Terra Report. Brazil. Report on the Brazilian Reinsurance Market. Issue. September number 21

Transcription

1 Issue number 21 Brazil September 2016 Publication Date: January 4 th, 2017 Index: Introduction... 2 Brazilian General Insurance Market... 3 Brazilian Reinsurance Market... 5 Results of Local Reinsurers 11 Results by Lines of Business Group: Property Group: Financial Risks Group: Rural Group: Liability Group: Marine Exhibit 1: Brazilian Insurance Segments per Susep s Classes Exhibit 2: List of Technical Terms Exhibit 3: Main Indexes of Local Reinsurers Acknowledgements Ratings: A.M. Best B++/bbb Global (Investment Grade) Stable Outlook Standard & Poor s bra Local Stable Outlook In the 12 months aggregate ending in September 2016, the reinsurance volume (gross of commission) originated by Brazilian insurers stood at BRL 9.83 bn against BRL 9.85bn registered in the same period of 2015, an annual rate decrease of 0.2%. The reinsurance volume mentioned below was particularly low on August and September as showed in the graphic below. It remains to be seen if this is the beginning of a trend or only a momentary deviation. The reinsurance volume, for the same period, issued by local reinsurers from Brazilian cedants stood BRL 7.6bn, increasing 8.8% in contrast of BRL 6.9bn registered in the 12 months aggregate ending in September In the nine months of 2016 the local reinsurers presented a profit of BRL 663 million, against a profit of BRL 696 million in the same period of IRB had a profit of BRL 480 million and other local reinsurers had BRL 183 million. Terra Report Report on the Brazilian Reinsurance Market The volume of retained premium by local reinsurers, originated both from risks in Brazil as well as from abroad, continues to grow. In the twelve months ended September 2016, this volume reached BRL 5.46 billion, an increase of 15.1% compared to BRL 4.75 billion of the previous twelve months. Ceded reinsurance premium (gross of commission, BRL bn) Shareholders: : Source: SUSEP, Terra Brasis Re, 12 month aggregate

2 September 2016 Terra Report Terra Brasis Resseguros Introduction Dear Reader, This edition of Terra Report analyses the Brazilian reinsurance market for the third quarter of In terms of the reinsurance volume ceded (gross of commission) by the Brazilian insurers, the third quarter brought a negative surprise. We experienced low volume ceded in August and September, leading to a drop in the aggregate volume for the last twelve months. Based on data from the June s edition, we considered that the decline in the premium growth rate had stabilized and noted the first signs of recovery. This expectation was frustrated and instead of an increase in the growth rate we actually observed a small decrease. It is precipitate to extrapolate based on just two months of data, however it will be important to observe the evolution of this volume in the coming months. In the last edition we also mentioned that we continue to expect a challenging year for local reinsurers. This expectation, unfortunately, seems to have materialize. In the first nine months of 2016, local reinsurers had a profit of BRL 663 million compared to BRL 696 million for the same period last year. High loss ratio levels in the Brazilian market remains, driven both by the global liquidity, which compresses reinsurance rates around the globe, as well as by the competition for market share in the Brazilian market, still considered a market of great medium term potential. On the positive side, the volume of retained premium by local reinsurers, originated both from risks in Brazil as well as from risks abroad, continues to grow. In the twelve months ended September 2016, this volume reached BRL 5.46 billion, an increase of 15.1% compared to BRL 4.75 billion of the previous twelve months. This is an important medium-term indicator, as the Brazilian reinsurance market continues to grow in a healthy way. Enjoy your reading, Rodrigo Botti, ARe General Director Terra Brasis Resseguros 2

3 September 2016 Terra Report: Brazil Terra Brasis Resseguros Brazilian General Insurance Market The General Insurance Market, defined as per methodology presented on Exhibit 1, showed the first signs of recovery, increasing the growth pace during the third quarter of 2016, and reversing decline of growth pace faced since the end of For the 12 months aggregate ending in September 2016, Brazilian Market generated BRL 87.2bn in insurance premium, compared to BRL 86.5bn in the same period of previous year, representing an annual growth of 0.8% versus 4.7% of the same period in Evolution of Insurance Written Premiums (BRL bn) % 15% 10% 5% 0% Growth of Insurance Written Premiums The Loss Ratio, obtained as a result of occurred losses over earned premium from the Income Statement of all the insurers from the Brazilian market, showed a worsening in the third quarter of 2016 compared to same period of In the 12 months aggregate ending in September 2016, the loss ratio stood at 50.0% compared to 48.5% for the same period of the previous year. Loss / Earned Premium Commercial Expense / Earned Premium Note: Percentage Values Referring to the Official Insurance Market Note: Percentage Values Referring to the Official Insurance Market The Commercial Expense Ratio, in the 12 months aggregate ending in September 2016, stood in 24.0% relatively stable when compared to the 23.8% for the 12 months aggregate ending in September

4 September 2016 Terra Report Terra Brasis Resseguros (Administrative, Tax and Other Expenses) /Earned Premium Reinsurance Result / Earned Premium Note: Percentage Values Referring to the Official Insurance Market Note: Percentage Values Referring to the Official Insurance Market The Administrative Expense Ratio (including taxes and other expenses) also showed a worsening in the analyzed period, finishing the 12 months aggregate ending in September 2016 in 15.9% versus 16.4% presented in the same period of the previous year. In the same period, the Reinsurance Result Ratio, defined as reinsurance result divided by earned premium, stood in 1.1% against 1.0% in the same period of This means that during the 12 months ending in September 2016, insurers incurred in higher expenses with reinsurance when compared with the same period of The Combined Ratio, including the reinsurance result ratio, showed a slight worsening, closing the 12 months aggregate ending in September 2016 in 91.0% compared to 89.8% registered in the same period of 2015, as a result of a deterioration in the set of indexes mentioned above. Combined Ratio, including reinsurance result ratio 4

