Terra Report. Report on the Brazilian Reinsurance Market. Issue. March number 19. Index:

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1 Issue number 19 March 2016 Publication Date: July 11 th, 2016 Index: Introduction... 2 Brazilian General Insurance Market... 3 Brazilian Reinsurance Market 7 Results of Local Reinsurers. 13 Results by Lines of Business 23 Group: Property Group: Financial Risks Group: Rural Group: Liability Group: Marine Exhibit 1: Brazilian Insurance Segments per Susep s Classes29 Exhibit 2: List of Technical Terms Exhibit 3: Main Indexes of Local Reinsurers Acknowledgements Ratings: A.M. Best B++ Global (Investment Grade) Stable Outlook Standard & Poor s bra+ Local Stable Outlook Terra Report Report on the Brazilian Reinsurance Market Even though the Brazilian Reinsurance Market is the focus of Terra Report, as we traditionally do, we start this issue by quickly elaborating on the composition and recent development of the Brazilian Insurance Market. Analyzing the growth of these different segments that composes the Brazilian Insurance Market, we can observe a less growth of the majority of the segments in 2015 compared to However, the vast majority of segment continues to grow at a higher pace than GDP. In the 12 months aggregate ending in March 2016, the Volume of the Brazilian Reinsurance Market (gross of commission) stood at BRL 10.2bn against BRL 9.3bn registered in the same period of 2015, an annual rate growth of 10.3%. In the 12 months aggregate ending in March 2016, the Reinsurance Volume (gross of commission) written by local reinsurers reached from Brazilian Insurers stood at BRL 7.4bn, corresponding to a 10.5% increase when compared to the BRL 6.7bn registered in the 12 months aggregate ending in March In the same period, the volume coming from offshore cedants reached BR1.3bn against BRL million showed in the same period of the previous year, an annual growth of 148.4%, an expressive volume, representing 17.8% of the volume received from Brazilian cedants compared to 7.9% registered in the same period of In the first quarter of 2016, the local reinsurers produced a net profit of BRL 262 million, in contrast to a net profit of BRL 193 million registered in the same period of In this period, IRB profited BRL 212 million, while the other local reinsurance reported a positive result of BRL 50 million. 5 year average annual growth by segment (2010 to 2015) Shareholders: : Source: SUSEP, Terra Brasis Re, ANS, Banco Central do Brazil. Note: Nominal values

2 Introduction Dear Reader, As we do every year, this edition of Terra Report brings a brief analysis of the composition and evolution of the Brazilian Insurances Market in We can observe a clear deceleration in premium growth across almost all market segments. In any way, despite a political and economic scenario which has been increasingly challenging, the sector keeps growing above Brazilian GDP. A point worth highlighting is the resilience of the Brazilian Reinsurance sector, considering the challenging conditions of the Brazilian economy. In 2015, the sector registered a growth higher than the previous year. This edition also brings an analysis of the first quarter of It is noted a stable pace of growth of the reinsurance volume, around 10%, with a short increase of reinsurance premium volume ceded to offshore reinsurances. This movement is very similar to the one registered in the same period of In this way, it is worth mentioning that three months is rather a short period to analyze and the data might contain accounting distortions. A couple of additional months will be needed to verify whether this is in fact a trend. Although local s reinsurance market has presented a higher net profit in the first quarter of 2016 compared to the same period of 2015, the present moment calls for care in any analysis. In the analyzed period, the local reinsurers showed a net profit of R$ 261 million compared to R$ 193 million registered in the first quarter of The challenges go beyond Brazilian s borders, with events which should impact not only the global insurance and reinsurance market, but also the world scenario as a whole and because of that they require more attention. In the domestic scenario, we can mention the impeachment process of the Brazilian president, in addition to the repercussions of police investigations, such as the Car Wash. In the international scenario, we can cite the exit of the United Kingdom of Europe Union and The United States presidential elections. Happy reading, Priscila Grossi, ARe Risk Analyst Terra Brasis Resseguros 2

