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IRB - BRASIL RESSEGUROS S.A.

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IRB Brasil Resseguros S A : RE records net income of R$ 80.5 million in the first quarter of 2022

05/20/2022 | 02:15pm EDT
IRB Brasil RE records net income of R$ 80.5 million in the first quarter of 2022 Published in: May 20, 2022
  • Reinsurer's result is 58% higher than that in the first quarter of 2021.
  • Total premiums written by the company exceeded R$ 2 billion, a rise of 4% compared to 1Q21.
  • In line with the strategy defined by the IRB Brasil RE management, sales in the local market already account for 62% of total premiums, a rise of 8 p.p. compared to 1Q21.
  • Total loss ratio in 1Q22 was 81%, as a result of the impact of weather effects and Covid-19.
  • Reinsurer's financial and equity result grew by 150.6%.

IRB Brasil RE released, this Monday (May 16), the results for the first quarter of 2022 (1Q22). The reinsurer reported a net income of R$ 80.5 million, 58% higher than the R$ 50.8 million recorded in the same period last year. The company will hold a conference call for investors on Tuesday (May 17), at 11:00 am (Brasilia time).

"We recorded an increase in results in a challenging quarter, taking another step towards the recovery of the company's profitability. The discipline in executing the strategy of increasing the weight of the local market in the portfolio, diluting concentration by business and adjusting price to risk, combined with operational efficiency and good financial performance, has brought gradual improvements in our margin. In this quarter, we highlight the one-off rise in loss ratio of the Rural segment, due to weather issues, as well as to the impact of Covid-19, particularly on the Life segment. We should highlight that there was no material impact, in this quarter, from the businesses subscribed before June 2020. We remind you, however, that, due to the natural characteristics of our business, occasional variations may occur in the coming quarters", evaluates IRB Brasil RE CEO Raphael de Carvalho.

Written premiums

In 1Q22, the total volume of premiums written by IRB Brasil RE grew by 4% compared to 1Q21, reaching R$ 2.005 billion, compared to the R$ 1.931 billion in the same period of the previous year. Written premiums in Brazil totaled R$ 1,240 billion in 1Q22, which represented an increase of 18.8% compared to the same period in 2021. Worthy of note are the Rural (+54.5%), Life (+30.8) and Property (+23.4%) lines. Premiums written abroad totaled R$ 764.6 million, a drop of 13.7% compared to 1Q21. The numbers are in line with IRB Brasil RE's strategy and show growth in the share of the local market in the company's portfolio, from 54% in 1Q21 to 62% in 1Q22.

"The first quarter is an important period of business renewal for IRB. The renewal of contracts that we wanted to retain reached 86%, including the domestic and international markets. Result higher than that of 1Q21. In addition, we closed 87 new deals, following the strategy of underwriting risks that bring growth and profitability to the company", says Daniel Veiga, vice president of Damage, Liabilities and Special Risks.

As previously disclosed by IRB Brasil RE, the company's geographic strategy is focused on Brazil, with local businesses accounting for at least two-thirds of the portfolio. Operations in the international market, on the other hand, have Latin America as a priority. Participation in other markets will be complementary, aiming at risk diversification, at all times with a focus on profitable growth.

"It is worth mentioning that the approval at our last shareholders' meeting of the increase in authorized capital by R$ 1.2 billion paves the way towards the acceleration of the implementation of our strategy. In this sense, we have already hired financial advisors who will assist us in the analysis of options for strengthening our capital structure, in order to face the challenges and opportunities that lie ahead", says Raphael de Carvalho.

The total premium retained was R$ 1,398 billion, a decrease of 8.9% compared to 1Q21, due to the higher volume of retroceded premiums. Without the LPT (Loss Portfolio Transfer) effect, retained premium would have grown 5.4% compared to 1Q21. Finally, the total premium earned was R$ 1,151 billion in 1Q22, 20.8% lower than that of 1Q21, as a result of the higher formation of technical provisions and the LPT impact. Excluding the effect of the LPT transaction, the decrease would have been 5.8%, compatible with the transactions of written premiums.

