On this Monday, (June 29), IRB Brasil RE presented the company’s results regarding the first quarter of 2020, when it registered profit, as well as the revised financial statement for 2019. The latter was presented again after an analysis led by new executive board, in office since the second half of March 2020 and which showed facts and signs a series of accounting records made by the former board was effectively incorrect and required adjustments.
The adjustments had a total impact of around BRL553.4 million on the company’s 2019 results and BRL117.2 million on the 2018 ones. The impact on the shareholders’ equity of IRB Brasil RE was BRL727.2 million for 2019 and BRL369.1 million for 2018. Then, the net profit for the fiscal year, after the revision, was BRL1.21 billion in 2019 (in comparison with BRL1.76 billion in the statement previously disclosed). According to the explanatory note disclosed in the revised statement, the main reasons for the changes are the improper record of certain claims, the lack of record of provisions for different other claims and underestimated provisions for a high number of cases, among other adjustments detailed in the Explanatory Notes to the Financial Statement.
“Revising financial statements already presented is never desirable. However, we needed to do it in face of what we found out and our commitment to present to the market a complete and true view on our Company”, says Werner Suffert, Financial and Investor Relations Executive Officer.
The assessments counted on experts from renowned companies and compliance and audit internal procedures, which made the adjustments and identified the Officers and other employees responsible for the records carried out improperly. Soon, IRB Brasil RE will present its conclusions to the Securities Commission (CVM) and to the Federal Insurance Commissioner (Susep), as well as it will analyze whistleblowing the facts and signs realized to the competent authorities, aiming at the due investigations. Last week, IRB Brasil RE had already presented to such bodies, in addition to the Prosecution Office (MPF), the conclusions on the independent investigation about the intentional disclosure of fake information to the market and internal assessments on the unduly payments made.
Quarter Results – Regarding consolidated figures, IRB Brasil RE registered a net profit of BRL13.87 million, including the reinsurance and retrocession operations, in the first quarter of 2020 – the adjusted result for the same period in 2019 was BRL177.89 million. On the other hand, the reinsurer’s premium issued in these first three months was BRL1.996 billion, an increase of 13% in comparison with the same quarter last year.
When it comes to premiums earned, IRB presented BRL1.499 billion in the period, in comparison with BRL1.241 billion from January to March 2019. With respect to the payments of claims, the company spent BRL1.147 billion for indemnities in this quarter, a value higher than the BRL959 million spent in the same period last year. On the other hand, the shareholders’ equity of IRB, calculated as BRL3.94 billion for the last quarter of last year, dropped to BRL3.56 billion in March of this year.
“The revision of the figures and results for the first quarter shows a Company that is sound, but still needs adjustments to its structure of geographic work and lines and types of business in order to be fit to the worldwide reinsurer profile, focused on its clients and consistent and sustainable results”, says the chairperson of the Board of Directors and current CEO, Antonio Cassio dos Santos. “I definitely believe these focuses constitute the only way to recover the trust from our target public: clients, shareholders, employees, regulators and business partners.”
Capitalization – In addition to it, the company informed that the Board of Directors approved the contracting of two banks – Bradesco BBI and Itaú BBA – to evaluate alternatives, aiming at a technical solution for complying with Susep’s rules (Resolution CNSP 321/2015) regarding the number of guarantor assets for the coverage of Technical Provisions and regulatory liquidity.
Such alternatives include the possible increase of the company’s capital, what would allow for the immediate reclassification of the company according to the criteria defined by Susep. Besides, a capitalization, if effective, would strengthen IRB Brasil RE’s capital structure, as well as it would improve its cash position.
“The capitalization, still being studied, is part of a solution for the company, as it strengthens it before the needed regulatory classifications, and improves even more the already high levels of solvency, adding more value to our stakeholders”, finishes Antonio Cassio.
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