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IRB Brasil Re highlights performance recovery as loss narrows in Q3

4th November 2020 - Author: Luke Gallin

Brazilian reinsurer, IRB Brasil Re, has announced an improved performance for the third-quarter of 2020 when compared with the previous quarter, reporting a loss of R$229.8 million (USD 40mn) for Q3 versus a loss of R$685.1 million (USD 119mn) for Q2.

irb brasil reThe reinsurer notes that the improvement in its performance reflects the rebound of the insurance market through the ongoing COVID-19 pandemic.

After delaying its Q1 2020 results, an internal investigation into the firm uncovered irregularities in the payment of bonuses and the amount of shares offered in its February and March 2020 repurchase program. Later, the São Paulo Court of Justice ruled in favour of IRB Brasil Re in the public citizen suit filed against the company.

In August of what’s been an eventful year for the company, which includes the expansion of its board and the addition of Isabel Blázquez Solano as Reinsurance Executive Vice President, the firm successfully raised $380 million via an issuance of common shares, in an effort to bolster liquidity margins and improve its cash position.

Following this capital raise, explains the company, it closed the third-quarter of 2020 with a regulatory capital surplus of R$1.5 billion (USD 261mn), equivalent to a regulatory solvency ratio of 182.4%.

According to the reinsurer, its Q3 results show that it’s now on the recovery trend and the firm expects to return to profitability next year, “as premiums tend to improve especially for the large risks, such as in the oil & gas, property and rural business lines.”

Chairman of the Board and Interim Chief Executive Officer (CEO), Antônio Cássio dos Santos, commented: “We are recovering our results within the planned schedule, and with the level of transparency we have committed to as disclosed to the financial market and the press. We show, line by line, what are discontinued businesses and what are remaining businesses. The main discontinued businesses are short-tailed, as they are international life policies with lump-sum payouts where the claims are filed right after the death of the insured.

“We have discontinued these businesses as part of our RE-Underwriting strategy, which consists in adapting the contracts that make sense to our portfolio, ensuring all our lines perform satisfactorily. Internally, we call this initiative CFG: Clean, Fix, Growth, i.e. we clean and organize our portfolio to ensure its sustainable growth.”

Turing to premiums for the quarter, and IRB Brasil Re has reported written premium of R$2.975 billion (USD 517mn). The underwriting result for Q3 2020 amounted to a loss of R$392 million (USD 68mn) as the company’s combined ratio reached 131.4%, which is an improvement on the combined ratio of 167% reported for Q2 2020.

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