> For the third consecutive quarter, the company recorded a positive result. Positive variation of R$346.5 million compared to 3Q22.
> Company accumulated net profit of R$76.4 million in 9M23. Growth of R$668 million compared to 9M22.
‘ Underwriting results, also for the third consecutive quarter, are positive: R$ 10.8 million. Positive variation of R$550.1 million compared to 3Q22.
‘ The loss ratio closed 3Q23 at 74%, registering a drop of 42.8 p.p. compared to 3Q22.
‘ Combined ratio of 111.4% is 44.7 p.p. lower than that seen in 3Q22.
IRB(Re) closed the third quarter of 2023 (3Q23) with net profit of R$47.7 million. The numbers, released today (11/09), show the reinsurer’s progress, with a positive result for the third consecutive quarter. There was an increase of R$346.5 million, reversing the net loss of R$298.7 million recorded in 3Q22. Compared to the second quarter of this year, growth is 137%. Year-to-date, the company achieved net profit of R$76.4 million, an increase of R$668 million compared to the first nine months of 2022 (9M22).
“We could summarize our results in one word: consistency. The numbers are consistent with our strategy and indicate gradual and continuous evolution. We work to generate sustainable results in the long term. It is important to say that, this quarter, we gathered our main executives to consider the company’s future. In November, we will finalize the Zero Base Budget for 2024. We are focused on solutions to protect society in different aspects, which will be materialized in the Business Plan. With this, we will define the volume and speed of growth that we desire for IRB in the coming years, with the profitability target being the starting point. We thus continue to be increasingly closer to our clients and investors, creating intimacy and improving our processes and the quality of our services”, comments Marcos Falcão, CEO of IRB(Re).
Positive underwriting result
The underwriting result in 3Q23 was positive at R$10.8 million, registering an increase of R$550.1 million compared to 3Q22, when a negative amount of R$539.3 million was recorded. It is worth noting that, in this 3Q23, as in the previous two quarters, the underwriting result in Brazil was positive: it went from a negative R$270.9 million in 3Q22 to a positive R$64.4 million. Abroad, in 3Q23, the subscription result was negative by R$53.6 million. Year-to-date, the company recorded a positive underwriting result of R$49.9 million, reversing the negative result of the first nine months of 2022, of R$1.296 billion, and pointing to a recovery trend in the operation.
In line with the company’s strategy of improving underwriting quality, the total written premium fell 18.4% in 3Q23 compared to the same period in 2022, reaching R$1.967 billion. In 3Q23, the share of businesses signed in Brazil increased, reaching 85% of the portfolio. This percentage was 69% in 3Q22. As per volume, there was a decrease of 3.7% compared to 3Q22, to R$1.674 billion. The premium issued abroad, which represented 15% of the portfolio, totaled R$293.3 million in 3Q23, which represented a drop of 56.4% compared to 3Q22.
“We turn our focus to Brazil and Latin America, where we know the risks, market needs, coverage, exposures, loss ratio and their catastrophic exposures. Being one step ahead, we refined our strategy, using different practices for countries with different needs and opportunities such as Peru, Paraguay, Uruguay, Colombia, Bolivia and Mexico. And, the global market continues to be analyzed, we maintain the strategy of developing non-proportional businesses, without assuming large catastrophic exposures”, explains Daniel Castillo, vice-president of Reinsurance at IRB(Re).
“We can see a reduction in the total premium from 3Q22 to 3Q23. This reduction is due to the cleaning of the portfolio, which was accelerated in businesses renewed in 2023. Although we accepted new businesses, we declined some unprofitable ones and reduced participation in others, always with the intent of having a better quality and more profitable portfolio. We renewed 86% of all the businesses we wanted to maintain and continued with a diversified portfolio across nine business lines. Regarding business distribution, in 9M23, the equity line remains the highlight, with 35% of the portfolio”, adds Castillo.
Loss ratio drops by 42.8 p.p.
In 3Q23, total retained claims fell 54.5% compared to 3Q22, closing at R$630.8 million. As a result, the loss ratio went from 116.8% to 74%, a drop of 42.8 p.p.. Year-to-date, this ratio is 75.2%, a reduction of 33.1 p.p. compared to 9M22. The company improved the combined ratio – which includes loss ratio, commissions and other expenses – by 44.7 p.p., going from 156.1% in 3Q22 to 111.4% in 3Q23. Considering 9M23, the combined ratio also shows growth, going from 143.7% in 9M22 to 110.2% now.
“When comparing 3Q23 with 3Q22, we saw a reduction in the loss ratio. It is worth recalling that the loss ratio results from contracts signed in previous periods. Therefore, it depends on the risk assessment processes when they are presented, as well as adequate pricing. We believe that the actions already mentioned – such as price adjustment, reduction of exposures with cancellation or reduction of participation in several contracts, in addition to the alignment of commercial conditions and technical modifications in renewed businesses – contribute to the evolution of this ratio”, explains Castillo.
Cash flow evolution
In relation to operating cash, in 3Q23, there was an improvement in cash flow, with a lower consumption of R$192 million, compared to a consumption of R$789 million in 3Q22. In the last 12 months, that is, from September 2022 to September 2023, consumption was R$554 million. Though still negative, it already shows a recovery trend in the long term.
“Operating cash consumption remains in line with our planning. With the strategy of cleaning the portfolio and, therefore, reducing premiums received, and also honoring large claims relating to risks taken in previous years, it is natural that there will be this cash consumption”, says Rodrigo Botti, vice-president of Finance, Actuarial and IRB(Re) Technology.
General and administrative expenses, in 3Q23, totaled R$75.8 million, a decrease of 13.5% compared to the R$87.6 million recorded in 3Q22. In 9M23, expenses totaled R$250.4 million, an increase of 5.5% compared to R$237.3 million in 9M22. It is worth noting that the amount for 2023 considers non-recurring expenses of R$7.9 million with the PDV and R$25.4 million with the agreement signed with the DoJ and SEC, excluding this impact, the recurring amount in 9M23 is R $217.1 million.
The financial and equity result in 3Q23 was positive at R$182.9 million, 5.6% higher than the result in 3Q22 (R$173.2 million). In 9M23, the accumulated amount is R$424.1 million. “This quarter, the financial and equity result was practically double the previous quarter, when we recorded R$95.8 million, and the highest since the second quarter of last year. In relation to the portfolio of financial assets, we closed 3Q23 with R$8.5 billion”, explains Paulo Valle, general director of IRBAsset, the reinsurer’s investment arm.
Sufficiency in regulatory indicators
The IRB(Re) must observe two regulatory indicators, as per Susep regulations, the body responsible for supervising the insurance and reinsurance sector: Adjusted Shareholders’ Equity Sufficiency Ratio in relation to the Minimum Capital Required (MCR) and the Coverage Ratio of Technical Provisions. In 3Q23, the company presented sufficiency in both ratios.
“The first indicator closed 3Q23 with a sufficiency of R$589 million, that is, 50% above the required capital, the best level since September 2021. The warranty sufficiency indicator ended the quarter with a sufficiency of R$608 million”, says Thais Peters, director of Internal Controls, Risks and Compliance at IRB(Re).
The complete Performance Analysis is available on the company’s Investor Relations website (www.ri.irbre.com).