3 Brazilian General Insurance Market Even though the Brazilian Reinsurance Market is the focus of Terra Report, as we traditionally do, we start this issue by quickly elaborating on the composition and recent development of the Brazilian Insurance Market. For a more extensive analysis refer to the December 2012 issue of Terra Report. As previously mentioned, to analyze what is usually called the Brazilian Insurance Market is not straightforward. Often the definition of insurance market includes pension products and premium bonds ( Capitalização ). Other times, health insurance is left out as it is not regulated by SUSEP, but by the ANS. Therefore, we believe that to properly analyze the market it is necessary to break it down into different segments. We defined eight segments, as shown and described below. In Exhibit 1 we show the parameters used in this classification Gross Written Premium and Contribution per Segment (BRL billion) Source: SUSEP, ANS, Terra Brasis Re. For health insurance only insurers were considered, health plans were excluded. Analyzing the growth of these different segments we can observe a less growth of the majority of the segments in 2015 compared to Roughly speaking, the segments grew last year by about 10% compared to the previous year. Premium Growth per Segment in 2015/2014 Premium Growth per Segment in 2014/2013 Source: SUSEP, ANS, Terra Brasis Re, Banco Central do Brasi Note: Nominal values Source: Susep, ANS, Terra Brasis Re, Banco Central do Brasi Note: Nominal values However, the vast majority of segment continues to grow at a higher pace than GDP, the only exceptions being P&C Corporate, P&C Personal Lines and Premium Bonds segments. Reinsurance and Life and Accident are the only segments that grew more in 2015 than in

4 Looking at a longer-term horizon, it is possible to note that all segments continue to show a growth above Brazilian GDP Economy. Despite of challenging Brazilian macroeconomic scenario, we believe this behavior should continue for a number of years. Average Annual Growth Over the Past 5 years per Segment (2010 to 2015) Source: SUSEP, Terra Brasis Re, ANS, Banco Central do Brazil Note: Nominal values 4

5 Now we follow with our usual analysis. The General Insurance Market, defined as per methodology presented on Exhibit 1, maintained the downward movement in the pace of growth during the first months of 2016, its process have started in For the 12 months aggregate ending in March 2016, Brazilian Market generated BRL 86.9bn in insurance premium, compared to BRL 85.0bn in the same period of previous year, representing an annual growth of 2,3% versus 6.7% of the same period in Evolution of Insurance Written Premiums (BRL bn) 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 first quarter of 2016 compared to same period of In the 12 months aggregate ending in March 2016, the loss ratio stood at 49.7% against 49.1% in 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 March 2016, stood in 24.0% against 23.4% in the 12 months aggregate ending in March 2015, registering a worsening. 5

6 (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 March 2016 in 17.6% versus 15.1% 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 0.4% against 1.4% in the same period of It means that during the 12 months ending in March 2016, Insurance Companies incurred in lower 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 March 2016 in 91.7% compared to 89.1% 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 6

7 Brazilian Reinsurance Market We start the analysis in this section using the past 12-month aggregate data In the 12 months aggregate ending in March 2016, the Volume of the Brazilian Reinsurance Market (gross of commission) stood at BRL 10.2bn against BRL 9.3bn registered in the same period of 2015, an annual rate growth of 10.3%. 12-Month Aggregate Reinsurance Premium Ceded (Gross of Commission, BRL bn) In the same period, the proportion of Reinsurance ceded over Insurance premium stood at 11.8% versus 10.9% registered in the same period of 2015, higher level since the opening of the market to private competition in Growth of Reinsurance Premium Ceded and General Insurance Premium Reinsurance Premium / General Insurance Premium 7

8 The 12 months aggregate Coinsurance Premium Volume ending in March 2016 stood at BRL 2.32bn, an increase of 4.9% compared to BRL 2.21bn 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 March 2016 represented 2.7% 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 reached from Brazilian Insurers stood at BRL 7.4bn, corresponding to a 10.5% increase when compared to the BRL 6.7bn registered in the 12 months aggregate ending in March In the same period, the volume coming from offshore cedants reached BR1.3bn against BRL million showed in the same period of the previous year, an annual growth of 148.4%, an expressive volume, representing 17.8% of the volume received from Brazilian cedants compared to 7.9% registered in the same period of Reinsurance (Gross of Commission) written by Local Reinsurers 8

9 The local Market closed the 12 months aggregate ending in March 2016 detaining 71% of the volume ceded by Brazilian Insurers, percentage close to the 72% 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 March 2016 and the preceding 12- month period. Reinsurance Flow in the Brazilian Market for the 12 month period ending March 2016 and the preceding 12-month period (Gross of Commission, BRL mm) Source: SUSEP, Terra Brasis Re, BRL millions, reinsurance gross of commission figures 9

