>The result, in the IFRS 4 Business View, exceeds the R$20.1 million recorded in 2Q23.
> Reinsurer records positive result for the sixth consecutive quarter.
> Net income in 1H24 reached R$144.3 million, compared to R$28.6 million in 1H23. Growth of 403.9%.
> Underwriting result closes 2Q24 at R$33.7 million. In 1H24, the amount reached R$156.2 million, compared to R$39.1 million in 1H23.
> The loss ratio for 2Q24 was 65%, an improvement of 8.6 p.p. compared to 2Q23. In 1H24, it was 61.8%.
> Combined ratio of 106% in the 2Q24 is 1.5 p.p. better than that the one seen in 2Q23. In 1H24, the ratio was 102.1%.
> Solvency reached 182%.
> Net profit calculated using the IFRS 17 methodology is R$194 million in 2Q24.
IRB(Re) recorded a net profit of R$65.2 million in 2024 (2Q24.) The numbers, released today (August 14th), consider Business View and show the evolution of the reinsurer, which achieved positive results for the sixth consecutive quarter. The amount calculated between April and June this year is 224.6% higher than that reported a year earlier, R$20.1 million in 2Q23.
In the year to date, the company obtained a net profit of R$ 144.3 million, an increase of R$ 115.7 million compared to 1H23, when it reached R$ 28.6 million. The 1H24 result, which highlights the underwriting and financial results, is 403.9% higher than a year earlier and exceeds the total net profit for 2023 by 26%, even taking into account the impact of the tragedy occurred in Rio Grande do Sul.
“Our numbers show that, quarter by quarter, we have consistently evolved in net and subscription results, which is a consequence of our business strategy. And now, the figures for 2Q24, when we posted a net profit of R$65.2 million, a loss ratio of 65% and a combined ratio of 106%, show an improvement when compared to 2Q23. The figures include the impact of the tragedy that occurred in Rio Grande do Sul. And I remind you: the act of paying out losses is the delivery of our product,” says Marcos Falcão, CEO of IRB(Re).
“I believe that by looking at the trail of the last 12 months, we are able to perceive our evolution more clearly. Starting from the very beginning of the new management, at the end of 2022, we have cleaned up the portfolio; we have focused on the combined ratio, which was at 136% and has been declining consistently and gradually; we have obtained a growing underwriting result, in other words, we are making money in our core business; and we have seen a growing and positive net income curve. When we started, 2022 had closed with a loss of R$630 million. We achieved a net profit of R$230 million over the last 12 months. We remain committed to generating sustainable, long-term results, focusing on the profitability of the business and controlling the items under our management: price, expenses and costs,” he adds.
Positive underwriting result
The underwriting result reached R$33.7 million in 2Q24, 4.7% lower than in 2Q23 (R$35.4 million), influenced by retained losses – the sum of PSL and IBNR – due to the downpours in Rio Grande do Sul. In the year to date, the total underwriting result amounted to R$156.2 million, compared to R$39.1 million in 1H23. Growth of 299%.
In line with the strategy of focusing on business in Brazil and reducing participation abroad, total premium issued rose 2.8% year-on-year in 2Q24, to R$1.434 billion. The share of businesses signed in Brazil increased, reaching 82% of the portfolio in 2Q24.
With respect to volume, there was a 18.4% increase in the premium issued in Brazil compared to 2Q23: R$ 1.178 billion. The premium issued overseas, which represented 18% of the portfolio, totaled R$256.2 million in 2Q24, a drop of 35.9% compared to 2Q23. In the first half of the year, the premium issued was R$2.874 billion, 3.5% less than in 1H23.
“Considering the strategy of concentrating business in Brazil, we can observe, semester by semester, a reduction in international business – excluding Latin America – which, in 1H24, accounted for 16% of the portfolio. At the same time, we were able to observe an increase in business in Brazil to almost 78% in 1H24. We are therefore continuing with our strategy of concentrating 70% of our business in Brazil, 20% in Latin America and 10% for other international markets. Observe that our percentage of premiums in Latin America is still low, at 6.4%, since the renewals of these businesses will take place in 3Q24. Most Latin American clients renew their deals on July 1st. In 1H24, we increased by 11.8% in Brazil and decreased by 34.9% abroad, in line with our strategy,” said Daniel Castillo, vice-president of Reinsurance at IRB(Re).