5 September 2016 Terra Report: Brazil Terra Brasis Resseguros Brazilian Reinsurance Market We start this section s analysis using 12-month aggregate data. The number of August and September 2016, showed a significant decrease in the reinsurance volume originated by Brazilian related the previous year. Thereat in the 12 months aggregate ending in September 2016, Reinsurance Brazilian market volume (gross of commission) stood at BRL 9.83bn against a small decrease of 0.2% related the same period of Month Aggregate Reinsurance Premium Ceded (Gross of Commission, BRL bn) Ceded reinsurance volume growth rate is volatile, as shown on the graph on the left below. Nevertheless, periods of decrease in volume are rare, with the last one registered in January of It remains to be seen whether the trend noted on the last two month is confirmed or proves to be just a temporary distortion. For the same period, the proportion of reinsurance ceded over general insurance premium stood at 11.3% versus 11.4% registered in the same period of Growth of Reinsurance Ceded and General Insurance Premium Reinsurance Volume / General Insurance Premium 45% 35% 25% 15% 5% -5% Insurance Reinsurance 5

6 September 2016 Terra Report Terra Brasis Resseguros The 12 months aggregate Coinsurance Premium Volume ending in September 2016 stood at BRL 2.1bn, a decrease of 4.4% compared to BRL 2.2bn recorded in the same period of the previous year. 12-Month Aggregate Coinsurance Premium Ceded (BRL bn) The Coinsurance Premium Volume in the 12 months aggregate ending in September 2016 represented 2.4% of the general Insurance premium volume compared to 2.6% registered in the same period of Growth of Coinsurance Premium Ceded Coinsurance Premium / General Insurance Premium In the same period, the Reinsurance Volume (gross of commission) written by local reinsurers ceded by Brazilian insurers stood at BRL 7.609bn, corresponding to an 8.8 % increase when compared to the BRL bn registered in For the same period, the volume coming from offshore cedants reached BR1.35bn against BRL 980 million for the same period of the previous year, an annual growth of 37.3%. This is an expressive volume, representing 12.3% of the total volume received, compared to 9.8% registered in the same period of Reinsurance (Gross of Commission) written by Local Reinsurers 6

7 September 2016 Terra Report: Brazil Terra Brasis Resseguros The local market closed the 12 months aggregate ending in September 2016 retaining 77.4% of the volume ceded by Brazilian insurers, percentage higher than to the 71% showed in the same period of Growth in Reinsurance Premium Ceded to Local Reinsurers by Brazilian Insurers Gross Reinsurance Premium Ceded to Local Reinsurers as Percentage of Total Reinsurance Premium Ceded The following flowcharts show the volume of reinsurance premiums and retrocession, gross of commission, in the Brazilian market for the 12 month period ending September 2016 and the preceding 12-month period. We note a significant increase in the retained premium by local reinsurers. For the 12-month period ending in September 2016, local reinsurers retained BRL 5,46 bi, a growth of 15% compared to the BRL 4.76 bi of the preceding period. Reinsurance Flow in the Brazilian Market for the 12 month period ending September 2016 and the preceding 12-month period 12-months aggregate ending in Sept months aggregate ending in Sept Reinsurers Reinsurers Brazilian 23% Brazilian 29% Insurers Insurers Local % Reinsurers 71% Insurers Insurers 985 Local Reinsurers Source: SUSEP, Terra Brasis Re, BRL millions, reinsurance gross of commission figures Gross Reinsurance Premium Ceded by Brazilian Insurers (BRL bn) 5,0 4,0 3,0 2,0 1,0 IRB Other Locals 0, Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Participation in the Gross Reinsurance Premium Ceded by Brazilian Insurers % 80% 60% 40% 20% 0% Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate 7

8 September 2016 Terra Report Terra Brasis Resseguros We now move to the analysis of the current year s figures. Looking at the first half of 2016, Brazilian insurers generated BRL 7.3bn in ceded reinsurance, corresponding to a decreasing of 4% in relation to the same period of 2015, when they generated BRL 7.6bn. The reinsurance written (gross of commission) by local reinsurers during this nine months of 2016 stood at BRL 5.3bn, corresponding to an increase of 5% compared to the same period of During this period, the volume of reinsurance (gross of commission) written by IRB was 18% higher than the same period of the previous year, and other local reinsurers showed a dropped of approximately 6%. In the period, the reinsurance written by offshore reinsurer increased 21%. Premium Ceded by Brazilian Insurers and Premium Received by Local Reinsurers from January to September (BRL mm) Gross Reinsurance ceded by Brazilian Insurers (gross of comission): 2016/ /09 16/ to IRB % to other Local Reinsurers % Total Local Market % to Reinsurers % Total % Gross Reinsurance accepted by Local Reinsurers (gross of comission): 2016/ /09 16/ from Brazilian Insurers % from Insurers % Gross Reinsurance Premium % Retrocession % Net Retained Premium % Source: SUSEP, Terra Brasis Re The following flowcharts show the volume of reinsurance premiums and retrocession, gross of commission, in the Brazilian market in the nine months of 2016 and Reinsurance Flow in the Brazilian Market January to September 2016 and 2015 Jan to Set 2016 Jan to Set Reinsurers Reinsurers Brazilian 27% Brazilian 33% Insurers Insurers Local Local 73% Reinsurers 67% Reinsurers Insurers Insurers 911 Source: SUSEP, Terra Brasis Re, BRL millions, reinsurance gross of commission figures 8

