IRB-Brasil Resseguros (IRBR3) Q4 2023 earnings summary

Executive summary

• 2023 closed with BRL 114 million net income, below the BRL 120 million expectation, and BRL 155 million in underwriting results for the last 12 months.

• Portfolio cleanup improved underwriting: the annual loss ratio fell to 70% from 104% in 2022, while the combined ratio improved to 109% from 137%.

• Strategy centers on Brazil and Latin America, with growth tied to pricing discipline, profitability and better capital use.

Financial highlights

• FY2023 acquisition costs were BRL 1.047 billion, down 5% YoY; Q4 costs rose to BRL 374 million from BRL 249 million due mainly to advances on life commissions.

• FY2023 administrative expenses rose 7.4% reported; excluding BRL 25 million tied to the DOJ agreement and BRL 13 million in voluntary termination costs, expenses were BRL 317 million, down 3.9% from BRL 330 million.

• Financial and equity result was BRL 125 million in Q4 and BRL 549 million for FY2023; excluding favorable court-decision effects, FY result exceeded 2022 despite lower assets under management.

• Operating cash flow improved YoY in recent quarters; overdue operational credits fell 11% QoQ, net overdue credits 47%, and third-party deposits 33%.

Outlook and guidance

• 2024 premium growth target is ~10%, with a combined ratio in the region of 95%; management said growth may be lower rather than cut prices.

• FY2024 growth is intended to align with the market and be accompanied by a substantial increase in profit, with capital allocated by business line and returns assessed deal by deal.

• January 2024 IFRS 4 results: net income BRL 36.8 million, underwriting result BRL 45 million, and combined ratio 97%; non-life combined ratio was 95.3%.

• Management expects to finish accumulating losses by end-2024 and may then resume dividends; receipt of precatory bonds was expected in April 2024.