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IRB Brasil Resseguros S A : 3Q21 Outcomes Presentation Transcript

Convention Name Transcript

IRB Brasil

3Q21 Outcomes

November 12, 2021


Good morning, women and gents, and welcome to the earnings evaluation name of IRB Brasil RE for the accrued figures of 2021 and 3Q21. Right this moment’s convention name contains Mr. Raphael de Carvalho, Firm’s CEO, Wilson Toneto, COO, Willy Jordan, CFO and IRO, Mr. Carlos André Guerra Barreiros, Basic Councilor for Dangers and Compliance Officer, and Mr. Daniel Veiga, Chief Underwriting Officer for P&C and Specialties.

We wish to inform you that this convention name is being recorded, and all contributors can be in listen-only mode throughout this presentation. Proper after that presentation, we are going to maintain the Q&A session, and when you want any help, please press *0.

The presentation was put collectively by IRB Brasil RE, and shouldn’t be taken as a supply of funding knowledge.

This presentation could comprise sure forward-looking statements and data regarding the Firm that mirror the present views and or expectations of the Firm and its administration on the subject of its efficiency, companies and future occasions. Ahead-looking statements embrace, with none limitations, any statements which will comprise forecast, indication or estimates and projections about future outcomes, efficiency or goals, in addition to phrases reminiscent of ‘we imagine’, ‘anticipate’, ‘count on’, ‘estimate’, ‘forecast’, amongst different phrases with comparable meanings. These forward- wanting statements are topic to dangers, uncertainties and future occasions. We advise traders that a number of necessary elements could trigger the precise outcomes to vary materially from the plans, from the goals, expectations, projections and intentions expressed on this presentation.

In no way, neither the Firm nor its subsidiaries, administrators, board members, officers, brokers or workers shall be liable to third-parties, together with traders, for any funding choices that have been primarily based on the knowledge and statements contained on this presentation or for any particular or basic damages arising there from.

Market and aggressive place data, together with market forecasts that have been alluded to all through this presentation, have been obtained by means of inside surveys, market analysis, public area data and company publications.

References to continued operations, one-off operations and runoff results can be introduced within the managerial format. The unaudited companies are going to be introduced right here for the perfect administration functions.

Mr. Raphael de Carvalho, CEO, will begin together with his presentation.

Raphael de Carvalho:

Good morning. Thanks all, and welcome these of you attending this convention, and thanks very a lot to your curiosity on this follow-up.

Regardless of the introduction, among the individuals have been talked about right here, however I wish to reinforce right here that we’ve some new names within the management of this Group. Simply to my facet, we’ve


Toneto and Guerra, who’re well-known to you from different calls, however we’ve a few new names, beginning on my own, Raphael de Carvalho, I’m taking the CEO place since starting of October, and we even have our Investor Relations and CFO Willy Jordan, who additionally not too long ago joined our crew in mid-October.

And I additionally wish to remind you one thing that was shared a few weeks in the past a couple of reorganization that we did right here in our enterprise space. We mainly cut up the outdated construction that was referred to as Reinsurance VP in tow enterprise models that reply on to me. I’ll get into the small print in direction of the top of this presentation, however that mainly talks so much concerning the government technique and the leverage benefits.

The primary one is the Life division, that I really wish to announce, it will likely be occupied by Ronald Poon Affat. Ronald is a really skilled businessperson, insurance coverage and reinsurance, life particularly, each in Brazil and Latin America. He’ll take this place subsequent Wednesday, and he is the pinnacle of one of many largest stay reassurance corporations of the world.

And the opposite construction, because it was talked about in the beginning of the presentation, is a Chief Underwriting Officer for P&C and Specialties. And to this, we elected Daniel Veiga, who has received a 20- 12 months profession, has been by means of mainly all our enterprise models, is a specialist in underwriting. And much more necessary than that, he is aware of our shoppers’ portfolio deeply.

And having mentioned all that, now I wish to invite Willy to share our earnings with you.

Willy Jordan:

Thanks, Raphael. Good morning, everybody. It’s a nice pleasure for me to participate for the very first time and be incomes outcomes name of IRB. And beginning with slide quantity three, we had for the fifth consecutive quarter a constructive money technology, with an accrued quantity of R$1.5 billion over the 9M. And even when we disregard the nonoperating occasions, such because the court docket settlement that was acquired from Eletronorte within the 1Q, and the funds acquired from the subsidiaries, we generated constructive working money of R$1.1 billion in 2021.

And we also needs to spotlight that the money technology outcomes ought to converge on the long term. Prior to now, IRB used to provide constructive outcomes, however it was burning money. And after the restructuring, we paid this debt with accounting outcomes, that are nonetheless destructive, however our money technology follow-up signifies that we’re heading in the right direction.

One other necessary data is that from the present figures, after we exclude the discontinued companies within the recurring bills, we’ve had a web revenue within the 9M21 of R$670 million larger than final 12 months, going from a recurrent lack of R$568 million within the 9M21 for a recurring web earnings of R$102 million in 2021.