9 September 2016 Terra Report: Brazil Terra Brasis Resseguros Considering the distribution volume of reinsurance from Brazilian cedants, IRB ended the third quarter of 2016 with a market participation of 37%, while the other local reinsurers ended the period with 36% participation and offshore reinsurers 27%. Reinsurance Market Share (gross of commission ) generated by Brazilian Insurers 2016/ IRB 37% 33% 31% 33% 37% 40% 26% 68% 85% 98% Other Local Reinsurers 36% 40% 37% 31% 23% 20% 22% 19% 9% 0% Reinsurers 27% 27% 32% 36% 40% 40% 52% 13% 7% 2% Total ceded by local cedants 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Market Share between Local Reinsurers (gross of commission) 2016/ IRB 51% 46% 46% 51% 62% 66% 55% 78% 91% 100% Other Local Reinsurers 49% 54% 54% 49% 38% 34% 45% 22% 9% 0% Total placed in the local market 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: SUSEP, Terra Brasis Re Analyzing only the Local Reinsurance Market, IRB retained 51% of market share, while the other local reinsurers shared remaining 49%. Next page s flowcharts show the reinsurance and retrocession volumes since 2007, the last year of the monopolistic reinsurance regime. 9

10 September 2016 Terra Report Terra Brasis Resseguros Reinsurance Annual Flow in the Brazilian Market since 2007 (Gross of Commission, BRL mm) Reinsurers 254 Reinsurers Brazilian 2% Brazilian 7% Insurers Insurers IRB Local 98% % Reinsurers Insurers 22 Insurers Reinsurers Reinsurers Brazilian 13% Brazilian 52% Insurers Insurers Local Local 87% Reinsurers 48% Reinsurers Insurers 84 Insurers Reinsurers Reinsurers Brazilian 40% Brazilian 40% Insurers Insurers Local % Reinsurers 60% Insurers 50 Insurers 149 Local Reinsurers Reinsurers Reinsurers Brazilian 36% Brazilian 32% Insurers Insurers Local % Reinsurers 68% Insurers 443 Insurers 451 Local Reinsurers Brazilian 27% Insurers Reinsurers Insurers % Local Reinsurers Source: SUSEP, Terra Brasis Re, BRL millions, reinsurance gross of commission figures. 10

11 September 2016 Terra Report: Brazil Terra Brasis Resseguros Results of Local Reinsurers The figures of the third quarter of 2016 still show a challenging business environment for Local Reinsurers. We note a worsening of the loss ratio, which was compensated by gains with retrocession operations, resulting in a Combined Ratio close to 100%. In the 12 months aggregate ending in September, the Loss Ratio experienced by the Local Reinsurance Market reached 94%, a decrease of 13% percentage point relative to the level of 81% registered in the same period of It is worth emphasizing that this is the Gross Loss Ratio, calculated from the gross occurred losses divided by the gross earned premium (i.e. gross of retrocession, net of commission.) Loss Ratio: Occurred Losses/ Earned Premium Commercial Expenses/ Earned Premium Source SUSEP, Terra Brasis Re, 12-month aggregate The Commercial Expense Ratio, in the 12 months aggregate ending in September 2016, remained stable, closing the period in 2.0% compared to 2.5% registered in the same period of the previous year. In the same period, the Administrative Expense Ratio (including taxes and other expenses) stood in 11.6% against 11.3% recorded in the same period of 2015, staying a stable. Administrative Expense Ratio (including taxes and other expenses)/ Earned Premium Retrocession Result / Earned Premium The Retrocession Result Ratio, for the 12 months aggregate ending in September 2016, reached -6.8% against +5.6% registered in the same period of 2015, showing that the local reinsurers had a positive result in their retrocession operations, recovering more in claims than what was paid in premium. 11

12 September 2016 Terra Report Terra Brasis Resseguros In the 12 months aggregate ending in September 2016, Combined Ratio (including retrocession result index) reached 100.9% against 100.5% showed in the same period of Combined Ratio, with Retrocession Result Ratio Combined Ratio Local Reinsurance Market Combined Ratio IRB and Others Locals 130% 120% 110% 100% 90% IRB Other Locals 80% Q16 Source: SUSEP, Terra Brasis Re Source: SUSEP, Terra Brasis Re 12

13 September 2016 Terra Report: Brazil Terra Brasis Resseguros We showed below the summary of results for local reinsurance market in the third quarter of 2016 and Summary of Results and Main Indexes for Local Reinsurers for January to September 2016 and 2015 Consolidated Other Local Local Reinsurers IRB Reinsurers 2016/ / / / / /09 Total Assets Shareholder's Equity Gross Written Premium Written Premium Earned Premium Loss Ratio 76% 80% 71% 57% 82% 106% Commercial Expenses/ Earned Premium 2% 3% 3% 3% 2% 2% Admnistrative + Other/ Earned Premium 8% 10% 6% 9% 11% 11% Tax/ Earned Premium 4% 3% 4% 2% 4% 4% Retrocession Result/Earned Premium 12% 7% 15% 23% 7% -13% Combined Ratio 101% 102% 98% 94% 105% 110% Reinsurance Operational Result Financial Result and Equity Pick-up Income Tax and Contribuitions Net Profit for the Period ROE (annualized) 14,8% 17,0% 23,1% 26,6% 7,7% 7,2% Source: SUSEP, Terra Brasis Re, numbers in BRL Million In the third quarter of 2016, the local reinsurers produced a net profit of BRL 663 million, in contrast to a net profit of BRL 696 million registered in the same period of In this period, IRB profited BRL 480 million, while the other local reinsurance reported a positive result of BRL 183 million. Net Profits January to September (BRL mm) Total Local Reinsurers Net Profits January to September (BRL mm) IRB and Others Locals IRB Other Locais S09 1S10 1S11 1S12 1S13 1S14 1S15 1S S09 1S10 1S11 1S12 1S13 1S14 1S15 1S16 Source: SUSEP, Terra Brasis Re Source: SUSEP, Terra Brasis Re As mentioned in previous editions, the group of Other Local Reinsurers is not homogeneous and, therefore, their analysis becomes more complex. Therefore, we continue the analysis of reinsurers based on their operation start, which we called Class. 13

