BR Insurance Corretora de Seguros S.A. Individual and consolidated quarterly financial information at June 30, 2018

Transcription

1 Individual and consolidated quarterly financial information at

2 Individual and consolidated quarterly financial information at Contents Management Report...3 Independent auditor s review report on the individual and consolidated quarterly financial information...14 Statements of financial position...16 Statements of income...17 Statements of comprehensive income...18 Statements of changes in shareholders equity...19 Statements of cash flows (indirect method) Statements of value added...21 Notes to the individual and consolidated quarterly information...22

3 EARNINGS RELEASE - 2Q18 Investor Relations ri@brinsurance.com.br Marcos Aurélio Couto Renan Stocco Baccarin CEO and Investor Relations Officer Investor Relations Manager +55 (11) (11) BR INSURANCE ANNOUNCES GROWTH OF 7.2% IN NET REVENUE COMPARED WITH THE FIRST QUARTER OF 2018 BR Insurance Corretora de Seguros S.A. (B3: BRIN3) one of the largest and most diversified Insurance brokers in Brazil announces today its 2Q18 results. This quarter information was reviewed by Grant Thornton Auditores Independentes, and prepared in accordance with the accounting practices adopted in Brazil and with the international financial reporting standards (IFRS) and CVM (Brazilian Securities and Exchange Commission) regulations. Message from Management Dear shareholders, BR Insurance continues to execute the initiatives of its strategic plan that seeks to leverage commercial efficiency and achieve profitability indexes compatible with the Company segment and relevance. The first stage of this process, completed in the first quarter, went through the redesign and definition of its five Business Units: Benefits, Affinity, Private Pension, P&C and Auto. Each of these Business Units already has its appointed leaders who are directly responsible for its management and results. This new structure will allow the Company's Management to have a more detailed view of the business, in line with the profitability generation proposal. In this second quarter of 2018, the Company operated in the two pillars considered most relevant in the strategic plan: the first, commercial efficiency and the second, profitability gain. In the commercial efficiency pillar, to further strengthen the Company's executive team, Mauro Camillo was hired at the beginning of June and is now responsible for the Commercial Transportation Insurance area of BR Insurance. Mauro is one of the most respected executives in the segment, having managed a portfolio of more than 1,000 clients of all sizes and segments. He is also one of the founders of the International Transportation Insurance Club (CIST) and currently holds the position of Chairman of the Advisory Board. Another relevant initiative completed in the period was the renegotiation of commercial conditions with the Company's main partners, seeking better commission rates in the proportion to deliver greater production and profitability for BR Insurance's partners. Investments were also made in the area of inside sales, which now serves all the Company's business units, prospecting new clients and commercial opportunities. Moreover, management approved a new cross-selling policy, encouraging the use of opportunities within the structure itself. As a result, the second quarter showed a significant increase in the client portfolio renewal rates, mainly in Benefits, the Company's most representative unit. 3

4 All these measures will enable the Company to leverage commercial performance in the coming periods and this effect can already be noticed in the second quarter of With regard to profitability gains, a series of initiatives to increase the Company's operating margin were completed at the end of June, highlighting an 18% reduction in our workforce since December 2017, ending the quarter with 458 employees. It was a relevant action for the sustainability of the business, at the same time that investments were made in the business / commercial structure. Moreover, the Company coordinated a series of renegotiations with its service providers, and significant reductions in administrative costs were achieved. At the corporate level, at the Extraordinary Shareholders' Meeting held today, the merger of four additional subsidiaries of the Company were approved: "Aral", "Barrasul", "GDE" and "Laport". These movements will bring even more operational synergy into the Company's structure. Net Revenue reached R$ 22.2 million, growing 7.2% over the immediately previous quarter, chiefly driven by the Benefits, Affinity and P&C units. EBITDA and Net Income for 2Q18 are impacted by planned Contingency review actions, but once this effect is excluded, BR Insurance's profitability and operating efficiency shows signs of recovery. It is emphasized that the review of contingencies did not generate any effect on the Company's cash position. New savings should still be noted over the coming quarters, and management believes that BR Insurance is able to resume in a short time its leading role in the insurance brokerage market in Brazil. Marcos Aurélio Couto CEO and Investor Relations Officer 4

5 Conference Call We will hold a conference call to discuss the quarterly results on August 10, 2018 as disclosed in the calendar sent to CVM. Time: In Portuguese, at 09h00, Brasilia s Time (08h00 New York s Time) and in English, at 10h00, Brasilia s Time (09h00 New York s Time). The attendees must call for domestic calls and +1 (412) for international calls. The access code for all numbers is BR Insurance. The live audio of the conference calls may be accessed at We will provide a replay of the audio about two hours after the event. Subsequent Events Extraordinary General Meeting of August 9, 2018: in line with the Company's corporate and operational structure optimization plan, the Company's shareholders approved the merger of the following subsidiaries: I. ARAL CONSULTORIA EM SEGUROS LTDA. ("ARAL"), the current name of ARAL Administradora de Benefícios Ltda.; II. BARRASUL B.I CORRETORA DE SEGUROS LTDA. ( BARRASUL ); III. GDE B.I. CORRETORA DE SEGUROS LTDA. ( GDE ); and IV. LAPORT B.I. CORRETORA DE SEGUROS LTDA. ( LAPORT ). Management believes that the mergers will improve the organization of its activities due to concentration of investments, gain in operational, administrative, accounting and management efficiency, reducing operational and financial costs, as well as bringing gains with other synergies. Each Merged Entity will no longer be an autonomous unit and will compose a single integrated and efficient structure. More information about the movement can be found in BR Insurance's Investor Relations website at or on the Brazilian Securities and Exchange Commission website at 5

