> Result for 2022, as disclosed throughout the year, was negatively impacted by the high loss ratio of the Agribusiness lines, due to atypical weather events, and Life, due to covid-19;
> Premiums issued in Brazil grew in 2022;
> Reinsurer is close to returning to the break-even point in 4Q22;
> Total loss ratio in 4Q22 was 93.8%, showing a reduction of around 30 p.p. compared to 4Q21;
> Financial and equity result for 2022 was 11.6% higher than in 2021;
> After four quarters, the company returned to generating positive cash of R$ 220 million in 4Q22.
IRB Brasil RE recorded a net loss of R$ 630.3 million in 2022, compared to R$ 682.7 million in 2021. A report released by the company on Wednesday night (03/08) shows that the 7.7% reduction in annual losses occurred even with the strong negative impact of recent claims, resulting from atypical weather events on the Agribusiness line and the covid-19 in Life, which totaled around R$ 1.2 billion in 2022.
In the fourth quarter of last year (4Q22), the reinsurer was close to reaching the break-even point, with a loss of R$ 38.8 million. The 4Q22 figures were impacted by the negative underwriting result of R$ 152.8 million, and the positive financial result of R$ 153 million. In addition to the reduction on an annual basis, the comparison with 2Q22 (-R$ 373.3 million) and 3Q22 (-R$ 298.7 million) shows a significant improvement in net income in relation to the most affected quarters in 2022 by the Agribusiness and Life lines.
Market with attractive rates and 82% of target contracts renewed
“2022 was challenging for the entire insurance and reinsurance sector. Management worked throughout the year, improving the portfolio, which allowed the generation of positive cash in the last quarter and almost reached the break-even point. We started 2023 accelerating the changes promoted last year, with regard to the review of underwriting policies and processes, seeking efficiencies and strengthening the relationship with customers. In January that year, we renewed 82% of the contracts we wanted to retain, continuing with our risk dilution strategy. In addition, market conditions continue to be attractive, with increased rates in all lines. Looking ahead, we believe that our team, which is very capable and experienced, with clear goals and financial discipline, will lead IRB back to recurring profitability”, says the CEO of IRB Brasil RE, Marcos Falcão.
Premiums written in Brazil grow and reach 68% of the portfolio
The total volume of premiums written in 2022 decreased by 9.9% compared to 2021, totaling R$ 7.892 billion. Issuance in Brazil totaled R$ 5.377 billion (68% of the portfolio), which represented an increase of 0.9%, reflecting the strategy of focusing business on the local market. Premiums written abroad reached R$ 2.514 billion (31% of the portfolio), with a reduction of 26.7% compared to 2021. The lower contribution of premiums written abroad in 2022 is mainly due to the re-underwriting strategy.
In 2022, retroceded premiums fell by 8.8%, following the decline in written premiums. Thus, total retained premiums amounted to R$ 4.968 billion, down 10.6% from the previous year. Total premiums earned in the 12 months of the year closed at R$ 5.097 billion, a 13.6% decrease compared to 2021, due to the effects of the variation in technical provisions and the reduction in written premiums.
“We continue to adjust our portfolio, as shown by the 4Q22 result. The total volume of written premiums fell 13.2% compared to 4Q21, reaching R$ 1.789 billion. There was a slight decrease in Brazil (0.5%) due to the discontinuity of some businesses in the Life segment. This movement, however, was offset by the increase in premiums in the Agribusiness line, as the 2022-23 Summer Harvest contracts had a readjustment of more than 30% in rates, in addition to reductions in insurance guarantees, reflecting the recent results of the sector. Abroad, we reduced premium issuance by 32.8%, considering the annual basis, in line with our strategy”, explains IRB Underwriting Vice-President Daniel Castillo.
Loss ratio drops by around 30 p.p. in 4Q22
In 2022, the IRB recorded R$ 5.314 billion in the volume of retained claims, a decrease of 11.2% compared to 2021. The main impacts were the atypical weather events that affected the Agribusiness line and the effects of covid-19 in Life. The loss ratio increased from 101.5%, in 2021, to 104.3% in 2022, although there was a nominal reduction in retained claims in 2022, which did not offset the decrease in earned premium. It is worth mentioning that, in 4Q22, the total loss ratio was 93.8%, showing a reduction of 29.7 p.p. compared to the same quarter of the previous year, of 123.5%.
“The loss ratio reflects the atypical weather events that affected the domestic Agribusiness segment and the impacts of the pandemic on the Life line. In the 2022 fiscal year, the IRB recorded incremental losses of R$ 975.1 million with claims at Agribusiness and R$ 228.2 million with claims related to covid-19 in Life. It is worth mentioning that, in 2021, such claims related to the pandemic totaled R$ 383.7 million. In other words, there is a tendency to cool down. If we exclude both events, which total R$ 1.2 billion, the company’s result would be positive”, says IRB’s Technical and Operations Vice-President Wilson Toneto.
Financial and equity result grows 11.7% and expenses fall
IRB’s financial and equity result was R$ 690.1 million in 2022, 11.7% higher than in 2021, due to the increase in the Selic rate, in addition to the non-recurring effect of gains from lawsuits, sale of the company’s headquarters in Rio de Janeiro and 20% ownership interest in CasaShopping.
After four quarters, the company returned to generating positive cash in 4Q22: R$ 220.1 million, compared to a cash consumption of R$ 1.182 billion in 4Q21. “Cash generation in this quarter was mainly due to the lower volume of claims payments and lower transfer of premiums for assignment of risks, that is, retrocession”, explains Falcão.
In 2022, general and administrative expenses totaled R$ 329.7 million, a decrease of 14.9% compared to 2021, mainly due to the reduction in expenses with own personnel and court expenses. The ratio on earned premiums ranged from 6.6% in 2021 to 6.5% in 2022.
Sufficiency in regulatory indicators
IRB must observe two regulatory indicators, as per Susep regulations, the institution responsible for supervising the insurance and reinsurance sector: Adjusted Shareholders’ Equity Sufficiency Ratio in relation to the Minimum Capital Required and the Coverage Ratio of Technical Provisions. On 12/31/2022, the company showed sufficiency in both.
“Our adjusted shareholders’ equity (PLA) corresponded to 101% of the minimum capital required (CMR) on 12/31/2022, while the technical provisions coverage indicator showed a sufficiency of R$ 332.1 million, says Risk, Compliance and Legal Vice-President Carlos Guerra.
The complete Performance Analysis is available on the company’s Investor Relations website (www.ri.irbre.com).
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