14 September 2016 Terra Report Terra Brasis Resseguros Comparing the third quarter of 2016 with the same quarter of 2015 we note that the last line result of the IRB as well as the Class of 2010 suffered a setback, showing the result of 2016 lower than that of For the same period, there is a significant improvement of the Classes of 2008 and The youngest class of 2014 shows a negative result higher than the previous year. These result, however, must take into account that they are reinsurers still in portfolio formation phase and therefore have very high administrative expenses and retrocession expenses in relation to the volume of premium produced. They also have greater volatility in their business portfolio. Summary of Results and Main Indexes for Local Reinsurers by Class January to September 2016 and 2015 Source: SUSEP, Terra Brasis Re Class of Class of Class of IRB Class of / / / / / / / / / /09 Total Assets Shareholder's Equity Gross Written Premium Written Premium Earned Premium Loss Ratio 71% 57% 87% 83% 85% 94% 74% 125% 100% 89% Commercial Expenses/ Earned Premium 3% 3% 2% 2% 3% 1% 2% 2% 1% 2% Admnistrative + Other/ Earned Premium 6% 9% 13% 12% 2% 19% 10% 5% 22% 39% Tax/ Earned Premium 4% 2% 5% 5% 3% 3% 4% 3% 2% 6% Retrocession Result/Earned Premium 15% 23% -4% 21% 17% -15% 12% -28% -7% 5% Combined Ratio 98% 94% 103% 122% 109% 102% 103% 107% 118% 141% Reinsurance Operational Result Financial Result and Equity Pick-up Income Tax and Contribuitions Net Profit for the Period

15 September 2016 Terra Report: Brazil Terra Brasis Resseguros Below we show written premium, net of commission, gross of retrocession, including Brazilian cedants and offshore cedants, as well as the market share of each local reinsurer, divided by "class". We indicated in red a decrease in the volume of premium or market-share. Main Index for Local Reinsurers classified by Class Authorization Date Written Premium Change Market Share Company 2016/ /09 BRL mm (%) 2016/ /09 IRB Apr 03, % 58,1% 51,6% IRB % 58,1% 51,6% JM May 23, % 2,1% 2,3% Munich May 23, % 5,2% 5,4% Mapfre Nov 14, % 3,5% 2,2% XL Dec 05, % 0,6% 0,6% Class of % 11,4% 10,5% Chubb Nov 25, % 1,6% 2,8% Austral Jan 31, % 4,6% 6,8% AIG Apr 04, % 0,9% 1,8% Class of % 7,1% 11,4% Zurich Jan 05, % 7,3% 9,7% Markel Jan 17, % 0,5% 0,2% Swiss Jun 14, % 2,8% 3,3% Terra Brasis Oct 04, % 1,1% 1,4% Allianz Dec 20, % 4,6% 6,2% BTG Feb 26, % 2,5% 3,1% Class of % 18,8% 23,8% Scor Aug 06, % 2,8% 1,9% AXA Aug 25, % 1,8% 0,8% Class of % 4,6% 2,6% Total % 100% 100% Source: SUSEP, Terra Brasis Re. Figures in red represent an deterioration in relation to the previous period In the terms of written premium, the class of 2010 and the class of 2012 showed a downturn compared to the same period of the previous year, while the other classes presented a growth. When it comes to the market-share, IRB held the lead, growing from 51% to 58%, while the class of 2010 and also the class of 2012 lost market share, and the class of 2008 and 2014 advanced. 15

16 September 2016 Terra Report Terra Brasis Resseguros The table below represents the summary of results of Local Reinsurers from January to September of 2016 and Summary of Results Local Reinsurers for January to September 2016 and 2015 (BRL mm) Total Local Market, IRB and Other Locals Total Local Market IRB Other Locals 2016/ / / / / /09 Assets Shareholders Equity Gross Reinsurance Premium Commission Non-Issued Risks in force International Operations Written Retrocession Written Premium Change in Reserves Earned Premium Losses Incurred Commercial Expenses Other Operational Expenses Administrative Expenses Tax Expenses Industrial Result Pre Retro Retrocession Result Industrial Result Financial Result Equity Pickup Operating Result Non-recurring Gains EBT Income Tax Social Tax Profit Sharing Net Income Loss Ratio 76% 80% 71% 57% 82% 106% Comm. Exp/Earned Premium 2% 3% 3% 3% 2% 2% Adm. Exp / Earned Premium 7% 6% 5% 6% 10% 7% Tax Exp / Earned Premium 4% 3% 4% 2% 4% 4% Other Exp / Earned Premium 1% 3% 0% 3% 1% 4% Expense Ratio 14% 15% 12% 14% 16% 17% Combined Ratio Pre Retro 90% 95% 83% 72% 98% 123% Retro Result/Earned Premium 12% 7% 15% 23% 7% -13% Combined Ratio 101% 102% 98% 94% 105% 110% (Non-Rec.+ Fin.+ Equity) /Earned Prem -21% -23% -22% -24% -20% -23% (Income tax+social tax+profit share) 8% 7% 8% 9% 7% 6% R.O.E. (1 ) 19,8% 22,7% 30,7% 35,4% 10,2% 9,6% Annualised Earned Premium/SE 159% 157% 195% 170% 127% 144% Source: SUSEP, Terra Brasis Re (1) R.O.E. Defined herein as annual net income divided by the shareholders equity of the end of the period. 16