6 Analysis of 2Q18 Results Net Revenue R$ thousand 2Q18 2Q17 Ch. % 2Q18 1Q18 Ch. % Net Revenue 22,194 23, % 22,194 20, % BR Insurance is now organized into 5 distinct business units: Benefits, Affinity, Private Pension, P&C and Auto, in line with the Company's Management's focus on the organization and professionalization of its commercial teams. The leaders of these units were defined throughout the first quarter of this year and have full responsibility for the results of their business unit. This reorganization has already begun to show positive results: Net Revenue grew by 7.2% compared to the first quarter of 2018, mainly driven by the Elementary Branches and Automotive units. On the other hand, compared to the same quarter last year, Net Revenue was 5.2% lower, chiefly due to the decrease in commercial performance in the segments of Benefits, P&C and Private Pension. With the loss of clients in the period, there was a significant reduction in premiums issued and consequent deterioration of average tickets, resulting in cheaper product offerings to our clients. Together, the three segments represent 75.9% of the Net Revenue. Net Revenue by Segment 6

7 SG&A R$ thousand 2Q18 2Q17 Ch. % 2Q18 1Q18 Ch. % SG&A (32,140) (31,168) 3.1% (32,140) (22,640) 42.0% Personnel (14,819) (19,149) -22.6% (14,819) (17,813) -16.8% Institutional and Legal (12,950) (5,040) 156.9% (12,950) (624) % Infrastructure (1,791) (2,575) -30.5% (1,791) (2,243) -20.1% Commercial / Marketing Expenses (1,116) (1,161) -3.9% (1,116) (609) 83.3% Other Operating Expenses (1,464) (3,242) -54.8% (1,464) (1,352) 8.3% Note: the "Transfers" account, now presented within SG&A, is no longer considered in this manner and historical figures have been updated reflecting this change in the presentation of this Earnings Release. As for operating expenses, the strong control implemented over the last few months has ensured a significant efficiency gain in the main expense groups, encompassing both BR Insurance's headquarters and branches. The main variations are detailed below: Personnel: The savings of 16.8%, or approximately R$ 3.0 million, compared to the first quarter of 2018, is due to the 18.4% reduction in the number of employees since December 2017, from 561 people at the end of 4Q17 to 458 at. Compared with 2Q17, when there were 588 employees at BR Insurance, the reduction achieved 22.6%, or R$ 4.3 million. Institutional and Legal: In this quarter, the Company performed a detailed review of its contingencies, resulting in a 156.9% increase in this expense group compared to the same period of last year. It is emphasized that the review of contingencies did not generate any effect on the Company's cash position. Infrastructure: these expenses were reduced by 20.1% compared to the immediately previous quarter and 30.5% in twelve months, in line with the restructuring and planning review of all areas and business units of the Company. The most important savings occurred mainly in the building occupation expenses - where we renegotiated lease agreements for branches and optimized the headquarters' structure - telephony and warehousing. Commercial / Marketing Expenses: following the strategy of commercial strengthening of all business units, expenses with marketing and related activities increased 83.3% compared to the first quarter of that year, but were still 3.9% lower in the twelve months comparison. Thus, when effects of the review of judicial contingencies are disregarded, total operating expenses would have been R$ 19.2 million in 2Q18, 12.8% and 26.6% lower than in 1Q18 and 2Q17, respectively. EBITDA R$ thousand 2Q18 2Q17 Ch. % 2Q18 1Q18 Ch. % EBITDA (12,117) (8,941) 35.5% (12,117) (3,042) 298.3% EBITDA Mg -54.6% -38.2% -16.4% p.p % -14.7% -39.9% p.p. Due to the movements already described above, EBITDA achieved in 2Q18 was negative by R$ 12.2 million. However, when expenses with the review of judicial contingencies are disregarded, EBITDA for this current quarter would have been R$ 0.8 million, with a margin of 3.8%. Compared with other 7

8 quarters, EBITDA in 1Q18 and 2Q17 would have been negative by R$ 2.5 million and R$ 3.9 million, respectively. Therefore, it is already possible to verify tangible operational improvement at the Company, a direct result of the new commercial strategy associated to the continuous process of cost reduction and generation of efficiency conducted by BR Insurance's management. Net Loss / Profit R$ thousand 2Q18 2Q17 Ch. % 2Q18 1Q18 Ch. % Net Loss / Profit before non-controlling interest (17,638) (6,637) 165.8% (17,638) (4,424) 298.7% Non-controlling interest - (194) % - (369) % Net Loss / Profit (17,638) (6,443) 173.8% (17,638) (4,055) 335.0% Thus, the Company recorded a net loss of R$ 17.6 million in 2Q18. When excluding the impact of the Institutional and Legal package mentioned in the EBITDA calculation, 2Q18 would have ended with a loss of R$ 4.7 million, against losses of R$ 3.4 million and R$ 1.4 million in 1Q18 and 2Q17, respectively. Cash Generation/Consumption The Company consumed R$1.7 million of recurring cash in the second quarter of 2018 (including financial income) and ended the quarter with cash/equivalents and securities totaling R$39.7 million. The restructuring process generated total expenses of R$0.9 million in the quarter. Cash R$ thousands 2Q18 1Q18 Initial Balance Final Balance Change (2.791) Earn-out (160) (108) Payment of Dividends - (31) Disposal of Investments - net effect - 30 Capex (112) (589) CVM Commitment Term Tax Credits Restructuring (874) (870) Generation / (consumption) of recurring cash (1.675) Financial Income Net Recurring Cash from Financial Income (2.129)

9 Stock Performance and Capital Composition BR Insurance's shares ended 2Q18 at R$14.70, representing an appreciation of 10.5% in the quarter, while the Ibovespa index depreciated 14.8% during the same period. The Company's shares were traded in all B3 trading sessions in 2Q18 and the average daily traded volume reached 26,935 shares. Shares outstanding (free float) 6,100, % Founders and Acquired Brokers 1,268, % Treasury Stock 310, % Shares Issued 7,678, % 9

