Leading Brazilian reinsurer plans capital boost to become global player

Lenardo Paixão, President and CEO of Brazil's largest reinsurer IRB Brasil Re, said that the capital infusion could be made via an IPO or an agreement with investors. The latter could involve other reinsurance groups or capital market investors such as hedge funds. The company wants to attract at least $500m in new capital, but exact details have not been finalised. Mr Paixão said that new funds could be raised before the end of the year. According to the terms of IRB Brasil's privatisation process, the company has until 2018 to secure the money. IRB Brasil held the reinsurance monopoly in Brazil until 2008 when other companies were allowed to operate in the sector. The firm was privatised in 2013 with the Brazilian government keeping less than 50% of its shares.hideIn recent years, the company has started a process of international expansion, opening up a subsidiary in Argentina and purchasing an 8% stake in Africa Re. According to Mr Paixão, IRB Brasil participates in reinsurance consortia in over 60 countries. "At the moment, we are advancing little by little, selecting very carefully the operations we get into and gaining experience in new markets," he said. "But our goal is to become a global reinsurance company." Mr Paixão said that the planned capital increase aims to boost the firm's international efforts. He also noted that although the company has no immediate plans to take advantage of market conditions and make acquisitions this possibility should not be discarded in the future. "We are not in the block to be purchased," he said. "And if you are not for sale, you can become a buyer." Since 2008, IRB Brasil has gone through a restructuring process, investing in technology and streamlining operations in order to increase efficiencies, Mr Paixão said. The company reported an 18.2% increase in premiums in 2014, reaching R$3.2bn. Net profits of R$601.5m were 72.5% higher than in 2013. IRB Brasil's share of the Brazilian reinsurance market is around half of all premiums transferred to the local market, which amounted to R$6.5bn last year. According to data compiled by reinsurer Terra Brasis from SUSEP-the Brazilian market regulator-including premiums sent abroad, Brazil's total reinsurance market grew by 10.3% in 2014 reaching R$9.1bn. Brazil's second largest reinsurer last year was Zurich, with R$585m in premiums following a 73% increase on 2013. Then comes Allianz, which saw premiums rise by 79% to R$455m. Dozens of reinsurers flocked to Brazil in 2008 as it became the latest big reinsurance market to open up to the world. Today, more than 120 reinsurers are present in the country, 16 of them with the status of local reinsurer. In six years the market has almost trebled in size, convincing an increasing number of groups to move in for growth. The latest arrivals have been AXA and SCOR. But factors such as fierce competition, low rates and restrictions on the transfer of premiums abroad have somewhat tempered enthusiasm in the sector. As the Brazilian economy slowed down over the past two years, reinsurance growth has fallen a little behind many forecasts. Some companies have fared less well than others. Markel, for instance, reported a 79% reduction of premiums last year in Brazil. In the case of XL, the drop was 36%.

Leading Brazilian reinsurer plans capital boost to become global player

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