17 September 2016 Terra Report: Brazil Terra Brasis Resseguros Summary of Results Local Reinsurers for January to September 2016 and 2015 (BRL mm) JM, Munich, Mapfre and XL JM Munich Mapfre XL 2016/ / / / / / / /09 Authorization Date May 23, 2008 May 23, 2008 Nov 14, 2008 Dec 05, 2008 Assets Shareholders Equity Gross Reinsurance Premium Commission Non-Issued Risks in force International Operations Written Retrocession Written Premium Change in Reserves Earned Premium Losses Incurred Commercial Expenses Other Operational Expenses Administrative Expenses Tax Expenses Industrial Result Pre Retro Retrocession Result Industrial Result Financial Result Equity Pickup Operating Result Non-recurring Gains EBT Income Tax Social Tax Profit Sharing Net Income Loss Ratio 51% 45% 70% 94% 151% 90% 65% 94% Comm. Exp/Earned Premium 0% 0% 2% 3% 1% 1% 3% 2% Adm. Exp / Earned Premium 6% 7% 10% 11% 4% 6% 11% 9% Tax Exp / Earned Premium 4% 4% 5% 5% 5% 5% 10% 7% Other Exp / Earned Premium 12% 2% 6% 3% 3% 3% 0% 0% Expense Ratio 23% 12% 22% 22% 13% 15% 25% 19% Combined Ratio Pre Retro 73% 57% 92% 116% 164% 105% 90% 114% Retro Result/Earned Premium 36% 35% 14% 26% -72% -3% 10% 9% Combined Ratio 110% 92% 106% 142% 93% 102% 101% 122% (Non-Rec.+ Fin.+ Equity) /E.P. -77% -64% -17% -42% -19% -33% -158% -75% (Inc. tax+social tax+profit share) 31% 33% 5% 1% 11% 13% 71% 21% R.O.E. (1 ) 11,1% 11,6% 12,0% -1,6% 26,3% 27,1% 14,8% 8,1% Annualised Earned Premium/SE 30% 30% 184% 166% 174% 148% 17% 26% Source: SUSEP, Terra Brasis Re (1) R.O.E. Defined herein as annual net income divided by the shareholders equity of the end of the period. 17

18 September 2016 Terra Report Terra Brasis Resseguros Summary of Results Local Reinsurers for January to September 2016 and 2015 (BRL mm) ACE, Austral, AIG and Zurich Chubb Austral AIG Zurich 2016/ / / / / / / /09 Authorization Date Nov 25, 2009 Jan 31, 2011 Apr 04, 2011 Jan 05, 2012 Assets Shareholders Equity Gross Reinsurance Premium Commission Non-Issued Risks in force International Operations Written Retrocession Written Premium Change in Reserves Earned Premium Losses Incurred Commercial Expenses Other Operational Expenses Administrative Expenses Tax Expenses Industrial Result Pre Retro Retrocession Result Industrial Result Financial Result Equity Pickup Operating Result Non-recurring Gains EBT Income Tax Social Tax Profit Sharing Net Income Loss Ratio 56% 127% 71% 70% 206% 145% 73% 110% Comm. Exp/Earned Premium 3% 0% 3% 2% 0% 0% 0% 0% Adm. Exp / Earned Premium 11% 11% 4% 3% 11% 8% 1% 1% Tax Exp / Earned Premium 4% 3% 2% 3% 6% 5% 2% 3% Other Exp / Earned Premium 0% -1% -9% 22% 0% 1% 0% 0% Expense Ratio 18% 13% 0% 30% 17% 13% 3% 4% Combined Ratio Pre Retro 74% 140% 71% 100% 223% 158% 76% 114% Retro Result/Earned Premium 48% -20% 24% -3% -85% -60% 19% -6% Combined Ratio 122% 120% 96% 97% 138% 99% 95% 108% (Non-Rec.+ Fin.+ Equity) /Earned Prem -24% -15% -10% -13% -12% -20% -13% -8% (Income tax+social tax+profit share) 2% 0% 4% 7% -1% 9% 8% 0% R.O.E. (1 ) 0,8% -13,2% 18,4% 25,1% -34,4% 23,8% 31,0% -0,3% Annualised Earned Premium/SE 253% 282% 173% 279% 135% 189% 318% 629% Source: SUSEP, Terra Brasis Re, (1) R.O.E. Defined herein as annual net income divided by the shareholders equity of the end of the period. 18

19 September 2016 Terra Report: Brazil Terra Brasis Resseguros Summary of Results Local Reinsurers for January to September 2016 and 2015 (BRL mm) Markel, Swiss, Terra Brasis and Allianz Markel Swiss Terra Brasis Allianz 2016/ / / / / / / /09 Authorization Date Jan 17, 2012 Jun 14, 2012 Oct 04, 2012 Dec 20, 2012 Assets Shareholders Equity Gross Reinsurance Premium Commission Non-Issued Risks in force International Operations Written Retrocession Written Premium Change in Reserves Earned Premium Losses Incurred Commercial Expenses Other Operational Expenses Administrative Expenses Tax Expenses Industrial Result Pre Retro Retrocession Result Industrial Result Financial Result Equity Pickup Operating Result Non-recurring Gains EBT Income Tax Social Tax Profit Sharing Net Income Loss Ratio 53% 127% 146% 120% 80% 71% 60% 169% Comm. Exp/Earned Premium 3% 4% 2% 6% 3% 3% 4% 3% Adm. Exp / Earned Premium 74% 53% 12% 12% 16% 16% 13% 1% Tax Exp / Earned Premium 7% 7% 5% 3% 4% 5% 4% 2% Other Exp / Earned Premium 5% 0% 1% 0% 0% 0% 0% -1% Expense Ratio 90% 64% 20% 21% 23% 25% 20% 4% Combined Ratio Pre Retro 143% 191% 166% 140% 103% 95% 80% 174% Retro Result/Earned Premium 2% 4% -57% -23% 6% 17% 29% -80% Combined Ratio 145% 195% 109% 118% 110% 112% 110% 94% (Non-Rec.+ Fin.+ Equity) /Earned Prem -34% -53% -23% -14% -22% -24% -12% -13% (Income tax+social tax+profit share) -4% 5% 5% 1% 5% 5% 1% 7% R.O.E. (1 ) -4,7% -25,8% 12,7% -11,5% 9,5% 6,8% 4,1% 39,8% Annualised Earned Premium/SE 66% 54% 154% 224% 126% 102% 299% 335% Source: SUSEP, Terra Brasis Re, (1) R.O.E. Defined herein as annual net income divided by the shareholders equity of the end of the period. 19

