This Thursday (11/11), IRB Brasil RE released its results for the third quarter (3Q21) and the first nine months (9M21) of 2021. The reinsurer recorded a recurring net income of R$101.7 million as a result accumulated up to September, compared to a loss of R$568.4 million in the same period in 2020. In the accounting result, which incorporates the impacts of discontinued businesses and non-recurring expenses, there was a 62.8% reduction in the net loss, which was R$311.8 million against R$837.3 million in the first nine months of the last year. In 3Q21, IRB recorded net income of R$44.5 million in the recurring view and a loss of R$155.7 million in the accounting view, the latter 27.8% lower than in the same quarter of 2020.
The company’s net accounting result in 3Q21 was negatively impacted by discontinued businesses (in run-off), with a total negative effect of R$329.5 million, of which R$219.4 million resulted from the remainder of discontinued contracts in the Life segment abroad. This impact was partially offset by non-recurring effects (one-offs) of R$129.3 million, mainly due to winning the lawsuit related to PIS/Pasep.
“The numbers show the company’s recovery and improvement. IRB has worked hard to have well-structured
processes, strong governance and long-term strategy, and has reviewed its entire underwriting portfolio to make it profitable and sustainable. Our objective is to grow profitably, using our competitive advantages to leverage our share in the local market”, says the CEO of IRB Brasil RE, Raphael de Carvalho.
In 3Q21, the total retained claim was R$1,992.3 million, an increase of 33.9% over the same period in 2020. The rise reflects the increase in provisions for claims to be settled, which grew as a result of the recognition of a claim from a discontinued contract (run-off) in the Life segment abroad, in the amount of R$219.4 million. Excluding the claims of discontinued businesses, which totaled R$349.2 million, the 3Q21 loss ratio was 99.6%.
“It is noteworthy that, when comparing the quarters, the loss ratio was impacted by the remainder of discontinued contracts. In the recurring view, we record claims in the equity, special risks and aviation segments, arising from Optional Contracts, whose risk coverage is part of our business and whose loss ratio is in line with the insurance and reinsurance market, which in the third quarter had a decline in performance in general terms”, analyzes Wilson Toneto, Technical and Operations vice-president of IRB Brasil RE.
In line with the strategy of reviewing the portfolio and focusing on the local market, the share of premiums written in Brazil increased from 51% in 9M20 to 61% in 9M21. From July to September, the total volume of IRB Brasil RE written premiums decreased by 12.4% compared to 3Q20, totaling R$2,607.7 million. The premium issued in Brazil totaled R$1,793.5 million in 3Q21, practically stable compared to the same period in 2020. The Rural lines, with an increase of 70.3%, and Life, with 38.1%, stand out. The premium written abroad totaled R$814.2 million in 3Q21, which represented a reduction of 30.2% compared to 3Q20.
In the nine months of 2021, the total volume of written premiums decreased 10.9% compared to the same period last year, totaling R$6,698.3 million. Year-to-date, premiums written in Brazil totaled R$4,078.7 million, representing an increase of 5.8%, reflecting an increase in Life (+43.1%) and Rural (+28.5%). The premium issued abroad was R$2,619.6 million, with a decrease of 28.5% compared to the nine months of 2020.
However, thanks to the lower volume of setbacks in 2021, the earned premium recorded growth both in the quarterly comparison and in the year to date. In 3Q21, earned premium reached R$1,670.4 million, 8.1% higher than in 3Q20, while in 9M21, earned premium was R$4,857.0 million, 1.7% higher than in 2020.
IRB Brasil RE presented positive operating cash generation for the fifth consecutive quarter. In this 3Q21, the generation of R$604.8 million is 332% higher than the R$140 million generated in 3Q20. In 9M21, operating cash generation totaled R$1.1 billion. “It is worth noting that results and cash generation have to converge in the long term. In the past, IRB gave positive results and burned cash. Since the restructuring, on the other hand, we have been paying this difference with accounting results that are still negative, but the positive cash generation indicates that we are moving on the right path”, assesses Willy Jordan, the company’s Vice President of Finance and Investor Relations.
Solvency and Regulatory Framework
At the end of 3Q21, IRB Brasil RE registered an excess of regulatory capital of R$647.2 million. This equates to a regulatory solvency ratio of 142% (adjusted equity vs. total venture capital), while the company’s total solvency ratio (generally used in other countries) reached the level of 264% (equity vs. total venture capital). The company ended the quarter with a sufficient regulatory framework of R$43 million. Excluding the additional 20% margin on risk capital, the sufficiency of eligible assets to guarantee technical provisions was R$347.4 million.
“In the fourth quarter, our focus will be on returning to profitable growth. We believe that some vectors will positively influence this trajectory, especially in 2022, such as infrastructure projects, concessions and the continuous
resumption of employment. We also expect a positive impact on financial profitability with the new interest rate scenario and the cooling of the effects of the run-off businesses”, analyzes Raphael de Carvalho.
The full Performance Analysis is available on the company’s Investor Relations website (www.ri.irbre.com)