And this, to a sure extent additionally demonstrates that if we have a look at the long term, the remaining contracts and the run-on, we’ve already began to indicate a significantly better efficiency. Once more, exhibiting that we’re heading in the right direction.

Now, going in direction of slide quantity 4, we wish to current you with the online earnings for the accrued figures of 2021, exhibiting the impacts of the runoff and nonrecurring one-off results. And as I discussed, we’ve had R$102 million within the one-off and discontinued companies. The impact of the tail of the discontinued contracts was R$539 million, partially offset by the one-off discontinued occasions.

The next slide demonstrates mainly the identical impacts within the 3Q, the place the recurrent web revenue was of R$44.5 million. And we additionally noticed within the 3Q a vital affect of the tail of the


discontinued claims, from the R$456 million losses, the impression was R$330 million, exactly due to the extra provisioning of R$129 million within the life phase overseas. Alternatively, we had one-off positive factors, referring to PIS PASEP in August, with a really constructive impact of R$129 million within the web revenue of the quarter.

On slide six, we wish to illustrate once more the results of the tail of the discontinued contracts. The tail of the runoff contracts have had a dilutive impression all through the time, and could have a steadily decrease significance in face of the companies that have been renewed and the brand new companies, the brand new offers. And the impacts of the underwriting corporations of the runoff companies have been destructive in R$753 million in 2020, and R$538 million 12 months on 12 months till September 2021.

And as you may see from the picture, this impression got here from 4 contracts that have been terminated in July 2020. And for 2021, this impression of R$538 million got here apart to this 4 contracts that have been additionally terminated in April and July.

So after we have a look at the underside of the slide, this picture illustrates very effectively the habits of the stale. So in 2020, the total contracts have generated R$753 million of impression within the underwriting outcomes, and this impression within the 9M21 went all the way down to R$316 million, so lower than half. And we’ve R$221 million extra that have been as a result of these 13 discontinued contracts in 2021.

Likewise, we will count on that the impact of this stale will nonetheless be felt within the coming quarters. Nevertheless, we hope that they’ll develop into much less consultant over time of 2022 and 2023.

Additionally it is necessary to focus on that, though the impression of the one-off contracts will steadily fall with time, our exercise is topic by its personal nature to oscillating outcomes. So in shorter observational intervals, as we noticed on this final quarter, we noticed that we would have punctual deviations of this trajectory.

Shifting on to the subsequent slide, we see what occurred with the premiums within the Firm. Though the retained premium has fallen by 10.9% within the 9M21 as in contrast with 2020, I wish to spotlight that within the home market there was a progress by 5.8%, which displays our technique of prioritizing our native market. As a consequence, manufacturing in Brazil accounted for 61% of the overall, relative to half final 12 months. Most of the discontinued contracts have been worldwide, and so they have been canceled or lowered as a result of their low profitability.

As regards retrocession premium, in 3Q21 and within the 9M21, there was a discount in retrocession bills as in comparison with 2020. This occurred as a result of the idea of comparability of 2020 included an exceptionally excessive quantity of retrocessions due to the discount of the publicity to overseas threat, and likewise as a result of have to adapt the Firm to regulatory limits. In 3Q20, we held LPT operations, loss portfolio switch operations, which alone elevated the retrocession ratio that quarter by 15 p.p.

As a consequence of the decrease retrocession, the earned premium has been steadily rising relative to earlier intervals within the quarter and the accrued for the 12 months.

Shifting on to slip eight, the fee ratio fell from 24.7% in 3Q20 to 19.7% in 3Q21, reflecting the renegotiation of contracts at extra applicable ranges.

Administrative bills, as soon as we exclude the nonrecurring results of the cost of fines relative to PIS/COFINS, provisions for labor lawsuits and cost of indemnification, the executive bills remained flat at 5%..

On slide 9, we see an enchancment within the loss ratio throughout the 9M21. The recurring ratio fell 7 p.p. and went from 02.1% in 2020 to 85.6% on the accrued to September. Additionally wanting on the


recurrences, however 3Q, we noticed claims, particularly in properties, particular dangers and aviation, the place the loss ratio was according to insurance coverage and reinsurance market, which had decrease efficiency, typically talking.

Additionally in 3Q20, we had LPT operations, which contributed additional to the discount of the loss ratio within the interval. Our mixed ratio additionally confirmed an enchancment in 9M. And searching on the graph, the mixed ratio on a recurrent foundation was 118%, a 2 p.p. enchancment relative to final 12 months. Quarter on quarter, the ratio was impacted by the results talked about on loss ratio, which is the principle part of this indicator.

And slide ten, we’re going to speak about solvency relative to regulatory requirement. The solvency is acceptable at 142% after we have a look at regulatory solvency, which considers adjusted web value. If we have a look at the overall web value, which is what’s utilized in different markets, our solvency goes to 264% of the minimal required capital.

The distinction between the 2 indicators has to do with our tax credit, that are excluded within the adjusted web value calculation. The lower within the solvency indicators and the sufficiency of protection implies a rise in technical provisions throughout the lengthy tail, however as new contracts come on stream, the tail impact goes to be minimized.