20 September 2016 Terra Report Terra Brasis Resseguros Summary of Results Local Reinsurers for January to September 2016 and 2015 (BRL mm) BTG, Scor and AXA BTG Scor AXA 2016/ / / / / /09 Authorization Date Feb 26, 2013 Aug 06, 2014 Aug 25, 2014 Assets Shareholders Equity Gross Reinsurance Premium Commission Non-Issued Risks in force International Operations Written Retrocession Written Premium Change in Reserves Earned Premium Losses Incurred Commercial Expenses Other Operational Expenses Administrative Expenses Tax Expenses Industrial Result Pre Retro Retrocession Result Industrial Result Financial Result Equity Pickup Operating Result Non-recurring Gains EBT Income Tax Social Tax Profit Sharing Net Income Loss Ratio -1% 3% 121% 0% 59% 0% Comm. Exp/Earned Premium 2% 0% 0% 0% 2% 0% Adm. Exp / Earned Premium 10% 31% 8% 0% 48% 0% Tax Exp / Earned Premium 6% 7% 1% 0% 4% 0% Other Exp / Earned Premium 7% 12% 0% 0% 0% 0% Expense Ratio 25% 50% 10% 0% 55% 0% Combined Ratio Pre Retro 24% 52% 131% 0% 114% 0% Retro Result/Earned Premium 58% 62% -21% 0% 21% 0% Combined Ratio 82% 114% 110% 0% 135% 0% (Non-Rec.+ Fin.+ Equity) /Earned Prem -52% -114% -11% 0% 13% 0% (Income tax+social tax+profit share) 32% 40% 0% 0% -10% 0% R.O.E. (1 ) 16,2% 11,8% 3,8% 0,0% -19,7% 0,0% Annualised Earned Premium/SE 42% 20% 259% 0% 51% 0% Source: SUSEP, Terra Brasis Re, (2) R.O.E. Defined herein as annual net income divided by the shareholders equity of the end of the period. 20

21 September 2016 Terra Report: Brazil Terra Brasis Resseguros Results by Lines of Business In this section we analyze the different lines of business in the Brazilian Market. The analysis is based on data of the Income Statement (I/S) from insurance and reinsurance companies, in this section we use the information of the Table of Operations (TO) from SUSEP s databank. General Insurance and Reinsurance Premiums for January to September 2016 and 2015 (BRL mm) General Insurance Premium Reinsurance Premium (TO) Local Reinsurance Premium 2016/ /09 Chg 2016/ /09 Chg 2016/ /09 Chg Property % % % Special Risks % % % Liability % % % Hull % Auto % % % Transportation % % % Surety % % % Credit % -1 Group Life % % % House Financing % % % Rural % % % Others % Individual Life % % % Marine % % % Aviation % % % Microinsurance % % % % Source: SUSEP, Terra Brasis Re, data obtained from the Table of Operations (TO) After additional analysis, we understand that there was a change concerning data definition in the Table of Operations. By mid-2012, the Table of Operations contained Reinsurance Volume gross of Commission. From this point forward, after a transitional period, the Operations Table seems to present data for Reinsurance Volume net of Commission. The graph below illustrates. Ceded Reinsurance from different data sources Table of Operations Reinsurance Premium (I/S, gross of commission) Reinsurance (I/S, net of commission)

22 September 2016 Terra Report Terra Brasis Resseguros Group: Property Insurance Premium Growth of Insurance Premium Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium Growth of Reinsurance Premium Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium / Insurance Premium Split of Reinsurance Premium by Type of Company Other Locals IRB 2,0 1,5 1,0 0,5 0,0 12/08 12/10 12/12 12/14 11/16 Source: SUSEP, Terra Brasis Re, BRL billions 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers 200% 150% 100% 50% All Locals 0% 12/08 12/10 12/12 12/14 12/16 22

23 September 2016 Terra Report: Brazil Terra Brasis Resseguros Group: Financial Risks Insurance Premium Growth of Insurance Premium Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium Growth of Reinsurance Premium Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium / Insurance Premium Split of Reinsurance Premium by Type of Company Other Locals IRB 0,8 0,6 0,4 0,2 0,0-0,2 12/08 12/10 12/12 12/14 11/16 Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers 150% 100% 50% 0% All Locals -50% 12/08 12/10 12/12 12/14 12/16 23

24 September 2016 Terra Report Terra Brasis Resseguros Group: Rural Group: Rural Growth of Insurance Premium 150% 100% 50% 0% -50% 12/04 12/06 12/08 12/10 12/12 12/14 12/16 Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium Growth of Reinsurance Premium Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium / Insurance Premium Split of Reinsurance Premium by Type of Company Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers 150% 100% 50% All Locals 0% 12/08 12/10 12/12 12/14 12/16 24

25 September 2016 Terra Report: Brazil Terra Brasis Resseguros Group: Liability Insurance Premium Growth of Insurance Premium Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium Growth of Reinsurance Premium Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium / Insurance Premium Split of Reinsurance Premium by Type of Company Other Locals IRB Foreigners 0,4 0,3 0,2 0,1 0,0-0,1 12/09 12/11 12/13 12/15 Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers 200% 150% 100% 50% Todas Locais 0% 12/08 12/10 12/12 12/14 12/16 Fonte: SUSEP, Terra Brasis Re, acumulado 12 meses Fonte: SUSEP, Terra Brasis Re, acumulado 12 meses 25

26 September 2016 Terra Report Terra Brasis Resseguros Group: Marine Insurance Premium Growth of Insurance Premium Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium Growth of Reinsurance Premium Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Reinsurance Premium / Insurance Premium Split of Reinsurance Premium by Type of Company Other Locals IRB 0,20 0,15 0,10 0,05 0,00-0,05 12/11 12/12 12/13 12/14 12/15 12/16 Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers 26

