Conference Call Transcript

IRB Brasil
22Q2 Results

Operator:

Good morning, ladies and gentlemen, and welcome to the earnings call for the 2Q22 for IRB
Brasil RE. We have with us today Mr. Raphael De Carvalho, the Company's CEO; Mr. Willy
Jordan, CFO and Investor Relations Officer; Mr. Wilson Toneto, COO; Mr. Carlos Andre Guerra
Barreiros, CRO, Compliance Officer and Legal VP; Mr. Daniel Veiga, P&C and Specialties VP;
and Mr. Ronald Affat Director of Life & Health.

We would like to inform you that this conference call is being recorded, and all participants will
be in listen-only mode during this presentation. Right after the presentation, we will begin the
questions and answer session. Should you need any support during the conference call, please
dial *0.

This presentation was created by IRB Brasil RE and should not be taken as a source of
investment data.

This presentation may contain certain forward-looking statements and information relating to the
Company that reflects the current views and/or expectations of the Company and its
management with regards to its performance, business and future events. Forward-looking
statements include without any limitations, any statements that may contain forecasts, indication
or estimates and projections about future results, performance or objectives as well as words
such as we believe, anticipate, expect, estimate, forecast among other words with similar
meanings. These forward-looking statements are subject to risks, uncertainties and future
events. We advise investors that several important factors may cause the actual results to differ
materially from the plans, from objectives, expectations, projections and intentions, expressed in
this presentation. Under no circumstances, neither the Company nor its subsidiaries, directors,
Board members, officers, agents or employees shall be liable to third parties, including
investors, for any investment decisions that were based on the information and statements
contained in this presentation or for any specific or general damages arising therefrom.

Market and competitive position information, including market forecasts that were alluded to
throughout this presentation were obtained through internal surveys, market research, public
domain information and corporate publications.

Mr. Raphael De Carvalho, CEO of IRB Brasil RE, will start his presentation.

Raphael de Carvalho:

Good morning, and once again, welcome to our conference call. We will begin on slide 2. I think
the title of this slide summarizes what we experienced. It was a quarter that was drastically
impacted by an atypical event if a historical drought that affected the South of Brazil that
concentrates the major volume of agriculture insurance in Brazil.

Since IRB is a leader in this market, we took a heavy loss from this effect. And this quarter, we
posted a loss of R$373 million. We will go into details about this during the presentation. Our
loss ratio was the main detracting factor leading to this loss. It reached 124% during this quarter
versus 96% in the 2Q21. This variation can be seen in the graph on the lower right-hand side.

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It is important to consider what our loss ratio would have been disregarding this atypical effect, if
we had normalized our loss ratio. The specific case of agricultural insurance, if we consider it
more typical loss ratio for this portfolio, for example, what we had last year, we can see that our
loss ratio for the 2Q would have been 89%, far below the 124% that we posted. Therefore, we
can see in the first part of the slide that our loss ratio was increased by 35 p.p. due to these
atypical weather-related events.

Further on in the presentation, when we talk about claims, if we consider the 1Q, normalized
claims were under 80%. Still on claims. During this quarter, we saw a moderate effect within the
expected range for claims related to the underwriting period prior to the 2H20. Why are we
mentioning the 2H20? That was the time in which we started adopting a more prudent
underwriting policy, interrupting that fear cycle that caused the losses that we already know. But
it is also important to highlight that these improvements in subscription were intensified in the
last 10 months.

Now to speak a bit about our premium, we saw that premium issued grew nearly 5% in the
1H20 in Brazil, and the next slides will show that the reduction in premiums was due to our
written premiums abroad, due to our broadly publicized strategy of increasing our position in
Brazil.

Since we are talking about strategy. Brazil represents about 2/3 of the premiums written in the 6
first months of 2022. If we look specifically at the 2Q, this percentage is 68%, as we can see on
the upper right-hand graph on this slide.