On the decrease a part of the slide, you see how we calculate the minimal capital requirement. We reveal its breakdown, its composition, which considers threat capital for subscription, credit score operation and market.

On slide 11, we present the sufficiency of our protection for technical provisions. On the decrease half, you see that, on the finish of September, technical provisions have been R$15.8 billion, as in comparison with the quantity of eligible property for collateral, which was R$16.2 billion. That’s, we’ve a surplus of R$347.4 million. If we embrace the protection margin, the regulatory security margin, which is 20% on the chance capital, which is R$304 million, we’re nonetheless enough from a regulatory viewpoint.

As we knowledgeable final quarter, in July this 12 months, the regulatory company has established standards which is able to full contribute to the rise in our sufficiency, particularly the change within the security margin of 20%, and that is going to be efficient in January 2022.

On slide 12, you could have our money place and investments, and this place is now stronger, having reached R$10 billion. The expansion within the interval has to do with the actions taken in 2020, reminiscent of rising capital inventory, debenture, issuing LPT operations and sale of property, and, in fact, the larger working money technology within the final 5 quarters.

As regards the monetary outcomes, the expansion within the quarter and within the 9M21 has to do with a larger stability of investments, the rise within the Selic fundamental fee, and likewise the financial updating of the recovered PIS PASEP tax. Quarter on quarter, the drop in monetary result’s defined due to the curiosity paid on debentures in 3Q20, which didn’t exist in 2020.

I now flip the ground over to Raphael for his ultimate remarks.

Raphael de Carvalho:

Thanks, Willy. At first, I mentioned that I’ve been within the Firm for 40 days. I wish to share with you ways I used these 40 days.

I concentrated most of my power. In reviewing the strategic planning and specializing in the longer term, clearly, with out placing plenty of power in attending to know the group and likewise fascinated about


the brief time period.

If I needed to summarize our imaginative and prescient for the longer term, I might say that we’ve to renew progress with profitability. That is our motto, our goal, and that is our mandate, the mandate of the Firm’s administration.

How can we intend to do this? To start with. We’re going to discover and faucet the aggressive benefits of our Firm. Our primary aggressive benefits are, first, IRB has a deep information of the native market. One among our Board members likes to say that nothing related occurred in Brazil within the final 80 years that required safety and that might put off IRB. So that is with us. We see that within the knowledge, within the statistics, within the actuarial expertise that we’ve. We’re uniquely positioned to make all of this obtainable to our shoppers.

A second level, and that’s the place I’m going to cease, we imagine that our potential to serve our shoppers in Brazil is exclusive. Our potential, due to the dimensions of our stability sheet, of our e-book within the nation, and the dimensions of the crew, the diploma of specialism and the quantity of companies that we make obtainable to our prospects and industrial companions. IRB is a Brazilian firm. We make choices right here, and we’re in a position to serve and perceive higher the wants of our shoppers.

In an effort to do this, we’ve carried out initiatives underneath our strategic plan, and we’ve three main strengths. We’re going to concentrate on larger effectivity in enterprise, it has to do with underwriting, course of enchancment, particularly when claims occur and when shoppers change knowledge with us; and we’ve effectivity in capital, the place we allocate capital and we will concentrate on these areas the place we will make a distinction, and fewer power in these areas the place we don’t make a lot of a distinction.

After which we’re going to concentrate on cultural transformation, and that is going to occur on two pillars. The primary one is a complete focus in decision-making, considering totally on our shoppers. After which innovation, that’s the second pillar. We all know the native market and we’ve what opponents don’t have.

So talking of our initiatives, our aggressive benefits clarify the place we’re going to focus our energies to renew progress with profitability. We’re going to concentrate on Brazil. And simply to provide you some numbers, Brazil has to account for two/3 of our operation, from 2/3 to three/4 our operations. Now we have been doing work to that finish and we’re going to do much more to accumulate new shoppers and to promote extra to present shoppers.

And to increase this space of differentiation of IRB, we’re going to concentrate on Latin America, specializing in some nations, and particularly on these areas the place we’re sturdy in Brazil. Which means we’re not going to depart different geographies, however we’re going to be extra selective, and we’re going to get in these areas the place our tax construction and our value construction can be utilized to our benefit. And particularly after we can earn enterprise that’s complementary to what we do in Brazil and in Latin America.

So that is how I summarize our imaginative and prescient for the longer term. Once more, that is the place I targeted most of my power on this 40 days, and that is the place the Group goes.

And now I wish to open for the analysts to ask their questions. Thanks very a lot.

Daniel Vaz, Credit score Suisse:

Thanks. My query has to do with the announcement you made regarding the division and the brand new Vice-President for Reinsurance. You should have Life, P&C and Specialties. You’ve introduced


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IRB Brasil Resseguros SA printed this content material on 25 November 2021 and is solely answerable for the knowledge contained therein. Distributed by Public, unedited and unaltered, on 25 November 2021 20:39:03 UTC.

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