10 Relationship with External Auditors In accordance with CVM Instruction No. 381 of January 14, 2003, the Company informs that its policy for contracting services not related to external audit is based on principles that preserve the independence of the auditor. In the quarter ended, Grant Thornton Auditores Independentes has been hired exclusively for the performance of audit services for the current year and review of the quarterly financial statements for the same fiscal year. About BR Insurance Corretora de Seguros S.A. BR Insurance is one of the largest and most diversified insurance brokers in Brazil. We are present in 9 states of the country, with 10 offices. Our broad portfolio of products and services, targeting an extensive geographic area and diverse economic sectors, provides us with diversified sources of revenue. We have a strong presence in the corporate health, life, auto, industrial, service, foreign trade and consumer, among others, catering to corporate clients and, to a smaller extent, individuals. For further information, visit Disclaimer This document does not constitute an offer, invitation, or solicitation of an offer to subscribe for, or purchase any securities, this presentation nor anything contained herein form the basis to any contract or commitment whatsoever. The material fact that follows contains general information about the business of BR Insurance Corretora de Seguros S.A. and its subsidiaries referring to the second quarter of This material must not be understood as an advice to potential investors, nor is this information intended to be complete as it is presented in a summarized form. No reliance should be placed on the accuracy, fairness, or completeness of the information presented herein and no representation or warranty, express or implied, is made concerning the accuracy of the information presented herein. This release contains statements that may be forward-looking and are only predictions, not guarantees of future performance. Investors are warned that these forward-looking statements are and will be subject to many risks, uncertainties, and factors related to the operations and business environments of BR Insurance such as competitive pressures, the performance of the Brazilian economy and the industry, changes in market conditions, among other factors disclosed in BR Insurance filed disclosure documents. Such risks may cause the actual results of the Company to be materially different from any future results expressed or implied in such forward-looking statements. BR Insurance believes that based on information currently available to management, the expectations and assumptions reflected in the forward-looking statements are reasonable. Nevertheless, BR Insurance cannot guarantee future results or events. Lastly, the Company expressly refuses any duty to update any of the forward-looking statements contained herein. 10

11 Statement of Income R$ thousand 2Q18 2Q17 Ch. % 2Q18 1Q18 Ch. % Net Revenue 22,194 23, % 22,194 20, % Transfers (2,170) (1,187) 82.9% (2,170) (1,109) 95.7% Gross Profit 20,024 22, % 20,024 19, % SG&A (32,140) (31,168) 3.1% (32,140) (22,640) 42.0% Personnel (14,819) (19,149) -22.6% (14,819) (17,813) -16.8% Institutional and Legal (12,950) (5,040) 156.9% (12,950) (624) % Infrastructure (1,791) (2,575) -30.5% (1,791) (2,243) -20.1% Commercial / Marketing Expenses (1,116) (1,161) -3.9% (1,116) (609) 83.3% Other Operating Expenses (1,464) (3,242) N/A (1,464) (1,352) 8.3% EBITDA (12,117) (8,941) 35.5% (12,117) (3,042) 298.3% EBITDA Mg -54.6% -38.2% -16.4% p.p % -14.7% -39.9% p.p. Depreciation / Amortization (2,170) (2,428) -10.6% (2,170) (2,248) -3.5% Other Results (4,319) 3,117 N/A (4,319) 799 N/A Financial Result 916 2, % 916 (55) N/A Profit Before Income Tax and Social Contribution (17,690) (5,727) 208.9% (17,690) (4,547) 289.1% Income Tax and Social Contribution 52 (910) % % Net Loss / Profit before non-controlling interest (17,638) (6,637) 165.8% (17,638) (4,424) 298.7% Non-controlling interest - (194) % - (369) % Net Loss / Profit (17,638) (6,443) 173.8% (17,638) (4,055) 335.0% 11

12 Balance Sheet Balance Sheet R$ Thousand 6/30/2018 3/31/2018 Assets Current Assets 58,486 64,462 Cash and Cash Equivalents 3,181 5,725 Financial Securities 36,538 36,785 Accounts Receivable 6,890 6,260 Taxes Receivable 10,723 14,440 Accounts Receivable from Disposal of Investments Other Current Assets Non-Current Assets 227, ,811 4,004 3,725 Other Receivables from Related Parties 2,182 1,864 Taxes Receivable Judicial Deposits 1,801 1,821 Other Non-Current Assets 0 18 Fixed Assets 3,762 6,360 Intangible 220, ,726 Total Assets 286, ,273 Balance Sheet R$ Thousand 6/30/2018 3/31/2018 Liabilities Current Liabilities 20,853 22,956 Suppliers 6,860 3,742 Payroll And Social Charges 7,844 10,549 Taxes Payable 557 1,749 Taxes Payable 1,482 2,195 Dividend Payable 493 1,134 Accounts Payable from Related Parties 0 - Accounts Payable for Subsidiaries Acquisition Other Current Liabilities 3,272 3,136 Non-Current Liabilities 30,266 21,506 Deferred Income Tax and Social Contribution 10,026 10,553 Taxes obligation Provision for judicial claims 18,853 9,541 Accounts payable for subsidiaries acquisition Other non-current Liabilities Equity 235, ,811 Social Capital 348, ,407 Treasury Shares -36,827-36,827 Premium on issued shares 143, ,932 Capital Reserve 46,329 47,542 Accumulated Loss (266,670) (249,034) Non-controlling interest 9 (1,209) Total Liabilities And Equity 286, ,273 12