27 September 2016 Terra Report: Brazil Terra Brasis Resseguros Exhibit 1: Brazilian Insurance Segments per Susep s Classes In the table below are definitions by Terra Brasis of the segments referring to different lines of business supervised by SUSEP. The lines in grey denote lines of business that are deactivated or in rundown. In this report, for the definition of General Insurance, the classes related to DPVAT were excluded, since we believe that such classes should be an independent category. Other classes related to VGBL, which Terra Brasis believes should be presented together with other Retirement Plan modalities, were also excluded. Segmentation of the Brazilian Insurance Market Under SUSEP Supervision Source: SUSEP, Terra Brasis Re 27

28 September 2016 Terra Report Terra Brasis Resseguros Exhibit 2: List of Technical Terms Here follows an initial dictionary with the definitions that we used in this report for certain reinsurance terms. We intend to add to the list as the work progresses and believe that this would be worthwhile since several reinsurance terms have been used with different meanings. Brazilian General Insurance Market: It is the market comprising insurance operations in accordance with official regulation by SUSEP, except for those classified in the DPVAT and VGBL modality. Brazilian Reinsurance Market: It is formed by operations comprising cessions of reinsurance ceded by Brazilian insurers and assumed by reinsurers that are authorized to operate in Brazil and classified as local, admitted, or occasional. Local Reinsurance Market: It is formed by operations comprising reinsurance business assumed by local reinsurers. Written Premium or Gross Written Premium: It is the value of the premium written by Insurers or Reinsurers, before reinsurance or retrocession deductions. In the case of reinsurers, as of May 2011, it is net of commissions paid to Cedants. Commission: It is the value that the reinsurer or retrocessionaire pays to the Cedant, with the objective of covering part of the expenses incurred in the administration and production of the business. Brokerage: It is the value paid to the broker ( broker ) in compensation for the intermediation of the insurance, reinsurance, or retrocession. Overriding: It is the part of the commission paid to Cedants in addition to their incurred commercial expenses. 28

29 September 2016 Terra Report: Brazil Terra Brasis Resseguros Exhibit 3: Main Indexes of Local Reinsurers Main Ratios From Local Reinsurers from January to September of 2016 and 2015 January to September 2016 Start of Operation Gross Prem. % Com Net Premium Earned Premium % L % B %OE %AE %TE %ER %CR pre RR %RR %CR RSub RSub /SE RInv RInv /SE RGro RNet RGro /SE ROE SE %SLV Total ,8% % 2% 1% 7% 4% 14% 90% 12% 102% -67-1% % ,2% 13,2% % Total New ,6% % 2% 1% 10% 4% 16% 100% 6% 106% % % ,7% 6,8% % IRB 04/ ,8% % 3% 0% 5% 4% 12% 83% 17% 100% 56 2% % ,0% 20,5% % JM 05/ ,9% % 0% 12% 6% 4% 23% 70% 40% 110% -10-2% 77 15% ,6% 7,4% % Munecker 05/ ,2% % 2% 6% 10% 5% 22% 93% 18% 111% -20-8% 54 21% ,6% 8,0% % Mapfre 11/ ,4% % 1% 3% 4% 5% 13% 169% -77% 93% 11 9% 28 22% ,8% 17,5% % XL 12/ ,9% % 3% 0% 11% 10% 26% 89% 12% 100% - -0% 42 18% ,0% 9,9% % ACE 11/ ,0% % 3% 0% 11% 4% 17% 76% 46% 122% % 28 41% 2 3,4% 0,5% 91 67% Austral 01/ ,6% % 3% -9% 4% 2% -2% 60% 31% 91% 11 5% 24 12% ,7% 12,3% % AIG 04/ ,6% % 0% 0% 11% 6% 15% 237% -99% 138% % 6 11% ,9% -22,9% 80 88% Zurich 01/ ,8% % 0% 0% 1% 2% 3% 79% 16% 95% 19 10% 54 28% ,6% 20,7% % Markel 01/ ,3% % 3% 5% 74% 7% 88% 143% 19% 162% % 9 15% ,8% -3,1% % Swiss 06/ ,9% % 2% 1% 12% 5% 20% 162% -56% 107% -15-9% 38 23% ,8% 8,5% % Terra Brasis 10/ ,4% % 3% 0% 16% 4% 23% 106% 4% 110% -6-8% 14 19% ,5% 6,3% % Allianz 12/ ,1% % 4% 0% 13% 4% 20% 78% 32% 110% % 41 24% 9 5 5,1% 2,7% % BTG 02/ ,8% % 2% 7% 10% 6% 24% 25% 57% 82% 15 5% 43 14% ,6% 10,8% % Scor 08/ ,5% % 0% 0% 8% 1% 10% 142% -34% 108% % 14 18% 1 2 1,9% 2,5% % AXA 08/ ,6% % 2% 0% 48% 4% 59% 119% 17% 135% % -9-4% ,5% -13,1% % January to September 2015 Start of Operation Gross Prem. % Com Net Premium Earned Premium % L % B %OE %AE %TE %ER %CR pre RR %RR %CR RSub RSub /SE RInv RInv /SE RGro RNet RGro /SE ROE SE %SLV Total ,8% % 3% 3% 6% 3% 16% 100% 3% 103% -77-2% % ,9% 15,1% % Total New ,8% % 2% 4% 7% 4% 16% 125% -17% 107% % % ,1% 6,4% % IRB 04/ ,6% % 3% 3% 6% 2% 16% 78% 21% 99% 145 6% % ,5% 23,6% % JM 05/ ,6% % 0% 2% 7% 4% 12% 52% 39% 91% 8 1% 68 13% ,2% 7,6% % Munecker 05/ ,4% % 3% 3% 11% 5% 22% 115% 14% 128% % % ,4% -1,1% % Mapfre 11/ ,8% % 1% 3% 6% 5% 18% 116% -7% 109% -2-2% 34 30% ,4% 16,8% % XL 12/ ,1% % 2% 0% 9% 7% 19% 91% 7% 98% -8-4% 26 13% ,9% 5,3% % ACE 11/ ,4% % 0% -1% 11% 3% 13% 144% -24% 120% % 18 32% ,5% -10,1% 74 30% Austral 01/ ,4% % 2% 22% 3% 3% 29% 103% -5% 99% 11 6% 45 23% ,8% 16,0% % AIG 04/ ,1% % 0% 1% 8% 5% 13% 157% -62% 95% 1 2% 16 24% ,7% 15,3% 91 62% Zurich 01/ ,7% % 0% 0% 1% 3% 3% 105% 2% 106% % 37 36% 1-0,8% -0,2% % Markel 01/ ,0% % 4% 0% 53% 7% 66% 199% 4% 204% % 11 20% ,2% -18,2% % Swiss 06/ ,4% % 6% 0% 12% 3% 23% 164% -50% 114% % 21 24% ,8% -9,1% % Terra Brasis 10/ ,9% % 3% 0% 16% 5% 24% 97% 15% 113% -6-8% 12 16% 6 3 7,7% 4,4% % Allianz 12/ ,2% % 3% -1% 1% 2% 3% 180% -91% 89% 21 13% 43 28% ,6% 25,4% % BTG 02/ ,3% % 0% 12% 31% 7% 52% 53% 64% 117% -6-2% 45 17% ,6% 8,7% % Scor 08/ ,8% % 0% 0% 19% 5% 25% 122% 0% 122% % 10 13% ,2% -2,5% 99 69% AXA 08/ ,7% % 9% 0% 124% 8% 158% 207% 31% 238% % 8 12% ,7% -7,8% % Total New : All reinsurers except IRB %AE : Administrative Expenses RInv : Investment Result plus non-recurring gains and equity pickup Gross Prem. : Gross Written Premium (BRL) %TE : Tax Expenses RInv/SE : Annualized Investment Result / Net end-of-period Shareholder's Equity % Com : Commission paid to Cedants %ER : Expense Ratio (%B + %OD + %DA) RGro : Gross Result (RSub + RInv) Net Premium : Net Written Premium (BRL) %CR pre RR : Combined Ratio pre Retrocession (%S+%ER) RNet : Net Result (RGro minus income tax, social contributions and profit sharing) Earned Premium : Earned Premium (BRL) %RR : Retrocession Result SE : End of Period Net Shareholder's Equity % L : Losses %CR : Combined Ratio (%S+%ER+%RR) RGro/SE : Gross Result / Shareholder's Equity % B : Brokerage RSub : Subscription Result ROE : Return on Equity (before Income Tax, Social Contributions, Profit Sharing) %OE : Other Expenses RSub/SE : Annualized Subscription Result / Net end-of-period Shareholder's Equity %SOLV : Solvency Margin, End-of-period SE/Annualized Gross Written Reinsurance Fonte: SUSEP, Terra Brasis Re 29

