Retained Premiums | 1,248.9 | 1,124.4 | -10.0% | ||||
Changes in Technical Reserves | (41.7) | (215.2) | 416.7% | ||||
Earned Premiums | 1,207.3 | 909.1 | -24.7% | ||||
Retained Claims | (933.2) | (528.8) | -43.3% | ||||
PSL | (820.4) | (558.5) | -31.9% | ||||
IBNR | (112.8) | 29.7 | n.m. | ||||
Acquisition Cost | (233.2) | (252.5) | 8.3% | ||||
Other Operating Income and Expenses | (37.1) | (5.5) | -85.3% | ||||
Underwriting Profit or Loss | 3.7 | 122.4 | 3175.0% | ||||
Administrative Expenses | (88.0) | (74.9) | -14.9% | ||||
Tax expenses | (47.3) | (38.3) | -19.0% | ||||
Finance income and Share of profit of | 145.5 | 141.6 | -2.7% | ||||
equity-accounted investees | |||||||
Finance Income | 144.9 | 129.7 | -10.5% | ||||
Share of Profit of Equity-accounted | 0.6 | 11.9 | 1996.4% | ||||
Investees | |||||||
Net Income before Taxes and Profit | 14.0 | 150.9 | 978.7% | ||||
Sharing | |||||||
Taxes and Contributions | (5.4) | (61.4) | 1027.7% | ||||
Profit sharing | 0.0 | (10.4) | n.m. | ||||
Total Net Loss | 8.6 | 79.1 | 825.0% | ||||
Written premiums
Note: The business lines are consolidated as follows: (i) Property (includes engineering risks, mortgage and other risks); (ii) Life (includes group and individual life and accident risks); (iii) Special Risks (include the oil
- gas exploitation and production and nuclear risks); (iv) Agriculture (includes Agriculture); Other (includes aviation, marine, cargo, motor, financial facility, surety, credit, surety bond, and liability).
1Q24 Performance analysis | ri.irbre.com | 9 |
Written premiums by business segment and line
(R$ in millions) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | (1Q24/ |
1Q23) | ||||||
Written Premiums - Brazil | 1,006.8 | 994.3 | 1,674.2 | 1,305.2 | 1,060.2 | 5.3% |
Property | 370.5 | 329.0 | 372.4 | 537.5 | 425.3 | 14.8% |
Life | 189.2 | 142.7 | 164.4 | 383.0 | 205.4 | 8.6% |
Agriculture | 150.0 | 374.7 | 138.1 | 114.1 | 170.8 | 13.8% |
Special Risks | 99.1 | 13.1 | 767.8 | 29.1 | 90.5 | -8.7% |
Other | 198.0 | 134.9 | 231.5 | 241.4 | 168.3 | -15.0% |
Written Premiums - Abroad | 576.9 | 400.0 | 293.3 | 270.3 | 379.9 | -34.2% |
Property | 289.0 | 184.8 | 184.2 | 172.6 | 276.1 | -4.5% |
Life | 33.6 | 73.2 | 24.3 | 5.8 | (17.2) | -151.1% |
Agriculture | 109.7 | 81.2 | 25.5 | 19.3 | 16.5 | -84.9% |
Special Risks | 16.5 | 20.2 | 19.6 | 15.3 | 13.2 | -20.0% |
Other | 128.0 | 40.6 | 39.7 | 57.4 | 91.2 | -28.8% |
Total Written Premiums | 1,583.7 | 1,394.4 | 1,967.5 | 1,575.5 | 1,440.1 | -9.1% |
Property | 659.5 | 513.8 | 556.6 | 710.0 | 701.4 | 6.4% |
Life | 222.9 | 215.9 | 188.7 | 388.9 | 188.2 | -15.5% |
Agriculture | 259.7 | 455.8 | 163.7 | 133.4 | 187.3 | -27.9% |
Special Risks | 115.6 | 33.3 | 787.5 | 44.4 | 103.7 | -10.3% |
Other | 326.0 | 175.5 | 271.2 | 298.8 | 259.5 | -20.4% |
History of quarterly written premiums
(R$ in millions) | ||||||
1.967 | ||||||
1.584 | 293 | 1.576 | ||||
1.440 | ||||||
1.394 | ||||||
270 | ||||||
577 | 400 | 380 | ||||
1.674 | ||||||
1.305 | 1.060 | |||||
1.007 | 994 | |||||
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | ||
Brazil | Abroad | |||||
1Q24 Performance analysis | ri.irbre.com | 10 |
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Disclaimer
IRB Brasil Resseguros SA published this content on 14 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 May 2024 12:20:05 UTC.