So concluding the first comments for this first page, as you can see in the last paragraph, our
indicators for SG&A are better than in the same period last year, which is an important initiative
to recover our operational margins.

Continuing with the next slide, here, we always disclose this information about what our renewal
was during the last quarter. We can see that 87% of the contracts we wanted to renew were
actually renewed, which is slightly lower than what we had in the 2Q21. This is in line with our
better underwriting strategy, but we are still counting on our clients' confidence.

To discuss our strategy, the lower graph on this slide shows our continuous dilution, reducing
our exposure in our businesses and, of course, trying to be present in more businesses. The
orange line on top shows domestic participation in contracts and the bars below show how our
dilution is going on contracts abroad, reaching 70% in the first months of 2022.

Willy will continue, discussing premiums.

Willy Jordan:

Thank you, Raphael. Good morning, everyone. Starting with slide 4. We can see how premiums
written in Brazil and abroad have evolved. As a quarterly comparison and also comparing the
first six months.

IRB continues redirecting its business, focusing on Brazil, as Raphael mentioned. In the first six
months of 2022, issued premiums in Brazil went up 4.8%, reaching nearly 65% of total issued
premium, what we see as a good balance for now.

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On the lower graph, we see our retrocession premium, a reduction to 25% in the retrocession
ratio in the 2Q when there were no LPT operations, in line with what we saw in the same quarter
last year.

In a comparison between the first six months, which we see on the right, we see that
retrocession expenses were 5.7% higher than the first six months of 2021, a total of R$1.02
billion, which represents our growth in the property line, up 37.3%, and others, which went up by
10%. The Company's retrocession ratio in the 6 months of 2022 went up 4.1 p.p. from 23.6% in
the first six months of 2021 to 27.7% in the first six months of 2022.

It is important to highlight that in the 1Q22, there was an LPT operation in the international
property line, which aggravated the retrocession premium line by R$219 million. If we were to
remove the effect of LPT, the retrocession ratio for the 6 months of 2022 would be 21.7%
versus 23.6% in the 1H21.

On the next slide, we see our evolution of the premium won. This quarter, we saw a stability
versus the 1Q21 and a reduction of 23% versus the 1Q21. In the first six months, we saw
stability in Brazil and a reduction of 53% of broad discounting LPT effects. The lower graph
shows the importance of our three main lines of business, Property, Agriculture and Life. Added
together, they correspond to 73% of the R$1.7 billion in written premium during the 2Q.

Continuing with slide 6, I will pass that on to Toneto, who is going to talk about our loss ratio.

Wilson Toneto:

Thank you, Willy. Good morning, everyone. On this slide, we can see the left-hand side graph
showing our claims history for the last few quarters. When we compare the 2Q22 with the 2Q21,
we see that the nominal value of claims has remained normalized.

Above the bars in the yellow squares, you see our overall loss ratio. In the 2Q22, as Raphael
said, it was 124% and versus 95.7% in the 2Q21. This variation was impacted by weather
effects in the South in agricultural insurance and some other effects, we will see later on.

As Raphael said, when we normalize the claims ratio for the 2Q from these effects, it is 89%. So
if we exclude the atypical variations, we have improved the observed claim ratios, which clearly
demonstrates the results of the strategies we implemented.

Comparing 6 months, we come to a similar conclusion. Although the claims ratio indicator was
104%, if we normalize it, excluding the effect of weather events and covid, it drops to 79%. So
that is far lower than what we saw in the 1H21.

To complement the data on this slide, the tail effect considering contracts subscribed before the
crisis in 2020, as we saw in the last few presentations, were far lower. In December 2021, you
will remember that they represented 75% of our expenses. In this quarter, this representation
dropped to below 20%.

Finally, the monetary effects on our results after the normalization of these effects come to a
total R$642 million. So this would reverse the results that the Company posted from a loss to a
positive R$63 million result. So if it were not for these catastrophic events, the Company would
be presenting this quarter a positive effect.