13 Statement of Cash Flows Cash flow R$ thousand 6/30/2018 3/31/2018 Cash flow from operating activities (1,953) (504) Loss/Profit before income tax and social contribution (17,690) (4,547) 13 Revenues/Expenses adjustments Non cash: 15,737 4,043 Bad Debt Provision Depreciation and amortization 2,171 2,248 Reversal of fair value for accounts payable - acquisitions (28) (3) Financial Guarantee (384) 471 Provision for judicial claims 9,814 (19) Interest and Income from securities (477) (496) Disproportional dividend loss Write-off fixed and intangible assets 3,218 1,235 Disposal of Investments - - Other Provisions Increase/decrease in assets and increase/decrease in liabilities (785) 4,335 Accounts Receivable (1,077) 519 Tax Receivable net of income tax and social contribution 2, Suppliers 3,118 (332) Payroll obligations (2,661) 2,609 Taxes Payable (419) 528 Judicial Claims (redemption) 20 (8) Payment of judicial claims (502) (66) Tax credit refund Other assets and liabilities (302) 91 Income Tax and Social Contribution paid (1,705) (681) Net cash from operating activities (2,738) 3,831 Cash from investing activities Fixed assets acquisition (82) (458) Acquisitions payment (without cash acquired) (50) (108) Intangible assets acquisition (30) (131) Investment / Redemption of securities 740 (6,320) Disposal of investments (without discontinued operations - cash) 30 - Net cash from investing activities 608 (7,017) Cash flow from investing activities Related Parties excluding financial guarantee Dividends distribution - non-controlling interest (467) (31) Net Cash from Financing Activities (414) (5) Decrease in Cash and Cash Equivalents (2,544) (3,191) Cash and cash equivalents on the beginning of the period 5,725 8,916 Cash and cash equivalents on the end of the period 3,181 5,725

14 (Free translation from the original issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.) Independent Auditor Review Report on Quarterly Information Form (ITR) Grant Thornton Auditores Independentes Av. Eng. Luis Carlos Berrini, th floor Berrini One Building Vila Olímpia São Paulo SP Brazil T To the Board of Directors and Shareholders of BR Insurance Corretora de Seguros S.A. São Paulo SP We have reviewed the accompanying individual and consolidated interim financial information of BR Insurance Corretora de Seguros S.A. ( the Company ), comprised in the Quarterly Information Form - ITR for the quarter ended, comprising the balance sheet as of and the respective statements of income and comprehensive income for the periods of three and six months then ended, and the changes in shareholders equity and cash flows for the period of six months then ended, including the footnotes. Management is responsible for the preparation of the individual interim financial information in accordance with the Technical Pronouncement CPC 21(R1) - Interim Financial Information, and the consolidated interim financial information in accordance with CPC 21(R1) and the international standard IAS 34 Interim Financial Reporting, as issued by the International Accounting Standards Board - IASB, such as for the presentation of these information in accordance with the standards issued by the Brazilian Securities Commission - CVM, applicable to the preparation of Quarterly Information - ITR. Our responsibility is to express a conclusion on this interim financial information based on our review. Review scope We conducted our review in accordance with the Brazilian and International standards on reviews of interim information (NBC TR Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for the financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the audit standards and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 14

15 Conclusion on the individual interim financial information Based on our review, nothing has come to our attention that causes us to believe that the individual interim financial information included in the Quarterly Information - ITR referred to above has not been prepared, in all material respects, in accordance with CPC 21(R1) applicable to the preparation of Quarterly Information - ITR, and presented in accordance with the standards issued by the Brazilian Securities Commission - CVM. Conclusion on the consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial information included in the Quarterly Information - ITR referred to above has not been prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34 applicable to the preparation of Quarterly Information - ITR, and presented in accordance with the standards issued by the Brazilian Securities Commission - CVM. Other matters Statements of value added We have also reviewed the individual and consolidated statements of value added (DVA), related to the six month period ended, prepared under the responsibility of the Company s management, which presentation in the interim information is required in accordance with standards issued by the Brazilian Securities Commission - CVM applicable to the preparation of Quarterly Information - ITR, and is considered as a supplementary information under IFRS, which do not require the presentation of DVA. These statements were subject to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that it has not been prepared, in all material respects, in accordance with the individual and consolidated interim financial information taken as a whole. São Paulo, August 9, Rafael Dominguez Barros CT CRC 1SP /O-1 Grant Thornton Auditores Independentes CRC 2SP /O-1 15

16 Statements of financial position at and December 31, 2017 (In thousands of Brazilian Reais) Parent Parent 6/30/ /31/2017 6/30/ /31/2017 6/30/ /31/2017 6/30/ /31/2017 Current assets Current liabilities Cash and cash equivalents (Note 3) 1,452 6,882 3,181 8,916 Trade payables 5,902 3,683 6,860 4,074 Securities (Note 3) 24,556 21,087 36,538 29,953 Labor obligations (Note 9) 6,830 6,913 7,844 7,940 Trade receivables (Note 4) 5,942 6,655 6,890 7,242 Income tax and social contribution payable (Note 10) - 1, ,016 Taxes recoverable (Note 5) 6,874 11,129 10,723 16,155 Other tax obligations 1,219 1,059 1,482 1,706 Other receivables from related parties (Note 6) Dividends payable ,021 Receivables for disposal of investments (Note 1.1) Other payables to related parties (Note 6) Other assets 5,044 3, ,126 Payables for acquisition of subsidiaries (Notes 6 and 7.1) ,307 51,078 58,486 63,821 Other liabilities 1,990 1,790 3,272 3,366 16,286 15,173 20,853 20,450 Noncurrent liabilities Deferred income tax and social contribution (Note 10) 8,855 9,776 10,026 11,089 Noncurrent assets Other tax obligations Other receivables from related parties (Note 6) 3,405 7,450 2,182 2,365 Provision for legal claims (Note 11) 15,581 8,565 18,853 9,626 Taxes recoverable (Note 5) Payables for acquisition of subsidiaries (Notes 6 and 7.1) 927 1, Escrow deposits (Note 11) 1,670 1,652 1,801 1,813 Other payables to related parties (Note 6) Other assets Other liabilities ,075 9,114 4,004 4,208 25,727 19,936 30,267 22,472 Investment (Note 7) 26,760 24, Equity Property and equipment 3,214 5,572 3,762 6,346 Capital (Note 13.1) 348, , , ,407 Intangible assets (Note 8) 197, , , ,634 Treasury shares (36,827) (36,827) (36,827) (36,827) 227, , , ,980 Goodwill on issue of shares 143, , , ,785 Capital reserve 46,329 47,542 46,329 47, , , , ,188 Accumulated losses (266,671) (244,978) (266,671) (244,978) 235, , , ,929 Noncontrolling interests (842) Total equity 235, , , ,087 Total assets 277, , , ,009 Total liabilities and equity 277, , , ,009 The accompanying notes are an integral part of these individual and consolidated quarterly financial statements. 16

