BB Seguridade Participações S A : Dados Econômico-Financeiros

Consolidated Financial Statements - 2021

BB Seguridade Participações S.A.

		INDEX
MANAGEMENT COMMENTS ON PERFORMANCE .........................................................................................................	1
STATEMENT OF INCOME ...............................................................................................................................................	16
STATEMENT OF COMPREHENSIVE INCOME...............................................................................................................	16
BALANCE SHEET............................................................................................................................................................	17
STATEMENT OF CASH FLOWS .....................................................................................................................................	18
STATEMENT OF CHANGES IN EQUITY.........................................................................................................................	19
STATEMENT OF VALUE ADDED ...................................................................................................................................	20
EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS ......................................................................................	21
1	- OPERATIONAL CONTEXT.........................................................................................................................................	21
2	- ACQUISITIONS, DISPOSALS AND CORPORATE RESTRUCTURINGS .................................................................	22
3	- PRESENTATION OF FINANCIAL STATEMENTS.....................................................................................................	23
4	- DESCRIPTION OF KEY ACCOUNTING POLICIES...................................................................................................	24
5	- RISK MANAGEMENT.................................................................................................................................................	30
6	- SEGMENT INFORMATION ........................................................................................................................................	34
7	- INVESTMENTS IN ASSOCIATES...............................................................................................................................	37
8	- COMMISSIONS INCOME ...........................................................................................................................................	45
9	- COSTS OF SERVICES PROVIDED ...........................................................................................................................	46
10	- PERSONNEL EXPENSES........................................................................................................................................	46
11	- ADMINISTRATIVE EXPENSES AND SALES ..........................................................................................................	46
12	- TAXES ......................................................................................................................................................................	46
13	- OTHER INCOME AND EXPENSE............................................................................................................................	49
14	- FINANCIAL RESULT................................................................................................................................................	49
15	- CASH AND CASH EQUIVALENTS..........................................................................................................................	49
16	- FINANCIAL INSTRUMENTS ....................................................................................................................................	50
17	- DIVIDENDS / INTEREST ON EQUITY CAPITAL RECEIVABLE .............................................................................	51
18	- COMMISSIONS RECEIVABLE ................................................................................................................................	51
19	- INTANGIBLE ASSET ...............................................................................................................................................	51
20	- OTHER ASSETS ......................................................................................................................................................	52
21	- CORPORATE AND STATUTORY OBLIGATIONS ..................................................................................................	52
22	- PROVISIONS AND CONTINGENT LIABILITIES .....................................................................................................	52
23	- UNEARDED COMMISSIONS ...................................................................................................................................	55
24	- OTHER LIABILITIES ................................................................................................................................................	55
25	- EQUITY.....................................................................................................................................................................	55
26	- RELATED PARTY TRANSACTIONS.......................................................................................................................	59
27	- OTHER INFORMATION ............................................................................................................................................	61

REPORT OF INDEPENDENT AUDITORS FOR FINANCIAL STATEMENTS

AUDIT COMMITTEE REPORT SUMMARY - FISCAL YEAR 2021

FISCAL COUNCIL REPORT

DECLARATION OF THE MEMBERS OF THE EXECUTIVE BOARD ABOUT THE FINANCIAL STATEMENTS

STATEMENT OF THE MEMBERS OF THE EXECUTIVE BOARD ON THE REPORT OF THE INDEPENDENT AUDITORS

MEMBERS OF THE MANAGEMENT BODIES

Consolidated Financial Statements - 2021

BB Seguridade Participações S.A.

MANAGEMENT COMMENTS ON PERFORMANCE

Dear Shareholders, Employees and Business Partners.

We present the Annual Management Report of BB Seguridade Participações S.A. ("BB Seguridade" or "Company") for the year 2021, in accordance with the requirements of the Brazilian Stock Corporations Act, the Brazilian Securities and Exchange Commission (CVM) and its Bylaws.

The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS).

It is noteworthy that this report presents accounting data of the companies invested in by BB Seguridade, which may differ from those disclosed by the affiliates, both due to differences in the financial reporting standards used and to the possible amortization of intangibles, deduction of results among affiliates, or due to other reasons. In this context, the net profit attributed to the invested companies reflects the results determined by the Company for each business segment, as per the Explanatory Note on Investments in Equity Interests.

Throughout this report, we will address the actions taken and results achieved in the year, as well as present the Company's strategic priorities.

1 - BUSINESS DESCRIPTION

1. Seguridade is a holding company that concentrates its investments in the insurance, open pension, premium bonds and dental care plans through private partnerships in companies maintained by its wholly-owned subsidiary, BB Seguros
   Participações S.A. ("BB Seguros"), as well as in the distribution of those products, highlighting its controlled company, BB
   Corretora de Seguros e Administradora de Bens S.A. ("BB Corretora").

In the insurance segment, operations are carried out through a joint venture that began in 2011 with the Spanish group MAPFRE, in a 20-years term agreement. This partnership is operated through two insurance companies: Brasilseg Companhia de Seguros S.A. and Aliança do Brasil Seguros S.A. (together, "Brasilseg"), focusing on the personal, rural, mortgage life, home, business and other mass segments.