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Let's continue with the next slide. In slide 7, we will detail here the main detractor of our results
in this half year period. And as we talked about in the last call for results, adverse and typical
weather events affected the contract signed in 2021, what we call underwriting year 2021. And
the effects reached the winter and summer harvest last year, and they were the most significant
ones in the last decade. So data published by Susep for the 1H22 indicate an average loss rate
of 281% of insurers in the rural sector compared to 90% in the same period of 2021.

Recent publications on the national media indicate the effects that are reflected in all reinsurers
operating in Brazil, confirming the magnitude of the event. In Europe, for example, a large
insurer operating in Brazil published in its presentation the results that the severe drought in
Brazil was one of the components of the loss ratio deviation.

I would like to recall here the dynamics of hiring and registration of rural insurance in the
Company. And if you look at the diagram, you will see that UY 2021 contracts, as noted in the
diagram, have effects that began that year, but end in 2022. With this, we have premiums and
claims recorded in both fiscal years.

As well known, the insurers receive claim notices and analyze, regulate the amounts claimed
and only later do they refer to their reinsurance for recovery of their protections. And therefore,
for the summer harvest claims in 2021, we received a good part of the information until June
and made the necessary records.

Therefore, the results of the 2Q were strongly impacted by such losses, which have even
exceeded the limits of our protections. As you know, we have protections against such events.
So we went beyond them, and this has never happened in the history of the Company after we
opened to the market in 2008.

In 2021, the 2Q, the loss ratio reached 259% and 180% in the 1H. We performed a
normalization exercise and this claim considering the loss ratio observed in 2021. As normal,
the recalculated indices would be 89% in the 2Q22 and 78% in the 1H. When we calculated the
total volume provision plus the amount paid for the winter 2021 and summer 2021-2022 harvest
reached R$1.5 billion, and this is the amount that IRB will bear at the end of this cycle to the
numerous Brazilian agricultural producers and farmers.

So based on the information and data received from the insurance, both IBNR and PSL to cope
with the estimated losses for the portfolio. However, taking into account the dynamics of our
business, it is possible that we have adjustments in these estimates that will only be known after
the conclusion of the regulation process by the assigners and receipt of the accountability in
July and August. And therefore, ladies and gentlemen. Here in Brazil, we had a true catastrophe
resulting from the drought that had never been seen. And once again, we played our role to
support agri business in our country.

I would now like to ask Veiga about the actions taken in the agro contract and also about the
impacts of covid.

Daniel Veiga:

Well, good morning, everyone. I now turn to slide 8, which summarizes the measures that were
implemented in the reinsurance contracts accepted by IRB as of 2022. First of all, a broad
review was made in the portfolio. We decided to reduce participation in different contracts to
seek greater dissemination and lower concentration of risks.

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We have structurally deficient businesses or some that had not been adjusted. We defined the
parameters to better balance the retention of the insurance and the cessation of part of these
risks in reinsurance, requiring minimum percentages of participation of the insurance. The
reinsurance commissions negotiated reduced substantially, decreasing pressure on the margins
of the business.

We also established a dispersion control and review of capacities between cultivation in the
main regions, and also an extensive review between summer and winter harvest, reducing the
weight of regions with greater volatility.

Finally, we reviewed our commercial insurance conditions for farmers. We adjusted the
minimum rates, we reduced coverage levels and productivity guaranteed, especially in the
areas whose historical results have been poor.

I now invite everyone to look at slide 9, where we are going to talk about important aspects,
which is the impact of covid on the Company's results. As you know well the pandemic impacted
the insurance market extensively and its effects continue affecting the insurance and
reinsurance segment. It is no difference with us.

On the left side, we can see the losses related to covid for 2020-2021 and in the first six months
of 2022 and the total losses throughout the period. From March 2020 to June 2022, we had an
impact of R$241 million because of covid-19. This impact was observed in different areas in
special in the Life segment, representing 82% in the period.