Total retained losses dropped 10%
Total retained losses dropped 10.1%, comparing 2Q24 with 2Q23, closing at R$ 675.5 billion. As a result, the total loss ratio went from 73.6% to 65%, an improvement of 8.6 p.p. even taking into account the impact of losses arising from the rains in Rio Grande do Sul. Considering geography, the loss ratio in 2Q24 was 62% in Brazil and 75% overseas, both better than in 2Q23. In the year to date, loss ratio dropped by 13.8 p.p., from 75.6% to 61.8%.
“With regard to the impacts of the tragedy that occurred in Rio Grande do Sul, I would like to point out that we remain committed to carrying out the analysis and payments as soon as possible. By June, we had calculated R$150 million in losses reported (PSL) added to R$107 million in IBNR provisions, totaling R$257 million recorded in the retained loss line. The segments most affected are property, housing and engineering. For these lines of business, we have the retrocession program and, after reaching a limit, we pass on the risks to the retrocessionaire. For the other risks, a provision was made for IBNR in order to cover our obligations related to this event. Three months after the event, we can safely say that we are well provisioned for potential future losses and have protection for what exceeds certain amounts,” explains Castillo.
The company also improved the combined ratio – which includes claims, commissions and other expenses – going from 107.5% in 2Q23 to 106% in 2Q24. The year-to-date figure also improved by 6.6 p.p. to 102.1% in 1H24. “We can see the evolution of the combined ratio, which decreased by 1.5 p.p. in 2Q24. Remember that the combined ratio shows the overall state of the underwriting. This ratio shows the effect of previous years and its reduction indicates that we are on the right track. Despite the catastrophe in Rio Grande do Sul, our combined ratio is down,” says Castillo.
General and administrative expenses breakdown
The general and administrative expenses of IRB(Re), in 2Q24, totaled R$ 83.8 million. A figure 3.3% better than that reported in 2Q23. The administrative expenses ratio reached 8.1% in 2Q24. In the year to date, administrative expenses remained lower than last year, totaling R$158.7 million, with a ratio of 8.1%.
The company’s financial and equity result in 2Q24 was R$165.8 million, 73.4% greater than the result in 2Q23. In the year to date, the financial and equity result was R$307.5 million, 27.5% above the same period last year.
“We ended 2Q24 with R$9.1 billion in financial assets, compared to R$8.5 billion in 2Q23. If we exclude a difference of R$400 million, resulting from the receipt of funds from a specific agreement in June for payment in July, we will have R$8.7 billion in assets. The allocation of these resources, in general, can be broken down between approximately 60% of assets in Brazil and 40% overseas”, says Paulo Valle, general director of IRB (Asset), the reinsurer’s investment branch.
Sufficiency in regulatory indicators
IRB(Re) must observe two regulatory indicators, as per Susep regulations, the institution responsible for supervising the insurance and reinsurance sector: Adjusted Owner’s Equity Adequacy Ratio in relation to the Minimum Required Capital (CMR) and the Technical Provisions Coverage Ratio. In June 30th, 2024, the company presented sufficiency in both ratios.
“The first indicator, the Adjusted Owner’s Equity Adequacy Ratio, closed 2Q24 with a sufficiency of R$820 million, or 82% above the required capital, the best level since September 2021. I would like to point out that, with better risk selection, we reduced the minimum capital requirement by R$433 million in 2Q24. The Technical Provisions Coverage Ratio ended the quarter with a sufficiency of R$609 million”, says Falcão.
IFRS 17
IRB(Re), in addition to reporting its numbers considering the IFRS 4 Business Vision, adopted by our sector regulator, Susep, and used by the company to make its decisions, published its 2Q24 results in IFRS 17, as required by the Securities and Exchange Commission of Brazil (CVM). The international standard, aimed at the insurance and reinsurance market, treats operational flows brought to present value, considering the time value of money.
Considering the IFRS 17 methodology, the company’s result in 2Q24 was a positive R$194 million, compared to a loss of R$37 million in 2Q23. In 1H24, it reached R$431 million. “In this quarter, we would highlight that reinsurance revenues increased by R$57 million and reinsurance expenses grew by R$572 million, essentially due to losses in Rio Grande do Sul. Net income from retrocession agreements increased by R$765 million, mainly due to the recovery of these claims. Finally, the R$136 million increase in the net financial result was mainly due to the positive exchange rate variation,” said Falcão.
The complete Performance Analysis is available on the company’s Investor Relations website.