Loss Ratio

In 1Q22, retained losses totaled R$ 933 million, which represents a nominal decrease of 11% compared to 1Q21. Loss ratio in 1Q22 totaled 81%, a rise of 8.9 p.p. compared to the same quarter of the previous year, of 72.1%. Excluding the LPT effect, the loss ratio was 82.8%. The increase in losses was caused by atypical weather effects in the Rural segment and by the consequences of Covid-19, particularly in the Life segment. If we reinstate these atypical effects to a normal condition, we would have a loss ratio of 67.5%.

In nominal terms, retained losses in Brazil went from R$ 454,9 million in 1Q21 to R$ 714,9 million in 1Q22. This was mainly due to the Rural and Life segments. On the other hand, retained claims overseas decreased by 63.3%, i.e., to R$ 218.1 million in 1Q22, an effect of the company's new strategy.

"The increase in the loss ratio of the Rural line, particularly in Brazil, reached about 112% in the quarter, reflecting the climatic events observed mainly in the south of Mato Grosso do Sul, central-west of Paraná and in Rio Grande do Sul. It is an extraordinary fact, which impacted the entire insurance and reinsurance industry. It is worth mentioning that, in addition to the portfolio hedging contracted by IRB, the geographic diversification of the portfolio mitigates adverse effects. We also recorded approximately R$ 64 million in claims due to Covid-19 this quarter, an increase of more than 160% compared to the same period last year. With the slowing of the pandemic, the impact by Covid-19 is expected to be less and less relevant", explains Wilson Toneto, Technical and Operations Vice President of IRB Brasil RE.

Financial and equity result

In 1Q22, the financial and equity result increased by 150.6% and was positive by R$ 259,6 million, compared to a positive result of R$ 103,6 million in the first quarter of 2021. We highlight the record of a non-recurring event, in the amount of R$150,2 million related to the gain in lawsuits against taxes. General and administrative expenses in 1Q22 totaled R$ 70,3 million, a decrease of 28.7% in relation to 1Q21. The administrative expense ratio was 6.1% in 1Q22.

IRB Brasil RE monitors two important regulatory indicators: the first, in relation to the coverage of technical provisions, which was already duly classified on 03/31/2022. The second deals with the sufficiency of the Adjusted Shareholders' Equity (ASE) in relation to the minimum capital required (MCR), with the ASE exceeding MCR by 105%. The company's classification in relation to the solvency parameters established in the legislation and regulation is reinforced by the verification of the total solvency ratio - commonly used abroad - corresponding to 231%. This ratio measures the sufficiency of total equity in relation to the same MCR.

The complete Performance Analysis is available on the company's Investor Relations website (www.ri.irbre.com).

Disclaimer

IRB Brasil Resseguros SA published this content on 20 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 May 2022 18:14:02 UTC.


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Financials
Sales 2022 6 118 M 1 202 M 1 202 M
Net income 2022 191 M 37,6 M 37,6 M
Net Debt 2022 - - -
P/E ratio 2022 26,5x
Yield 2022 0,07%
Capitalization 2 900 M 570 M 570 M
Capi. / Sales 2022 0,47x
Capi. / Sales 2023 0,45x
Nbr of Employees 457
Free-Float 71,7%
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Number of Analysts 8
Last Close Price 2,31 BRL
Average target price 3,33 BRL
Spread / Average Target 44,2%
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Managers and Directors
Raphael Afonso de Carvalho Chief Executive Officer
Antonio Cassio dos Santos Chairman & President
Willy Otto Jordan Neto Chief Financial & Investor Relations Officer
Wilson Toneto COO, CTO & Investor Relations Officer
Carlos André Guerra Barreiros General Counsel & Risk, Compliance Officer
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