And then if we look at the right side of the slide where we compare the first six months of 2021
to the first six of 2022, we can see an increment of 116% of the covid-related impact. And once
again, we can see that these losses are concentrated in the Life segment mostly.

And in terms of perspective, it is important to highlight that we anticipate stabilization, especially

as a result of the vaccine coverage and also because of the reduction of debts due to covid.

And I turn back to Willy so he can conclude the presentation.

Wilson Toneto:

So we are now on slide 10. This graph is recurring in our presentation, but it is very important
because it indicates the impact of the largest provisions, with claims in lighter blue, and also
claims that were not informed compared to the premium.

In the bars, we have the amount, and in the lines, we have the representation. And altogether,
in face of our premium revenue in 2016, it represented 90%. And in 2019, it reached 60%. Even
with the increase in risks and claims provision, this impact was reduced. We also had changes
in our management in 2020, and therefore, we have tried to take into account the risks that are
taken, and you can see the impact in the last quarters. And therefore, the conclusion here is that
the provision for claims when duly reinforced make us less vulnerable to losses from all the
subscription years.

On the right side, we can see the concentration of claims in the 2Q. And here, they represent
64% in Brazil. The rural segment on the lower graph with 45% of the total. They confirm what

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we have said. Of course, the climate effects of the rural segment were very important for the
Company and very well.

I now turn back to Willy so that he can move on with the presentation.

Willy Jordan:

Well, thank you, Toneto. So now on slide 11. We show the acquisition costs, which totaled
R$253 million in the 2Q22, down 35% quarter-over-quarter. And when we analyze the
relationship between the acquisition cost and the earned price for the period, the index went
from 22.4% to 18.8%, thus contributing to the operating margin in the quarter. When these
indices are compared in the semester, we see improvement with a reduction from 22.3% to
21.9%.

At the bottom of the slide, we show the evolution of administrative expenses, which totaled
R$79 million, a decrease of 25% when compared to the same quarter last year. And therefore,
the administrative expense index was 5.9%. In the first six months of 2022, the drop was more
significant from R$205 million to R$150 million, causing the index to fall from 6.4% to 5.5%.

And as a result of all the figures we have just mentioned in slide 12, on the upper part, we can
see the expanded combined index, which demonstrates the final profitability of our business. At
the bottom of the slide, we show the same normalized index of the typical effects of this period
as already widely explained by Toneto.

On the bottom here, so that we can understand the business without the distortions caused by
the typical events that I had already mentioned. The combined index expanded in the 1H22,
when excluding the effect of agro and covid, would be 99%. In other words, it would already
show a profitability where the earned price added to the financial results cover the costs of
commissioning.

In this slide, we can see that the financial result was positive in R$104 million, an increase of
17% compared to the same period in 2021, and this is a result of the increase in the Selic rate
and also in the variable costs. The portfolio of assets had a value of 17% in the 2Q.

In the first months, we had R$364 million positive when compared to the first months of 2021,
already taking into account the nonrecurring effect regarding two legal suits that were won. And
here, we can see the portfolio assets that represent 44% of our total financial assets. This is
aligned with the strategy of the Company, also to meet with international operations, and due to
its characteristics, it has profitability not linked to the BRL or the CDI.

And then finally, on slide 14, we see how our regulatory indicators were at the end of the 2Q.
We can see R$614 million, and with that, the adjusted net amount corresponded to R$548
million. This quarter, we can see the coverage of the technical provisions in the amount of
R$730 million with the technical provisions in need of coverage at the end of the quarter.

And now I turn back to Raphael to close our presentation as you see the Company.