30 September 2016 Terra Report Terra Brasis Resseguros Acknowledgements It is with enthusiasm that we continue to publish our market report, Terra Report, a research piece covering the Brazilian Reinsurance Market, which we share with our clients, partners, and colleagues. We are immensely grateful to SUSEP for making its databank available to the public. We also thank ANS and CNSeg for information used herein. The report also contains analyses and adjustments made internally by Terra Brasis and, in this way, we apologize in advance for possible inaccuracies contained in this publication. We hope our readers appreciate this work as much as we appreciate developing it. Without a doubt, it is extremely gratifying to be involved in the Brazilian reinsurance market at such an important moment of its development. Any criticism, comment, or suggestion for this work is very welcome. 30

31 September 2016 Terra Report Terra Brasis Resseguros Contacts Name Title Telephone Paulo Eduardo de Freitas Botti Chief Executive Officer Carlos Roberto De Zoppa Technical Executive Vice President Bernardo Nolasco Chief Investment Officer Rodrigo Botti, ARe General Manager, CFO & COO Paulo Hayakawa Chief Underwriting Officer Beatriz Americano Chief Administrative Officer Tatiana Bianco Risk Manager

32 Head Office Av. Presidente Juscelino Kubitschek, 1700, 12º Andar Itaim Bibi, São Paulo, SP Colombia Office Carrera 9 Nº Oficina 1207, Edifício Torres Unidas 2 P.H. Bogotá, Colômbia This document was prepared by Terra Brasis Re S.A. ("Terra Brasis Re") for informational purposes only. Terra Brasis Re, its partners, companies under common control, its directors, employees and agents do not express any opinion, do not guarantee, nor assume any responsibility for the adequacy, consistency, or completeness of any information contained herein or any omission regarding this report. This publication is also not designed to be a complete statement or summary of markets or strategies discussed in this document. None of the people mentioned in this paragraph shall be liable for any loss or damage of any kind arising from the use of the information contained herein, or which may be obtained by third parties by any other means. Terra Brasis Re should not be construed as providing financial, tax, or legal advice. The information contained herein was obtained from public sources, and Terra Brasis Re has not conducted an independent verification of this information. Any projections or forecasts contained in this report are based on subjective estimates and assumptions about events and circumstances that have not yet occurred and are subject to significant variations. Thus, it is not possible to ensure that results from any projections or forecasts contained in this document will be effectively verified. This publication is only valid on the date hereof, and future events could undermine its conclusions. Terra Brasis Re assumes no responsibility to update, revise, amend or cancel this publication due to any future event, unless previously requested. It is not the obligation of Terra Brasis Re to implement the procedures in this document, nor is Terra Brasis Re responsible for any inaccuracies in any negotiations or transactions relating to this report. No investment or financial decision should be based solely on the information presented here. All information contained in this report should be kept strictly confidential and can only be released, quoted, or reproduced in whole or in part, with the prior written consent of Terra Brasis Re for people who have agreed to treat such information as confidential