In open pension plans, BB Seguridade operates together with the Principal Financial Group, through Brasilprev Seguros e Previdência S.A. ("Brasilprev"). This partnership will remain valid until 2032, as provided in the agreement in force since 2009. Brasilprev sells private pension solutions, with emphasis on defined contribution plans, in the PGBL (Free Benefit Generator Plan) and VGBL (Life Free Benefit Generator) modalities.

The Company's business in premium bonds is concentrated with Brasilcap Capitalização S.A. ("Brasilcap"), in partnership with Icatu Seguros and Aliança da Bahia.

Also, in the dental care plan segment, the Company operates together with Odontoprev through Brasildental Operadora de Planos Odontológicos S.A. ("Brasildental"). The joint operation began in 2014 and will last for 20 years.

In the distribution side of the business, BB Corretora's main channel is Banco do Brasil. Complementarily, BB Corretora seeks to expand its distribution channels through commercial partnerships with companies from the most diverse business segments, also maintaining strategic investment in a digital brokerage company, the Ciclic Corretora de Seguros S.A. ("Ciclic"), in a partnership with the Principal Financial Group that began in 2018 and will extend until 2032, aiming at developing the sale of insurance products through remote channels.

2 - BUSINESS ENVIRONMENT

The 2021 fiscal year was again marked by challenges imposed by the health crisis generated by the Covid-19 pandemic, which went through its most critical moment in the first half of the year.

During the second half of 2021, substantial progress in the vaccination process of the Brazilian population led to a decrease in the number of hospitalizations and deaths and allowed the resumption of economic sectors that had been shut down. However, the emergence of this more promising scenario was offset by the high inflation and interest rates environment reaching the contractionary field. The rise in prices proved to be more persistent and widespread and required a more restrictive approach from the Central Bank, which raised the Selic rate by 725 basis points throughout the year, from 2.0% in January 2021 to 9.25% in December. This combination put pressure on household disposable income and reduced the space for a more intense growth in the consumption of new goods and services, a fact that was reflected in the loss of vigor of the economic activity throughout the year.

In 2021, there was also a strong volatility of financial assets, especially the depreciation of the BRL against the USD, impacted by internal factors notably linked to fiscal uncertainties. On the other hand, the credit market in the National Financial System presented a positive performance driven by the progress related to the emergency relief measures adopted. In addition, there was a recovery of the employed population, mainly in informal jobs.

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Consolidated Financial Statements - 2021

BB Seguridade Participações S.A.

In the international market, after the negative impact of Covid on the world economic activity in 2020, the year was marked by a generalized economic recovery, but also by a series of points that weighed negatively on global dynamism. The energy crisis in Europe and the problems related to the construction sector in China set the tone of the global uncertainty, combined with the persistence of the supply chain crisis, the high inflation registered in the main economies and the risk of a new wave of the pandemic in view of the low vaccination status of poor countries, which weighed negatively on the recovery of the global economy. In fact, the rise of the new variant Omicron and doubts regarding its degree of aggressiveness contributed to the increase of global risk aversion and led to new measures of social distancing in some continents at the end of 2021.

In the Brazilian insurance market, the positive point of the year was the return of a double-digit growth in the total volume of insurance premiums, pension contributions and premium bonds, which grew 13.4%1 YoY, according to data provided by the Superintendency of Private Insurance (SUSEP). Insurance premiums written increased by 13.5%, while pension contributions recovered from the fall recorded in 2020, growing 14.6%.

The negative side of the year was the strong increase in the number of claims reported in life related products, especially in the second quarter, due to the spread of new variants of the coronavirus. In the open private pension segment, the lower level of disposable income of the population and the increase in indebtedness contributed to an increase in redemptions, limiting the growth of reserves for this product.

3 - ECONOMIC AND FINANCIAL PERFORMANCE

As a holding company, BB Seguridade's net income consists basically of the equity income arising from its investees, along with the holding standalone operating and financial income and expenses.

The table below presents BB Seguridade´s income statement for 2021 and 2020, as well as the comments on the main variations of the year.

Table 1 - Financial Performance | Income Statement - Parent View

BRL thousand	Fiscal Year 2021	Fiscal Year 2020	Chg.%
	on 2020
Equity income	3,923,593	3,833,384	2.4
BB MAPFRE Participações S.A. (Brasilseg)	1,067,020	1,086,543	(1.8)
Brasilprev Seguros e Previdência S,A,	756,544	686,379	10.2
Brasilcap Capitalização S,A,	2,341	105,780	(97.8)
Brasildental Operadora de Planos Odontológicos S,A,	17,083	17,702	(3.5)
BB Corretora de Seguros e Administradora de Bens S,A,	2,162,039	1,969,105	9.8
Other	(81,434)	(32,125)	153.5
Other Income and Expenses	(8,572)	(10,882)	(21.2)
Personnel expenses	(12,167)	(11,602)	4.9
Administrative expenses	(3,152)	(3,096)	1.8
Tax expenses	(2,083)	(3,645)	(42.9)
Other operating income/(expenses)	8,830	7,461	18.3
Net investment income	22,901	37,295	(38.6)
Investment income	26,992	62,764	(57.0)
Investment expenses	(4,091)	(25,469)	(83.9)
Earnings before taxes	3,937,922	3,859,797	2.0
Taxes	(4,705)	(9,026)	(47.9)
Net income	3,933,217	3,850,771	2.1