17 Statements of income Three and six-month periods ended and 2017 (In thousands of Brazilian Reais, except for basic and diluted loss per share) Parent Parent 6/30/2018 6/30/2017 6/30/2018 6/30/2017 6/30/2018 6/30/2017 6/30/2018 6/30/2017 (6 months) (6 months) (6 months) (6 months) (3 months) (3 months) (3 months) (3 months) (Reclassified) (Reclassified) (Reclassified) (Reclassified) Net revenues Services rendered (Note 14) 34,348 21,559 42,901 45,552 17,988 12,183 22,194 23,414 Operating expenses Transfer (2,349) (1,140) (3,279) (2,648) (1,690) (577) (2,170) (1,187) Compensation, payroll charges and benefits (Note 15) (26,969) (25,205) (32,052) (38,246) (12,382) (12,412) (14,373) (19,150) Selling/marketing expenses (1,591) (1,483) (1,720) (2,204) (1,056) (846) (1,116) (1,161) Infrastructure (2,908) (3,618) (4,034) (5,318) (1,258) (1,786) (1,791) (2,576) Institutional and legal (Note 16) (11,025) (4,928) (14,020) (6,201) (10,489) (3,916) (13,401) (5,040) Third-party services (2,003) (3,224) (2,222) (4,372) (997) (1,920) (1,094) (2,590) Allowance for doubtful debts (Note 4) (862) 1,376 (910) 1,513 (471) (71) (447) 253 Other operating income (expenses), net 108 (375) 196 (810) 52 (205) 101 (574) Depreciation / amortization (3,850) (2,874) (4,419) (4,850) (1,888) (1,506) (2,171) (2,428) Proceeds from disposal of investments (Notes 1.1 and 7) (4,765) 1,119 (19) (231) (3,346) (178) (19) (331) Other income (expenses) (Note 17) (3,022) 2,168 (3,520) 3,207 (3,767) 2,157 (4,319) 3,117 (59,236) (38,184) (65,999) (60,160) (37,292) (21,260) (40,800) (31,667) Operating loss (24,888) (16,625) (23,098) (14,608) (19,304) (9,077) (18,606) (8,253) Finance income (expenses), net Finance expenses (Note 18) (105) (174) (174) (266) (26) (129) (77) (172) Finance income (Note 18) 790 2,393 1,129 4, , ,949 Other finance income (expenses), net (Note 18) 1,580 2,084 (94) (252) 2,265 4, ,314 1,202 2, ,525 Loss before income tax and social contribution (22,623) (12,322) (22,237) (10,294) (18,102) (6,761) (17,690) (5,728) Income tax and social contribution - current (Note 10) - - (898) (2,756) - - (484) (1,501) Income tax and social contribution - deferred (Note 10) ,073 1, (1,574) (910) Loss for the period (21,693) (11,718) (22,062) (11,868) (17,637) (6,444) (17,637) (6,638) Loss for the period attributable to: Noncontrolling interests - - (369) (150) (194) Controlling interest (21,693) (11,718) (21,693) (11,718) (17,637) (6,444) (17,637) (6,444) Basic loss per share (Note 13.6) - in reais (2.94) (1.59) Diluted loss per share (Note 13.6) - in reais (2.93) (1.45) The accompanying notes are an integral part of these individual and consolidated quarterly financial statements. 17

18 Statements of comprehensive income Three and six-month periods ended and 2017 (In thousands of Brazilian Reais) Parent Parent 6/30/2018 6/30/2017 6/30/2018 6/30/2017 6/30/2018 6/30/2017 6/30/2018 6/30/2017 (6 months) (6 months) (6 months) (6 months) (3 months) (3 months) (3 months) (3 months) Loss for the period (21,693) (11,718) (22,062) (11,868) (17,637) (6,444) (17,637) (6,638) Other comprehensive income Total comprehensive income for the period (21,693) (11,718) (22,062) (11,868) (17,637) (6,444) (17,637) (6,638) Comprehensive income for the period attributable to: Noncontrolling interests - - (369) (150) (194) Controlling interest (21,693) (11,718) (21,693) (11,718) (17,637) (6,444) (17,637) (6,444) The accompanying notes are an integral part of these individual and consolidated quarterly financial statements. 18

19 Statements of changes in shareholders' equity Six-month periods ended and 2017 (In thousands of Brazilian Reais) Capital reserve Capital (excluding share issue costs) Treasury shares Goodwill on issue of shares Subscription warrant Share grant reserve Others Accumulated losses Total Company Noncontrolling interests Total Balance at December 31, ,386 (36,827) 143,581 3,589 45,346 - (162,589) 341, ,452 Exercise of share subscription warrant Loss for the period (11,718) (11,718) (150) (11,868) Payment of dividends to noncontrolling interests (1,032) (1,032) Noncontrolling interests gain on unproportionate dividends ,010 1,010 Disposal of investments (388) (388) Others (1) (1) - (1) Balance at June 30, ,386 (36,827) 143,788 3,589 45,346 - (174,308) 329, ,380 Balance at December 31, ,407 (36,827) 143,785 3,589 45,346 (1,393) (244,978) 257,929 (842) 257,087 Exercise of share subscription warrant Loss for the period (21,693) (21,693) (369) (22,062) Payment of dividends to noncontrolling interests (498) (498) Noncontrolling interests gain on unproportionate dividends Disposal of investments (Note 13.3) (1,213) - (1,213) 1,213 - Others Balance at 348,407 (36,827) 143,932 3,589 45,346 (2,606) (266,671) 235, ,179 The accompanying notes are an integral part of these individual and consolidated quarterly financial statements. 19

