IRB Brasil RE records a net profit of R$80.5 million in the first quarter of 2022
Published on: May 20, 2022
- The reinsurer’s result is 58% higher than in the first quarter of 2021.
- Total premiums written by the company exceeded R$2 billion, up 4% from 1Q21.
- In line with the strategy defined by the management of IRB Brasil RE, sales in the local market already represent 62% of total premiums, an increase of 8 pp compared to 1Q21.
- The total loss ratio in 1Q22 was 81%, due to the impact of weather effects and Covid-19.
- The reinsurer’s financial and equity result increased by 150.6%.
IRB Brasil RE published, this Monday, May 16, the results for the first quarter of 2022 (1Q22). The reinsurer reported net income of 80.5 million reais, 58% more than the 50.8 million reais recorded in the same period last year. The company will hold an investor conference call on Tuesday, May 17 at 11:00 a.m. (Brasilia time).
“We delivered an increase in results during a challenging quarter, taking another step towards turning around the profitability of the business. Discipline in executing the strategy to increase local market weight in the portfolio, dilution of concentration by activity and adjustment of price to risk, combined with operational efficiency and good financial performance, enabled us to gradually improve our margin. of the Rural segment, due to weather problems, as well as the impact of Covid -19, in particular on the Life segment. Note that business written before June 2020 did not have a significant impact on this quarter. remember, however, that due to the natural characteristics of our business, occasional variations could occur in the coming quarters”, assesses Raphael de Carvalho, CEO of IRB Brasil RE.
In 1Q22, the total volume of premiums written by IRB Brasil RE increased by 4% compared to 1Q21, reaching R$2.005 billion, compared to R$1.931 billion in the same period of the previous year. Premiums written in Brazil totaled 1,240 billion reais in 1Q22, representing an increase of 18.8% compared to the same period in 2021. Of note are the rural sectors (+54.5%), life (+ 30.8) and goods (+ 23.4%). ) lines. Premiums written abroad totaled R$764.6 million, a decrease of 13.7% compared to 1Q21. The figures are in line with IRB Brasil RE’s strategy and show growth in local market share 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 the contracts that we wanted to keep reached 86%, including the national and international markets. Result higher than that of 1Q21. In addition, we concluded 87 new business, following the underwriting strategy of growth and profitability-enhancing risks for the company”, declares Daniel Veiga, Vice-President Damages, Liabilities and Special Risks.
As previously reported by IRB Brasil RE, the company’s geographic strategy is centered on Brazil, with local businesses making up at least two-thirds of the portfolio. Operations in the international market, on the other hand, focus on Latin America. Participation in other markets will be complementary, aiming at risk diversification, with an emphasis at all times on profitable growth.
“It is worth mentioning that the approval at our last general meeting of shareholders of the increase in authorized capital of R$1.2 billion paves the way for the acceleration of the implementation of our strategy. sense, we have already hired financial advisors who will assist us in analyzing options for strengthening our capital structure, in order to face the challenges and opportunities that lie ahead of us,” says Raphael de Carvalho.
Total premiums withheld amounted to R$1,398 billion, down 8.9% compared to 1Q21, due to the increase in the volume of retroceded premiums. Without the LPT (Loss Portfolio Transfer) effect, retained premiums would have increased by 5.4% compared to 1Q21. Finally, the total earned premium amounted to R$1,151 billion in 1Q22, 20.8% lower than in 1Q21, due to the higher formation of technical provisions and the LPT impact. Excluding the effect of the LPT transaction, the decline would have been 5.8%, compatible with the written premium transactions.
In 1Q22, retained losses totaled R$933 million, representing a nominal decrease of 11% compared to 1Q21. The 1Q22 claims ratio was 81%, up 8.9pp from the same quarter a year earlier of 72.1%. Excluding the LPT effect, the loss ratio was 82.8%. The increase in losses was caused by atypical climatic effects in the Rural segment and by the consequences of Covid-19, in particular in the Life segment. If we restored these atypical effects to a normal state, we would have a loss ratio of 67.5%.
In nominal terms, retained losses in Brazil increased from R$454.9m in 1Q21 to R$714.9m in 1Q22. This is mainly due to the Rural and Living segments. On the other hand, receivables held abroad decreased by 63.3% or 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 approximately 112% during the quarter, reflecting the climatic events observed mainly in the south of Mato Grosso do Sul, the center-west of Paraná and in Rio Grande do Sul It is an extraordinary fact, which has had an impact on the entire insurance and reinsurance sector.It should be mentioned that in addition to the portfolio coverage contracted by IRB, the geographical diversification of the portfolio mitigates the negative 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. As the pandemic slows down, the impact of Covid-19 should become less and less relevant,” says Wilson Toneto, Vice President Technical and Operations of IRB Brasil RE.
Financial result and equity
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$103.6 million in the first quarter of 2021. We highlight the record of a recurring non-event, for an amount of R$ 150.2 million related to the gain in the lawsuit against taxes. General and administrative expenses in 1Q22 totaled R$70.3 million, down 28.7% compared to 1Q21. The administrative expense ratio was 6.1% in 1Q22.
IRB Brasil RE monitors two important regulatory indicators: the first, relating to the coverage of technical provisions, which has already been duly classified as of 03/31/2022. The second deals with the sufficiency of adjusted equity (ASE) in relation to the minimum capital requirement (MCR), the ASE exceeding the MCR by 105%. The classification of the company in relation to the solvency parameters established in the legislation and regulations is reinforced by the verification of the total solvency ratio – commonly used abroad – corresponding to 231%. This ratio measures the adequacy of total capital in relation to the same MCR.
Full performance analysis is available on the company’s Investor Relations website (www.ri.irbre.com).