In 2021, the net income reached R$3,933.2 million, up 2.1% YoY. In 2020, there was an extraordinary event that affected the earnings, as explained below:

1. Corretora - donation against Covid-19: in order to help the society with the responses to the impact of the pandemic, the Board of Directors approved a donation capped at R$40 million by BB Corretora to Banco do Brasil Foundation (FBB), with the exclusive purpose of acquiring food and hygiene, cleaning and personal protection supply necessary for the social aid to the most affected people. It was disbursed R$37.9 million in the 1H20 and R$2.1 million in in July and August of that year. The total impact to the net income was of R$26.4 million.

Table 2 - Extraordinary Events

1 Total variation in the sum of premiums written, pension contributions and premium bonds collection. Does not include health insurance. Source: Susep (data: November, 2021).

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Consolidated Financial Statements - 2021

BB Seguridade Participações S.A.

BRL thousand	Controller		Var.%
2021		2020
Adjusted net income	3,933,217	3,877,171	1.4
Extraordinary events	-	(26,400)	-
BB Corretora: donation against Covid-19	-	(26,400)	-
Net income	3,933,217	3,850,771	2.1

Setting apart the extraordinary event mentioned in the table 2, which affected the equity income line in 2020, the adjusted net income grew 1.4% in 2021. The R$56.0 million increase in the net income on a recurring basis is explained by:

1. Corretora (+R$166.5 million): with higher brokerage revenues supported by the good commercial performance of the main business lines;

Brasilprev (+R$70.2 million): supported by the consistent growth in operating result, partially offset by the negative market to market result of prefixed income securities.

On the other hand, the equity income arising from Brasilcap dropped R$103.4 million, explained by the recognition of losses in prefixed income assets available for sale, while Brasilseg equity income was R$19.5 million lower, due to the worsening in the loss ratio and the higher tax rate after the 5 p.p. temporary increase of CSLL in the 2H21.

The performance of each investee company will be better explained below.

The negative balance of other income and expenses line was reduced by 21.2% in 2021. The 42.9% decrease in tax expenses, concentrated in PIS and Cofins charged on financial income, which declined 57.0%, and the 11.0% increase of revenues arising from the ADR Level 1 program, due to a higher volume traded,, are the main reasons that explain the variation.

Investments

Pursuant to the article 243 of Law 6,404/76, the following table presents the equity investments in BB Seguridade's affiliates and subsidiaries, as well as the changes occured throughout the year. The changes are detailed in Explanatory Note 7.b) attached to the Financial Statemets.

Table 3 - Financial Performance | Shareholding positions

BRL Thousand		Shareholding		Investment Balance	Equity Income
	stake (%)
	Activity	Dec/21	Dec/21	Dec/20	FY2021
Shareholding positions
BB Seguros	Holding	100.00%	7,074,640	5,924,821	1,761,554
BB MAPFRE	Insurance	74.99%	2,337,086	2,245,714	1,067,020
Brasilprev	Pension Plans	74.99%	4,354,377	3,338,239	756,544
Brasilcap	Premium Bonds	66.66%	427,840	470,327	2,341
Brasildental	Dental Care	74.99%	16,088	15,582	17,083
BB Corretora	Broker	100.00%	6,009	46,908	2,162,039
Ciclic	Broker	74.99%	1,850	14,483	(12,633)

Equity income - Investees performances

BB MAPFRE (Brasilseg)

In 2021, the net income of the insurance business retracted 1.6% YoY, mainly by the increase of the loss ratio (+8.5 p.p.) and by the higher effective tax rate led by the temporary increase of CSLL, which was partially offset by the 1.8% growth of net investment income. The higher CSLL reduced Brasilseg's result in R$60.7 million. Setting apart this effect, the net income would have grown 2.5%.

The deterioration of loss ratio was mainly due to the higher frequency of claims reported in produtcts with death coverage, reflecting the worsening of the pandemic in the 1H21, but with signs of normalization at the end of 2H21, driven by the advanced immunization program. Based on managerial data provided by Brasilseg (dated as of 01/18/2022), claims related to Covid-19 totaled R$864 million and was more than 3 times higher as compared to the R$231 million of 2020.

Premiums written was 16.2% higher, mainly driven by: rural insurance (+35.5%), due to the increase in agricultural inputs costs, with the consequent evolution of the credit to fund the cycle 2021/2022; term life insurance (+17.1%), supported by the growth in new sales and the increase in premiums renewal; and home insurance (+23.4%), led by the growth of both sales and average ticket after the launch of a new portfolio in the 1H21.

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