10 We now move to the analysis of the current year. Looking now at the first quarter of 2016, Brazilian Insurers generated BRL 2.4bn in ceded reinsurance, corresponding to an increasing of 6.5% in relation to the same period of 2015, when they generated BRL 2.2bn. The reinsurance written (gross of commission) by local reinsurers during this first three months of 2016 stood at BRL 1.7bn, corresponding to an increase of 1% compared to the same period of During this period, the volume of reinsurance (gross of commission) written by IRB was 26% higher than the same period of the previous year, and other local reinsurers showed a dropped of approximately 17%. In the period, the reinsurance written by offshore reinsurer increased 22%. Premium Ceded by Brazilian Insurers and Premium Received by Local Reinsurers from January to March (BRL mm) 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 first three months of 2016 and Reinsurance Flow in the Brazilian Market January to March 2016 and 2015 (Gross of Commission, BRL mm) Source: SUSEP, Terra Brasis Re, BRL millions, reinsurance gross of commission figures 10

11 Considering the distribution volume of reinsurance from Brazilian cedants, IRB ended the first quarter of 2016 with a market participation of 37%, while the other reinsurers closed the period with 33% and the offshore reinsurers 30%. Reinsurance Market Share (gross of commission ) generated by Brazilian Insurers Source: SUSEP, Terra Brasis Re Analyzing only the local reinsurance Market, IRB detained 52% of market share, while the other locals shared 48% of the rest of the market. Gross Reinsurance Premium Ceded by Brazilian Insurers (BRL bn) Participation in the Gross Reinsurance Premium Ceded by Brazilian Insurers Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate 11

12 The following flowcharts show the volume of reinsurance premiums since 2007, the last year of the monopolistic reinsurance regime. Reinsurance Annual Flow in the Brazilian Market since 2007 (Gross of Commission, BRL mm) 2007 Offshore 2008 Offshore 66 Reinsurers 254 Reinsurers Brazilian 2% Brazilian 7% Insurers Insurers IRB Local 98% % Reinsurers Offshore Offshore Insurers 22 Insurers Offshore 2010 Offshore 565 Reinsurers Reinsurers Brazilian 13% Brazilian 52% Insurers Insurers Local Local 87% Reinsurers 48% Reinsurers Offshore Offshore Insurers 84 Insurers Offshore 2012 Offshore Reinsurers Reinsurers Brazilian 40% Brazilian 40% Insurers Insurers Local % Reinsurers 60% Offshore Offshore Insurers 50 Insurers 149 Local Reinsurers Offshore 2014 Offshore Reinsurers Reinsurers Brazilian 36% Brazilian 32% Insurers Insurers Local % Reinsurers 68% Offshore Offshore Insurers 443 Insurers 451 Local Reinsurers Brazilian 27% Insurers Offshore Reinsurers Offshore Insurers % Local Reinsurers Source: SUSEP, Terra Brasis Re, BRL millions, reinsurance gross of commission figures. 12

13 Results of Local Reinsurers In spite of an increase in the reinsurance volume and also a net profit in the period, the figures of the first quarter of 2016 show a challenging business environment for the local reinsurers. It is noted a worsening of the loss ratio, which was compensated for winnings with retrocession operations, resulting in a Combined Ratio hovering above 100%. In the 12 months aggregate ending in March, the Loss Ratio experienced by the local reinsurance market reached 101%, a growth of 27 percentage points relative to the level of 74% 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 110% 100% 90% 80% 70% 60% 12/ / / / / /2016 Source SUSEP, Terra Brasis Re, 12-month aggregate Commercial Expenses/ Earned Premium 35% 30% 25% 20% 15% 10% 5% 0% 12/ / / / / /2016 The Commercial Expense Ratio, in the 12 months aggregate ending in March 2016, remained stable, closing the period in 2.2% compared to 2.1% registered in the same period of the previous year. In the same period, the Administrative Expense Ratio (including taxes and other expenses) stood in 11.8% against 11.6% recorded in the same period of 2015, showing a slight deterioration. Administrative Expense Ratio (including taxes and other expenses)/ Earned Premium 35% 30% 25% 20% 15% 10% 5% 0% 12/ / / / / /2016 Retrocession Result / Earned Premium 20% 15% 10% 5% 0% -5% -10% -15% 12/ / / / / /2016 The Retrocession Result Ratio, for the 12 months aggregate ending in March 2016, reached -14.2% against 8.8% registered in the same period of 2015, demonstrating that the local reinsurers showed a positive result in their retrocession operations, recovering more in losses that in what was paid in premium. This result was in part influenced by the significant claims registered in the fourth quarter of

