Brazilian reinsurer IRB Brasil Re has completed a successful capital raise through a new share offering.
The development comes after months in which it was seeking to raise new capital following significant losses from crop failures and droughts. The firm was looking to bolster its capital levels and ensure its solvency ratio is well above the minimum required levels.
It had been reported in mid-August that the firm was looking to raise around $300m. Reports at the time suggested that the reinsurer’s solvency ratio had declined to near 105%, with 100% or lower a point where the regulator might act.
Now, the firm has said in a statement: “The Company’s Board of Directors set the price per share at R$1 following the conclusion of the bookbuilding process and approved an increase of the Company’s capital stock of R$1,200m, divided into 1,200,000,000 newly issued common shares, totalling a capital stock of R$5,453.08m, divided into 2,467,890,331 common shares and one preferred share (Golden Share).”
It added: “In accordance with CVM regulations, the total number of 597,014,925 shares initially offered by the Company was increased by 101%, or 602,985,075 common shares, comprised of 1,200m newly issued common shares, at the Price per Share (the “Additional Shares”), resulting in the total number of 2,467,890,331 shares.”
The firm said that in order to comply with CVM regulations and to ensure the participation of existing shareholders in the Restricted Offering, a priority right was given to existing shareholders of the Company to subscribe for up to all of the Shares (including the Additional Shares) placed through the Restricted Offering pro rata to their shareholdings in the Company’s capital (“Priority Offering”). Therefore, all of the Shares (including the Additional Shares) offered in the Restricted Offering were offered to existing shareholders first pursuant to the Priority Offering.
The carrier had confirmed last month that at a meeting held on August 22nd, 2022, its Board of Directors had approved a primary follow-on offering of the firm’s common shares with restricted placement efforts in Brazil to no more than 75 professional investors headquartered or resident in the country.
The steep underwriting loss reported by the firm in Q2 of R$661m saw its combined ratio weaken to 154.3% as the loss ratio hit 124.2%. At the same time, net income fell from a loss of R$206.9m to a loss of R$373.3m, while written premiums also reduced from R$2,160.0 million to R$1,685m.
Following the release of its results, executives at the firm noted the significant impact of the severe drought in the southern part of Brazil, which actually led the firm to exceed the limits of its retrocession protection – the first time this has happened since its inception.