20 Statement of cash flows Six-month periods ended and 2017 (In thousands of Brazilian Reais) Parent 6/30/2018 6/30/2017 6/30/2018 6/30/2017 (Reclassified) (Reclassified) Cash flows from operating activities Loss for the period before income tax and social contribution (22,623) (12,321) (22,237) (10,294) Adjustments to revenues and expenses not affecting cash and equivalents: Allowance for doubtful debts (Note 4) 862 (1,376) 910 (1,513) Depreciation and amortization 3,850 2,874 4,419 4,850 Reversal of fair value of payables for acquisition of brokerage companies (Note 18) (31) (329) (31) (329) Financial guarantee (Note 18) Share of profit (loss) of subsidiaries (Note 7) 4,761 (1,350) - - Provision for legal claims 7,533 2,173 9,795 2,506 Interest and yield on securities (2,348) (4,133) (973) (4,299) Losses on unproportionate dividends (Note 7) 498 1, ,010 Disposal of investment Write-off of property and equipment and intangible assets 3,889-4,453 Other provisions (2,833) (13,221) (2,457) (7,584) (Increase) decrease in assets and increase (decrease) in operating liabilities Trade receivables (149) 3,474 (558) 4,347 Taxes recoverable - net of income tax and social contribution offset 1,992 1,350 3,405 1,601 Trade payables 2, ,786 1,807 Labor obligations (83) (2,795) (52) (2,873) Tax obligations 110 (248) 109 (428) (Payments) / Redemptions of escrow deposits (18) (7) Payment of legal claims (Note 11) (517) (11) (568) (1,075) Refund of tax credits ,013 1,194 Other assets and liabilities (437) (1,083) (192) 682 Income tax and social contribution paid - - (2,386) (3,409) 3,332 1,591 3,569 1,896 Net cash (used in) generated by operating activities 499 (11,630) 1,112 (5,688) Cash flows from investing activities Payments for acquisition of brokerage companies (net of cash acquired) (158) - (158) - Purchase of property and equipment (492) (305) (540) (307) Purchase of intangible assets (11) (1,421) (161) (1,671) Capital increase (4,340) Redemption of securities (2,728) (3,327) (5,580) (12,350) Disposal of investment (net cash from discontinued operations) 26 3, ,045 Merger of investment (net cash) Other receivables and other payables - related parties 1,773 (862) - - Dividends received 1 5, Net cash generated by (used in) investing activities (5,929) 3,440 (6,428) (11,283) Cash flows from financing activities Related parties - excluding financial guarantees Payment of dividends to noncontrolling interests - - (498) (1,164) Net cash used in financing activities - - (419) (947) Decrease in cash and cash equivalents (5,430) (8,190) (5,735) (17,918) Cash and cash equivalents at the beginning of the period 6,882 12,905 8,916 23,534 Cash and cash equivalents at the end of the period 1,452 4,715 3,181 5,616 The accompanying notes are an integral part of these individual and consolidated quarterly financial statements. 20

21 Statements of value added Six-month periods ended and 2017 (In thousands of Brazilian Reais) Parent 6/30/2018 6/30/2017 6/30/2018 6/30/2017 (Reclassified) (Reclassified) Revenues Operating revenues (net of cancelations) 39,524 24,827 48,828 50,975 Disposal of investments - - (19) (231) Allowance for doubtful debts (862) 1,376 (910) 1,513 Input purchased from third parties Material, electric energy, outsourced services and others (20,397) (10,938) (25,664) (16,862) Gross value added 18,265 15,265 22,235 35,395 Depreciation and amortization (3,850) (2,874) (4,419) (4,850) Wealth created by the Company 14,415 12,391 17,816 30,545 Wealth received in transfer Share of profit (loss) of subsidiaries (4,761) 1, Disposal of investment (4) (231) - - Finance income (includes gains on financial instruments - guarantees) 2,394 4,477 1,059 4,581 Unproportionate dividends (901) (1,010) - - (3,272) 4,586 1,059 4,581 Total wealth for distribution 11,143 16,977 18,875 35,126 Wealth distributed Personnel Salaries and wages 15,620 13,652 18,457 21,308 Benefits 9,679 9,581 11,686 14,006 FGTS (Severance Pay Fund) 1,756 1,862 1,996 2,810 27,055 25,095 32,139 38,124 Governments (taxes, fees and contributions) Federal and municipal 4,361 1,144 5,872 4,405 Lendors and lessors Rents and interest 1,419 2,456 2,024 3,455 Shareholders Loss for the period (21,692) (11,718) (21,692) (11,718) Unproportionate dividends ,010 Noncontrolling interests - - (369) (150) (21,692) (11,718) (21,160) (10,858) 11,143 16,977 18,875 35,126 The accompanying notes are an integral part of these individual and consolidated quarterly financial statements. 21

