- The reinsurer’s result in the quarter were negatively impacted by the loss ratio of the Rural line, which strongly affected the insurance and reinsurance market.
- Total loss ratio in 2Q22 was 124.2%, an increase of 28.5 p.p. compared to the same quarter of the previous year (95.7%), with the impact of weather effects in Rural.
- In 1H22, premiums written by the company in Brazil grew 4.8%, i.e. 65% of the portfolio, in line with the strategy determined by IRB.
- In the first six months of the year, the financial and equity result was positive by R$ 364 million, an increase of 88.8%.
IRB Brasil RE released, this Monday (08/15), the results for the second quarter (2Q22) and the first half of 2022 (1H22). The weather effects that caused significant crop failure in agribusiness and resulted in large claims for insurers and reinsurers, in addition to claims resulting from covid-19, had a negative impact on the company’s numbers, which recorded a net loss of R$ 373.3 million in 2Q22. In the year-to-date period, the net loss totaled R$ 292.8 million.
According to the Performance Analysis released by IRB, such effects, mainly in the Rural line, compromised the recovery of results that started in the first quarter of the year. Normalizing the atypical weather and covid-19 effects, the company has allegedly closed the first half with a positive result, thanks to the financial result and the significant reduction in operating losses, as a result of the underwriting improvement process started in mid-2020.
In 2Q22, the total volume of premiums written by IRB decreased by 22% compared to 2Q21, reaching R$ 1.685 billion, compared to R$ 2.160 billion in the same period of the previous year. The premium written in Brazil totaled R$ 1.154 billion in 2Q22, a decrease of 7% compared to the same period in 2021, mainly due to adjustments in the Equity, Rural and Aviation lines. The premium written abroad totaled R$ 530.9 million in 2Q22, which represented a decrease of 42.2% compared to 2Q21. This reduction is in line with the re-underwriting strategy.
In 1H22, the total volume of written premiums decreased 9.8% compared to 1H21, totaling R$ 3.689 billion. In the year-to-date period, premiums written in Brazil totaled R$ 2.394 billion, which represented an increase of 4.8% compared to the same period in 2021, reflecting the highest volume of premiums written in the Property (+6.3% ), Rural (+9.3%) and Others (+13.8%) segments. The premium written abroad was R$ 1.295 billion, a decrease of 28.2% compared to 1H21. The lower contribution of the premium written abroad is mainly due to the Aviation (-71%), Rural (-59%) and Life (-26.3%) lines, in line with the company’s strategy.
The total retained claim in 2Q22 was R$1.663 billion, in line with 2Q21, of R$1.658 billion. Total loss ratio in 2Q22 was 124.2%, an increase of 28.5 p.p. compared to the same quarter of the previous year, of 95.7%.
In nominal terms, retained claim in Brazil increased from R$ 769.6 million in 2Q21 to R$1.056 billion in 2Q22. The loss ratio increased from 91.7% to 143.9% when comparing 2Q21 with 2Q22. The claims recognized in the period mostly follow the losses with the cultivation of grains that occurred mainly in the South region and part of Mato Grosso do Sul.
The loss ratio abroad was 100.2%, compared to 99.5% in 2Q21, impacted by the effects of Life claims, mainly in Peru, and the tail effect of discontinued Aviation contracts.
In the first six months of 2022, total retained claims amounted to R$ 2.596 billion, with the loss ratio showing an increase of 19.3 p.p. compared to 85% in the same period last year. The loss ratio for the six months of 2022 normalized for atypical weather effects and covid-19 was 78%, an improvement of 7 p.p. compared to the same period of the previous year.
Financial and equity result
In 2Q22, the financial and equity result was positive by R$ 104.3 million, a growth of 17% compared to the same period in 2021, even negatively affected by the recalculation of some liabilities, which had a negative effect of R$ 65.1 million in the quarter. Without this adjustment, the financial result would have been R$ 169.5 million in the quarter, 90% more than in the same quarter of 2021, driven by the performance of 107% in relation to the CDI in the investment portfolio in Brazil.
In the first six months of 2022, the financial result was positive by R$ 364 million, compared to R$ 192.8 million in 1H21, benefiting from the increase in the Selic rate, which boosted the growth of the portfolio’s profitability in Reais, from 2.8 % in 1H21 to 6.5% in 1H22.
General and administrative expenses in 2Q22 totaled R$ 79.4 million, a decrease of 25.1% compared to 2Q21. Thus, the administrative expense ratio dropped to 5.9% in 2Q22.
IRB Brasil RE must observe two important regulatory indicators. On June 30, 2022, there was insufficient adjusted shareholders’ equity in relation to the minimum required capital in the amount of R$ 613.8 million. Adjusted shareholders’ equity corresponded to 64% of the minimum required capital on that date. The company also presented insufficient classification of the coverage of technical provisions of R$ 729.7 million on that same date. The IRB provided Susep with a coverage regularization plan, which should remedy the sufficiency of both regulatory indicators within the time horizon set forth by the legislation.
The company published, on the morning of this Monday (Aug/15), a material fact informing that it is studying the possibility of carrying out a fundraising operation that, in principle, consists of a subsequent public offering for the primary distribution of common shares, to be carried out in Brazil and with placement efforts abroad, respecting the capital increase limit authorized by the IRB’s Bylaws.
It should be noted that, to date, the company has not determined or approved the effective realization or structuring of the potential fundraising, as well as its terms and conditions, in particular the criteria for setting the issue price of the new shares, and, therefore, on the date hereof, there is no public offering for the distribution of shares issued by the company being conducted in Brazil or in any other jurisdiction.
The complete Performance Analysis is available on the company’s Investor Relations website (ri.irbre.com).