Brazilian reinsurer IRB Brasil Re has announced a new share offering as the company looks to raise its capital level to meet the minimum requirements of local regulators after drought losses drove a large underwriting loss in the second quarter.
It was reported in mid-August that IRB Brasil Re was preparing for a share offering as it seeks to raise close to USD 300 million. At this time, reports suggested that the reinsurer’s solvency ratio had declined to near 105%, with 100% or lower a point where the regulator might act.
Yesterday, the carrier confirmed that, at a meeting held August 22nd, 2022, its Board of Directors 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.
Within the scope of this restricted share offering, IRB Brasil Re says that up to 597,014,925 common, nominative, book-entry shares of the company will be issued and sold by the firm.
Further, the total number of shares initially offered may increase by up to 200% of the total number of shares initially offered, which amounts to up to 1,194,029,850 new shares issued by the company, under the same conditions and at the same price as the shares initially offered.
Previously, it was reported that between R$1 billion and R$1.5 billion is expected to be raised from the offering, putting the capital sought near USD 200 million to USD 300 million.
IRB Brasil Re expects the pricing of this restricted offering to occur on September 1st, 2022.
The steep underwriting loss reported by the firm in Q2 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$206.9 million to a loss of R$373.3 million, while written premiums also reduced from R$2,160.0 million to R$1,685.0 million.
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.