22 1. General information BR Insurance Corretora de Seguros S.A. ( BR Insurance or Company ), with its registered office at Rua Gilberto Sabino, 215, São Paulo - SP, is engaged in brokerage and management of insurance of all types, including supplementary pension plan and health insurance, and in holding of interests in other companies that operate mainly in the insurance consulting and intermediation market. The Company was established as a corporation on March 15, 2010 through exchange of shares for share units of brokers ( Brokerage Companies ) and it has common shares traded on the New Market of B3 (Brazilian Stock Exchange), under ticker symbol BRIN Corporate reorganizations Merger of Brokerage Companies In the year ended December 31, 2017, the Company merged seventeen of its subsidiaries, as approved at the Extraordinary General Meeting of shareholders as summarized below: Date Brokerage company Registered office 03/09/17 Aplick Master B.I. Corretora de Seguros Ltda. ( Aplick ) Recife PE Neval B.I. Corretora de Seguros Ltda. ( Neval ) Recife PE Base Brasil B.I. Corretora de Seguros Ltda. ( Base ) São Paulo SP Coelho dos Santos Corretora de Seguros Ltda. ( Coelho ) São Paulo SP Sebrasul Assessoria e Corretagem de Seguros Ltda. ( Sebrasul ) São Paulo SP 09/01/17 Fazon Corretora de Seguros Ltda. ( Fazon ) Belo Horizonte MG Graciosa Corretora e Administração de Seguros Ltda ( Graciosa ) Curitiba PR Adavo s Consultoria & Corretagem de Seguros Ltda ( Adavos ) São Paulo - SP Montejo B.I. Corretora de Seguros Ltda ( Montejo ) São Paulo SP Promove Corretora de Seguros Ltda ( Promove ) São Paulo SP ZPS/MW Corretora de Seguros Ltda ( ZPS ) São Paulo SP 12/15/17 Triunfo Corretora Administradora de Seguros Ltda ( Triunfo ) Belo Horizonte MG AWF Corretora de Seguros Ltda ( AWF ) Curitiba PR CS3 Consultoria e Corretagem de Seguros Ltda (CS3 ) São Paulo SP Enesa Corretora de Seguros Ltda ( Enesa ) São Paulo SP Itax Consultoria e Corretagem de Seguros Ltda ( Proaxi ) São Paulo SP RD3 Consultoria em Previdencia Ltda ( RD3 ) São Paulo SP The mergers are justified by the improvement of the operating integration process, reduction of the complexity and corporate costs, tax optimization, among others. At the time of the mergers, all Brokerage Companies were wholly-owned subsidiaries of BR Insurance and the equity of the subsidiaries was absorbed by the Company and the account balances were merged. 22

23 The assets and liabilities merged in the six-month period ended June 30, 2017 were as follows: Parent Current assets Cash and cash equivalents 2 Securities 6,023 Trade receivables 1,449 Related parties 590 Other assets 404 8,468 Noncurrent assets Taxes recoverable 1,452 Other assets 303 1,755 10,223 Current liabilities Labor and other tax obligations 607 Income tax and social contribution payable 438 Other liabilities 1,012 2,057 Noncurrent liabilities Provision for legal claims and other liabilities 984 Merged net assets 7,182 There was no change in the financial position or presentation of the consolidated financial information. On September 1, 2017, the Company s shareholders approved at the Extraordinary General Meeting the non-materialization of the merger of A&M, decided at the EGM of December 7, 2016, due to the rejection of the filing of the corporate acts related to such operation by the Board of Trade of the State of Ceará. They also authorized the Officers to carry out all acts necessary for the assignment of the remaining assets and liabilities of the subsidiary to the Company, and the subsequent dissolution of such subsidiary. Acquisition and disposal of investments On March 16, 2017, the Board of Directors approved the beginning of negotiations for the disposal of the equity interests held by the Company in Romap Master BI Corretora de Seguros Ltda. ( Romap ), 99.9% and BRIB Corretora de Resseguros Ltda. ( BRIB ), 60.0%, which were completed on March 28 and July 5, 2017, respectively, for the total price of R$ 600. The transactions generated losses amounting to R$ 231 in the six-month period ended, recorded in proceeds from disposal of investments (note 7). On April 18, 2017, as part of its growth strategy, the Company acquired 100% of the shares of Newsa Participações S.A. ( NEWSA Part. ), which is engaged in holding equity interests in other companies of the brokerage and insurance management segments. In April 2017, a new investor was admitted, and the equity interest was reduced to 70%. 23

24 In the year ended December 31, 2017, it held investments of 99.75% in Newsa Corretora de Seguros Ltda ( Newsa Corretora ) and 99.99% in Newsa Administradora de Benefícios Ltda ( Newsa Adm ). On April 2, 2018, it sold its interest in Newsa Corretora and, on the same date, BR Insurance acquired all the shares of Newsa Participações. Accordingly, in the quarter ended, a net loss of R$ 19 was recognized in the (Note 7). Comparative results and cash flows of the discontinued operations: 6/30/2018 6/30/2017 Net revenues Operating expenses (903) (238) Finance income (expenses), net - 16 (-) Income tax and social contribution - (4) Profit for the period from discontinued operations (825) (13) 6/30/2018 6/30/2017 Net cash generated by operating activities Net cash used in investing activities - - Net cash used in financing activities (21) (55) Net cash used in discontinued operations Cash and cash equivalents at the beginning of the period - 76 Cash and cash equivalents at the end of the period As at, the parent BR Insurance had investments in sixteen brokerage companies, represented by fifteen limited liability companies and one corporation (seventeen at December 31, 2017), operating in ten Brazilian states. 2. Presentation of financial information, significant accounting policies, judgments and estimates The individual and consolidated financial information for the three-month period ended June 30, 2018 was authorized for issue and disclosure, as per the approval from the members of the Company s Board of Directors on August 9, This quarterly financial information was prepared in accordance with technical pronouncement CPC 21 (R1) - Interim Financial Reporting. The parent company s individual financial information was prepared in accordance with the accounting practices adopted in Brazil (BR GAAP) and consolidated in conformity with the international accounting standards adopted in Brazil also issued by the International Accounting Standards Board (IASB), both presented consistently with the standards issued by the Brazilian Securities and Exchange Commission ( CVM ). 24

25 The financial information was prepared on the historical cost basis, except for certain financial instruments measured at their fair values, as described in the accounting policies. Historical cost is based on the consideration paid in exchange for assets and liabilities are recognized at the amounts received in exchange for the obligation or, in some circumstances, at the amounts of cash and cash equivalents required to settle the liability in the normal course of operations. Fair value is the amount by which an asset can be exchanged, or a liability settled, between knowledgeable and willing parties. All significant information in the financial information, and only such information, is disclosed and corresponds to that used by Management in managing the Company and its investees. The significant accounting practices, judgments and estimates, applied in the preparation of this individual and consolidated quarterly financial information, are presented in notes 2 and 3 to the Company s financial statements for 2017, disclosed on March 22, 2018, unless otherwise stated. All amounts presented in this financial information are expressed in Brazilian reais R$, unless stated otherwise Basis of consolidation and investments in subsidiaries The individual and consolidated quarterly information includes the financial information of companies directly or indirectly controlled by the Company, through its direct subsidiaries, mentioned in Note 7. The accounting closing periods of the subsidiaries included in the consolidation coincide with those of the Parent company, and the accounting practices and policies were consistently applied in the consolidated companies and are consistent with those used in the prior year Reclassification of account balances At the time of the closing of this quarterly financial information, Management, focused on the restructuring of processes of BR Insurance, reviewed the presentation of the statements of income, cash flows and value added, and reclassified the comparative information for better presentation of the figures disclosed. 25

