IRB recovers regulatory sufficiency in 3Q22

Publicado em: 11/11/2022

Table of content

> The company’s regulatory indicators are complied with;

> Reinsurer recorded a net loss of BRL 298.7 million in the third quarter of this year (3Q22);

> The result continues to be negatively impacted by the loss ratio of the Rural line, which strongly affected the market, but the loss is 20% lower than in the previous quarter (2Q22);

> Loss ratio normalized for climate effects and excluding the effect of the 3Q22 LPT (91.3%) fell by 28 p.p. in relation to 3Q21 (119.3%);

> In the first nine months of the year (9M22), premiums written by the company in Brazil grew by 1.3% and account for 67.7% of the portfolio, in line with the strategy defined by IRB;

> Continuous improvement in the accumulated administrative expenses indicator for the year (9M22).

IRB Brasil RE released, this Thursday (10/11), the results for the third quarter of 2022 (3Q22). The weather effects that caused the failure of important crops in Brazil and resulted in large claims for insurers and reinsurers continue to negatively impact the company’s numbers, which recorded a net loss of BRL 298.7 million in 3Q22, compared to a net loss of BRL 155 .7 million in 3Q21. The result represents a 20% reduction in losses compared to the previous quarter (2Q22), a period also strongly impacted by these unusual weather events that affected agribusiness. Normalized, that is, excluding the extraordinary effects of Rural, the result for 3Q22 would be negative by BRL 123.3 million.

“The global reinsurance market faced a challenging third quarter. Weather events, in addition to high inflation, war and the consequences of the pandemic, impact the sector inside and outside Brazil. Once again, in the domestic market, the historic drought affected our result. This relevant effect raised the loss ratio to levels above those projected by the company, which already expected to reap more significantly in this quarter the results of the re-underwriting strategy. We believe that the moment of inflection of results has shifted in time, but that all actions were taken correctly so that the company operates with profitability in the medium term, executing our strategy in a disciplined manner”, evaluates Raphael de Carvalho, CEO of IRB Brasil RE.

In the first nine months of 2022 (9M22), IRB accumulates a net loss of BRL 591.6 million, against a loss of BRL 311.8 million in 9M21.

Written premiums

In 3Q22, the total volume of written premiums decreased by 7.5% compared to 3Q21, reaching BRL 2,412.4 million, compared to BRL 2,607.7 million in the same period of the previous year. Premiums written in Brazil totaled BRL 1,738.9 million in 3Q22, down 3% compared to the same period in 2021. This was mainly due to the decrease in business in Rural, with the non-renewal of contracts that were out of line with the prevailing hard market conditions and the company’s risk appetite. Premiums written abroad totaled BRL 673.5 million in 3Q22, down 17.3% from 3Q21.

Still in line with the company’s strategy, in the year, premiums written in Brazil totaled BRL 4,133.2 million, which represented an increase of 1.3% compared to the same period of 2021, reflecting the higher volume of premiums issued in the Life (+15.3%) and Property (+6.1%) segments. Premiums written abroad, in 9M22, were BRL 1,969.1 million, down 24.8% compared to 9M21.

“In 3Q22, we renewed 85% of the contracts we wanted to keep. This renewal percentage is the highest in recent quarters. In the same way, we made progress towards greater dilution per business, reducing exposure to each risk. This movement is in line with the company’s strategy, which focuses on being a protagonist in Brazil, with local businesses accounting for approximately two thirds of the portfolio. Brazil’s share in the portfolio grew and, in 9M22, reached 68%. The execution of the strategy will provide a gradual improvement in the underwriting result”, explains Daniel Veiga, Vice President of Damages, Liabilities and Special Risks.

Loss Ratio

The total retained claim in 3Q22 was BRL 1,387.1 million, a reduction of BRL 605.2 million (or 30.4%) compared to 3Q21. Compared to 2Q22, we see a nominal reduction of BRL 276.6 million, a decrease of 16.6%. The total loss ratio in 3Q22 was 116.8%, showing a reduction of 2.4 p.p. compared to the same quarter of the previous year, of 119.3%, and 7.4 p.p. compared to 2Q22, of 124.2%. Excluding the effect of the BRL 328.3 million LPT (Loss Portfolio Transfer) operation on the International Aviation line and the climate impacts on the Rural Domestic line, the normalized loss ratio was 91.3%.

In the accumulated result for the year, the total retained claim was BRL 3,983.8 million, a decrease of BRL 715.9 million, or 15.2%, compared to 9M21 (BRL 4,699.8 million). The total loss ratio in this period, of 108.3%, showed an increase of 11.5 p.p. compared to the same period of the previous year, of 96.8%. Excluding the LPT operation and the impacts of atypical weather events, the normalized loss ratio for 9M22 was 84.8%.

“The loss ratio still reflects the atypical weather events, which affected the domestic Rural segment by BRL 900.6 million in 9M22, and the impacts of the covid-19 pandemic on Life. Even with the cooling off of deaths in 2022, we recorded BRL 179.2 million of retained claims resulting from this event, notably in Life businesses, in 9M22. The trend is for the impact to be smaller and smaller in the company’s claims”, comments Wilson Toneto, Technical and Operations Vice President of IRB Brasil RE.

Financial and equity result

In 3Q22, the financial and equity result was positive by BRL 173 million, down 32.6% compared to the same period in 2021. The decrease stems from the extraordinary financial income that occurred in September 2021 of BRL 167.2 million from monetary restatement of the recovery of taxes. Disregarding this event, the financial and equity result increased by 93.2%.

General and administrative expenses in 3Q22 totaled BRL 87.6 million, a decrease of 3.0% compared to 3Q21. Thus, excluding the effect of the LPT, which reduces the earned premium, we have an administrative expenses ratio of 6.1%. The LPT gross administrative expense ratio was 7.4% in 3Q22.

“Also in 3Q22, there was a non-recurring sale of the IRB headquarters, in Rio de Janeiro, for BRL 85.3 million, which was recorded as equity result, in addition to the inflow of capitalization resources, which impacted the financial result of September . In 9M22, the financial and equity result was positive by BRL 537.1 million, compared to BRL 449.6 million in 9M21. It is worth noting that the total proceeds from the sale of a stake in a shopping mall in Rio de Janeiro will be accounted for until December”, informs Willy Otto Jordan Neto, Vice President of Finance and Investor Relations at IRB Brasil RE.

Regulatory indicators

IRB Brasil RE must observe two important regulatory indicators. In 3Q22, the company regained sufficiency in both. As of September 30, 2022, the sufficiency of adjusted shareholders’ equity in relation to the minimum capital required was BRL 153.6 million. Thus, the adjusted shareholders’ equity corresponded to 109% of the minimum capital required on that date. Also on September 30, 2022, IRB presented sufficiency in the coverage of technical provisions and regulatory liquidity of BRL 325.9 million, compared to the positive balance of BRL 235.5 million on December 31, 2021.

“As previously explained, in 2Q22, we had insufficient coverage of the minimum capital required and coverage of technical provisions. As provided for in the regulatory framework, we prepared a coverage adequacy plan (CAP), most of whose planned actions also generated positive effects in covering the minimum capital required. We ended this quarter with sufficient regulatory indicators”, says Carlos André Guerra Barreiros, Vice President of Risks, Compliance and Legal at IRB Brasil RE. The complete Performance Analysis is available on the company’s Investor Relations website (

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