Raphael de Carvalho:

It is important to highlight that the Company has posted very good results in about R$8 million
assets to face its obligations with its clients. Yesterday, we sent to Susep a formal plan or a

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PRC that describes the ongoing actions in plan to recover the Company's some other initiatives.
As was published last morning in our material fact, the Company is evaluating several initiatives
to reinforce its position, including a share offering, which would, in principle, be a primary offer.
And IRB has, within its assets, real estate and other relevant assets. And according to
regulations, they cannot be used in the coverage of technical provisions. So we are working on
selling these assets and participation.

There is a third line of action consisting in the use of structured retrocession operations, as was
mentioned before in financing evaluation, which would reduce our capital.

When we look at the results for this 1H22 normalize from the adverse weather effects that we
mentioned and covid, the results were positive. Thanks to the financial results and operational
improvements we posted in comparison to last year.

We know how frustrating it could be in a recovery to have to deal with so atypical and damaging
events that harshly get in the way of our results. But we should not lose sight of the recovery,
we saw, during these 6 months, if we disregard the disastrous events. So we believe it is
essential to maintain discipline and perseverance in executing our plan.

As we said, we had an increase in the business share of Brazil where we are getting better
margins. We had a reduction in concentration by contract and segment as we saw on the
second slide. Administrative expenses were under control, which improved our margins. And as
we mentioned, there was a continuous adjustment of the price risk ratio.

And that concludes my notes, and now I will pass it back on to the operator for our question-
and-answer session. Thank you.

Operator:

Ladies and gentlemen, we will now begin the questions and answer session. If you have any
questions you can dial *1, if at any point your question has been answered please dial *2.
Questions will be answered in the order they come in, please remember to unhook your phone
when you're asking a question so that we can provide optimal sound quality. Please hold while
we prefer questions. The first question will be asked by Kaio Prado from UBS.

Kaio Prato, UBS:

Good morning. Thank you for the opportunity to ask this question. I would like to ask about your
regulatory insufficiency indexes. I have three questions here, if you might help me. The first one
is why did you make a decision to not have the LPT operation this quarter? I imagine that that
would help your indexes. So I would just like to understand why that decision was made and
why you chose not to have it this quarter?

Secondly, considering the capital increase you mentioned in your material fact, I would like to
hear some more about the situation and what do you imagine would be the ideal amount
through follow-on or through a different capture or structured operation, considering your future
loss ratio, to leave you at a more comfortable level?

And the third question is about your premium dynamics. With liquidity, how does that impact you
for contract renewals and for new policies? Have you seen any impact from that? That is all.

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Thank you.

Raphael de Carvalho:

Thank you, Kaio. I will start answering your question, and I will pass it over to some of our
colleagues. First, about the LPT operation, I would like to remind you of what I said during one
of the slides. We have three initiative trails. One of them is connected to capital. The second
one is connected to real estate and participations. And the third would be operations in the
insurance and reinsurance markets.

Our decision to use these operations is connected to two factors. First, the effects that they
would cause on the needs we would have then. And secondly, the cost. So during this time, we
didn't use it because we considered the effects and costs associated would not provide for the
best equation. So I think that is the best answer to why we did not carry out the LPT operation
you mentioned.

Considering the capital increase, it is important to remind you that a short while ago, we had an
extraordinary general meeting, where not only did we change our bylaws, but we also approved
an increase to the authorized capital by R$1.2 billion. So in a way, shareholders made available
to the Company the power of increasing our capital up to that amount.

So that answers the question as to what stage we are in and what values we can consider in the
capital increase. The second point, on premiums, can you repeat your question just so that we
can make sure that we understood it well?

Kaio Prato:

Yes. So my last question about premiums is: how this liquidity problem impacts you for contract
renewals and also for new policies, if you see any impact from that due to your capital position?

Raphael de Carvalho:

That is a great question, and we tried to address it by showing the percentage of renewals that
we had during the quarter, which was the highest in the last few quarters. So from the
customer's confidence point of view, we have not seen any changes, and we have been very
proactive. We have been in contact with our clients so that no questions are left unanswered.

Considering capital needs, they do not affect our capacity to issue premiums, but of course,
they are not recommended, so it may happen.