26 The effects of the reclassification are as follows: Parent 6/30/2017 6/30/2017 Statement of income Originally presented Reclassified Originally presented Reclassification Reclassification Reclassified Net revenue Services rendered 24,068 (2,509) 21,559 49,152 (3,600) 45,552 Operating expenses Transfer - (1,140) (1,140) - (2,648) (2,648) Compensation, payroll charges and benefits (25,097) (108) (25,205) (38,125) (121) (38,246) Selling/marketing expenses - (1,483) (1,483) - (2,204) (2,204) Infrastructure - (3,618) (3,618) - (5,318) (5,318) Institutional and legal - (4,928) (4,928) - (6,201) (6,201) Third-party services (6,673) 3,449 (3,224) (10,186) 5,814 (4,372) Other operating income (expenses), net (7,168) 6,793 (375) (10,368) 9,558 (810) Allowance for doubtful debts - 1,376 1,376-1,513 1,513 Depreciation / amortization (2,874) - (2,874) (4,850) - (4,850) Gain (loss) on investments 1,350 (231) 1,119 - (231) (231) Proceeds from disposal of investments (231) (231) Other income (expenses) - 2,168 2,168-3,207 3,207 (40,693) 2,509 (38,184) (63,760) 3,600 (60,160) Operating loss (16,625) - (16,625) (14,608) - (14,608) Finance income (expenses), net Finance expenses (174) - (174) (266) - (266) Finance income 4,477 (2,084) 2,393 4,834 (339) 4,495 Other finance income (expenses), net - 2,084 2, Gain (loss) on financial instruments guarantee (254) 254-4,303-4,303 4,314-4,314 Loss before income tax and social contribution (12,322) - (12,322) (10,294) - (10,294) 26

27 Parent Parent 6/30/2017 6/30/2017 Statement of cash flows Originally presented Reclassified Originally presented Reclassification Reclassification Reclassified Cash flows from operating activities Allowance for doubtful debts 1,133 (2,509) (1,376) 2,087 (3,600) (1,513) (Increase) decrease in assets and increase (decrease) in operating liabilities Trade receivables 965 2,509 3, ,600 4,347 Net cash used in operating activities (11,630) - (11,630) (5,688) - (5,688) (Decrease)/increase in cash and cash equivalents (8,190) - (8,190) (17,918) - (17,918) Cash and cash equivalents at the beginning of the period 12,905-12,905 23,534-23,534 Cash and cash equivalents at the end of the period 4,715-4,715 5,616-5,616 Parent Parent 6/30/2017 6/30/2017 Statement of value added Originally presented Reclassified Originally presented Reclassification Reclassification Reclassified Revenue Operating revenues (net of cancelations) 27,336 (2,509) 24,827 54,575 (3,600) 50,975 Allowance for doubtful debts (1,133) 2,509 1,376 (2,087) 3,600 1,513 Total wealth for distribution 16,977-16,977 35,126-35,126 The reclassification had no effect on the other individual and consolidated quarterly financial information New technical pronouncements adopted (i) IFRS 15 Revenue from Contracts with Customers (CPC 47 Revenue from Contracts with Customers) The standard establishes the principles that an entity will apply to determine the measurement of revenue and how and when it is recognized, based on five steps: (1) identify the contracts with the customers; (2) identify the performance obligations in the contracts; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contracts and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new standard supersedes IAS 11 Construction Contracts, IAS 18 Revenues and related interpretations. 27

28 The changes establish the criteria for measurement and recognition of sales as they were made with the proper presentation, as well as the recording for the amounts the Company is entitled to in the operation, considering any estimates of loss in value. The Company and its subsidiaries adopted the new standard at the required effective date, prospectively, since the Company and its subsidiaries assessed the detailed impacts of the aspects related to measurement and disclosure of performance obligations and expected consideration in the provision of brokerage services, and assessed certain contractual obligations established with insurance companies and operators involving variable consideration, for which the effects of the assessment of the impacts of the adoption of IFRS 15 were not significant to the financial statements of the Company and its subsidiaries. The estimates of impairment losses do not have a significant impact on revenue recognition since the provision of brokerage services does not offer guarantees, and losses on doubtful receivables do not have material impacts due to the measurement policies adopted by the Company. There is no significant financing component in the contracts entered into with customers (nor expressly stated in the contract in an implicit manner by the payment conditions established by the parties). There is also no component of consideration payable to the customer in the contracts entered into by the Company. The consideration promised to the customer is expressly stated in the contract or agreement entered into, and there is a forecast of variability solely in the additional production/commission agreement, in which the Company has a variable compensation with reference to net premiums based on ratings. Therefore, the variable consideration characteristic is applicable only to additional production/commission agreements (due to the increase in the volume of net premiums negotiated), the effects of which were not considered significant for recognition in the financial statements. Primary service lines Brokerage commission (insurances and endorsements) Intended for sales of insurances related to property and casualties, finance lines, pension plans, benefits and personal lines, with expert consultants and quotation of service proposals of multi-insurance companies, offering high added value insurance solutions. Agency fee Agency fee is due when there is a new corporate client for the insurance company and sale of insurance with exclusivity conditions. In cases of nomination and renewal, there is no agency fee. Provision of agreed services Intended for the provision of certain services to clients, such as advisory in insurance restructuring, enabling these clients to broaden its range of offers in contracting insurance and reducing cost with premiums paid. 28