14 As a result, the 27% increase in the loss ratio was virtually offset by the fall of almost 23% in the retrocession result index. In the 12 months aggregate ending in March 2016, Combined Ratio (including retrocession result index) reached 100.9% against 96.6% showed in the same period of Combined Ratio, with Retrocession Result Ratio 120% 110% 100% 90% 80% 12/ / / / / / / /2016 Combined Ratio Local Reinsurance Market Combined Ratio IRB and Others Locals Source: SUSEP, Terra Brasis Re Source: SUSEP, Terra Brasis Re 14

15 We showed below the summary of results for local reinsurance Market in the first three months of 2016 and Summary of Results and Main Indexes for Local Reinsurers for January to March 2016 and 2015 Source: SUSEP, Terra Brasis Re, numbers in BRL Million In the first quarter of 2016, the local reinsurers produced a net profit of BRL 262 million, in contrast to a net profit of BRL 193 million registered in the same period of In this period, IRB profited BRL 212 million, while the other local reinsurance reported a positive result of BRL 50 million. Net Profits January to March (BRL mm) Total Local Reinsurers Net Profits January to March (BRL mm) IRB and Others Locals Source: SUSEP, Terra Brasis Re Source: SUSEP, Terra Brasis Re As mentioned in previous issues, the current group of Other Local Reinsurers is not homogeneous and, therefore, their analysis becomes more complex. This way, we continue the analysis of reinsurers based on their operation start, which we called Class. 15

16 Comparing the 1Q2016 with the 1Q2015 it is possible to see an improvement in the loss ratio of the class of 2008 to class of 2012, while IRB and the class of 2014 showed a worsening in this index. Furthermore, these last two showed, in the analyzed period, a higher recovering in losses than in what was paid in premium on its retrocession operations, contributing to an improvement in the Combined Ratio liquid of retrocession operations. Summary of Results and Main Indexes for Local Reinsurers by Class January to March 2016 and 2015 Source: SUSEP, Terra Brasis Re In addition, IRB and the class of 2012 showed a strong result with investment operations, which contributed for a net profit higher than shown in the same period The class of 2008 also presented a net profit higher than the previous year. This result was influenced by a drop in the loss ratio and also by a decrease in the reinsurance operations. 16

17 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 Source: SUSEP, Terra Brasis Re. Figures in red represent an deterioration in relation to the previous period In the production terms, 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 47% to 58%, while the class of 2010 and also the class of 2012 lost market share, and the class of 2010 advanced. 17

18 The table below represents the summary of results of Local Reinsurers from January to March of 2016 and Summary of Results Local Reinsurers for January to March 2016 and 2015 (BRL mm) Total Local Market, IRB and Other Locals 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 Summary of Results Local Reinsurers for January to March 2016 and 2015 (BRL mm) JM, Munich, Mapfre and XL 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 Summary of Results Local Reinsurers for January to March 2016 and 2015 (BRL mm) ACE, Austral, AIG and Zurich 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. 20

21 Summary of Results Local Reinsurers for January to March 2016 and 2015 (BRL mm) Markel, Swiss, Terra Brasis and Allianz 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. 21

22 Summary of Results Local Reinsurers for January to March 2016 and 2015 (BRL mm) BTG, Scor and AXA 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. 22

23 Results by Lines of Business In this section we analyze the different lines of business in the Brazilian Market. In contrast with the previous sessions of this report, which are 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 March 2016 and 2015 (BRL mm) Source: SUSEP, Terra Brasis Re, data obtained from the Table of Operations (TO) After additional studies, we understand that there was a change in the definition of the data presented in the Table of Operations. By mid-2012, the Table of Operations contained raw Reinsurance Commission data. From this moment on, after a transitional period, the Operations Table seems to present data for Reinsurance Premiums Liquid of Commission. The graph below illustrates that Ceded Reinsurance from different data sources 23

24 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 Source: SUSEP, Terra Brasis Re, BRL billions 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers 24

25 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 Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers 25

26 Group: Rural Group: Rural 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 Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers 26

27 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 Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers Fonte: SUSEP, Terra Brasis Re, acumulado 12 meses Fonte: SUSEP, Terra Brasis Re, acumulado 12 meses 27

28 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 Source: SUSEP, Terra Brasis Re, BRL billions, 12-month aggregate Loss Ratio: Insurers Loss Ratio: Local Reinsurers 28

29 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 29

30 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. 30

31 Exhibit 3: Main Indexes of Local Reinsurers Fonte: SUSEP, Terra Brasis Re Main Ratios From Local Reinsurers from January to March of 2016 and

32 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. 32

33 September 2015 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 Priscila Grossi Risk Analyst Mathias Gerhard Intern

34 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