It is important to remind you, and this is something I mentioned in the beginning of my remarks,
that our operation is ongoing, and it will solve this situation that we are in right now.

Kaio Prato:

Great. Thank you.

Operator:

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The next question was sent through the webcast platform, it was Richard by mister Caio Reis
from interbank.

Caio Reis, Banco Inter:

This question is: about agriculture contracts, how does risk-sharing work with the insurance
companies? Were contracts misselected?

Operator:

Daniel Veiga:

Thank you. So how do these contracts work? In the agricultural segment, we have proportional
based contracts, meaning there is a society, a participation in claims and premiums among the
insurance companies and the reinsurance companies. So that is how agricultural insurance
behaves, especially considering the intrinsic, catastrophic factor, which can affect several
companies.

So insurance companies have a standard. And in most cases, it proportionately distributes risks
and claims in contracts.

Wilson Toneto:

Let me just add something about that adverse selection. I would just like to highlight that what
we saw during this time was a true catastrophe. It was not only an adverse selection, but we
went through a historical moment in our country.

As was mentioned, IRB has never had a general claims ratio above this amount. So we had
already placed certain protections, but they were surpassed considering the loss ratio that we
saw in the market.

So of course, after some losses that the Company and the market showed, evidently, we would
expect that better conditions would be established, both for insurance companies as well as for
reinsurance companies. I think that is it.

IRB:

To give you some dimension on what we mean by a historical atypical phenomenon, in Paraná,
we have not had a drought of this sort for over 90 years. In Rio Grande do Sul, over 75 years.
These are areas that have a large concentration of the insured crops. These are regions that
culturally take out insurance.

Guilherme Grespan, JPMorgan:

Good morning. Thank you for taking this call. I have a simple question. You mentioned
participations in real estate as one of the measures that you can take. But just to give us an
order of magnitude, when you have an insufficiency of R$600 million to R$700 million, what are
your main assets, and what is the market value that you believe you would be able to get? Just
to give us some perspective. Thank you.

Wilson Toneto:

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Guilherme, actually, there is a negotiation ongoing. We are assessing if these participations can
be carried out. So the magnitude would be adequate for this negotiation. But accounting data is
reflected in our balance. Although we have had major impacts to our portfolio, we have real
estate, buildings, lands, participations in shopping malls that can be negotiated. So I apologize
that the information on the values, right now, we are unable to provide.

Victor Rodriguez, Banco Inter (via webcast):

What are the next steps for the formal plan sent to Susep? What is the timeline given to Susep
so that you can resume solvency in provision levels that are greater than the minimum
regulatory levels?

Carlos Guerra:

Good morning, Victor. Thank you for your question. We have two different options. Yesterday at
Susep, we entered a recovery plan for coverage. Susep foresees that this plan must be carried
out within three months. And therefore, we have until the end of October to organize the
provision coverage.

And regarding defaults, we have something for the month of June, and we have to wait for their
contact so that we can take the required measures. Once we receive their notice, we will have
some time to do it.

According to our understanding, the measures adopted for the coverage recovery plan, the
other one will be automatically solved. And therefore, we probably will not have this second step
with Susep. And we understand that our plan is well executed, and if we do it by the end of
October, both indices will be okay within this timeline.

Operator:

We now conclude the Q&A session. I would like to turn over to Mr. Raphael de Carvalho for his
final considerations. Please proceed.

Raphael de Carvalho:

Once again, I would like to thank you all for being here and for the questions asked. I reinforce
the messages given in the final considerations. The harder and the more frustrating it is to deal
with historic atypical events as the ones we had in the middle of our recovery process. When we
remove this cloud away from us, it is easy to see that the Company is recovering and that we
would have had a 1Q with positive results.

I thank you all for your attention, and I am looking forward to seeing you in our next results
conference.

Operator:

IRB conference is now over, and we thank you all for your presence. Have a wonderful day.

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