Release Date: May 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IRB Brasil Resseguros SA (BSP:IRBR3, Financial) reported a net income growth from BRL185 million to BRL412 million over the past 12 months, indicating strong financial performance.
- The company has improved its regulatory solvency, with a sufficiency of 207%, up by 38 percentage points compared to the first quarter of 2024.
- IRB Brasil Resseguros SA is focusing on operational efficiency by reducing payroll and reviewing service contracts, which is expected to enhance decision-making processes.
- The company has a strategic focus on profitability, particularly in the non-life segment, which has shown a combined ratio of 97%, indicating effective risk management.
- IRB Brasil Resseguros SA is investing in technology and process automation, such as the data lake project, to optimize internal data and improve operational efficiency.
Negative Points
- The life segment experienced negative results due to the cancellation of a major contract, leading to a reduction in premiums and ongoing claims.
- The combined ratio for the life segment remains high at 139%, reflecting challenges in managing this part of the business.
- The company faced significant claims, including a major loss from a lubricant plant, impacting material losses and net profit.
- Premiums in the first quarter were below the same period last year, partly due to the timing of contract renewals and challenges in the agribusiness sector.
- Administrative expenses remain high, with a ratio of 11%, which the company acknowledges needs to be reduced to improve overall efficiency.
Q & A Highlights
Q: Despite the worse technical rate, you had income growth quarter-on-quarter and year-on-year. Can you break down the rate throughout 2025? Do you believe you'll reach less than 100%? Also, can you elaborate on the perspective of premiums throughout the year, especially with the domestic market challenges?
A: This is Daniel Castillo. The combined ratio is a major challenge in underwriting. Our business is priced at a 95% combined ratio, but it's important to look at the last 12 months rather than just one quarter. The life combined ratio is at 129% and may come down as we clean the portfolio. Non-life business is at 97%. We expect the international business to improve and come closer to domestic levels. Regarding premiums, we had a reduction in Q1 due to contract timing shifts, but we expect growth throughout the year, especially with renewals in Latin America.
Q: What is the time frame for adjustments in the Life segment to contribute both in premiums guaranteed and retained? How do you break down the growth potential between international and domestic markets?
A: The Life business has reached a minimum premium level, and we are preparing a business plan to develop life businesses that will bring results in the next 24 months. We see opportunities in Brazil and Latin America, but we must be cautious due to past negative surprises. We aim to focus more on the scientific aspect of underwriting.
Q: With good regulatory capital levels, what is your approach for cash generation in the next 12 months?
A: Our cash generation is not solely based on net profit projections but also on tax credits. We plan to use part of our cash to pay off debt, particularly BRL600 million in debt, with BRL300 million due this year. If everything goes according to plan, we expect to pay dividends of 25% as per the bylaws.
Q: What is the ideal level for administrative expenses, and how will initiatives like the voluntary dismissal program impact results in the second quarter?
A: We believe the expense ratio is still high, even at 9%. We aim for operational efficiency and growth in premiums to dilute administrative expenses. Initiatives like the data lake, process mapping, and renegotiating contracts should provide medium-term benefits.
Q: Can you explain the BRL45 million foreign exchange variance gain and its sustainability? Also, clarify the expected impact of BRL52 million in the portfolio and the lube oil plant claim.
A: The BRL45 million gain resulted from a positive position in reais due to receivables from lawsuits converted from dollars. The expected loss from the Globe 25-26 effect is being adjusted monthly, with an impact of BRL6-7 million per month. The lube oil plant claim was accounted for in this quarter, with a net impact of BRL130-140 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
