The actions of IRB (IRBR3) soared on the Ibovespa this Friday (5), leading the index’s gains, after Citi raised its recommendation for the company’s shares from ‘neutral’ to ‘buy’, considering the “positive” results in all quarters 2023.
IRB Brazil (IRBR3). Photo: Disclosure
At closing, the IRB actions (IRBR3) rose 13.21%, quoted at R$42.35.
IRBR3 Quote
Graph generated on: 04/05/2024
5 Dias
In a report, the bank stated that the IRB performance last year brought a more optimistic message about the rural segment for the first half of 2024.
“Now we are more comfortable. We see premiums resuming growth (moderate pace) and the combined index (slowly in the coming years) converging towards the subscription target of 95%”, he highlights.
Citi still sees difficulties in its balance sheets, but with a capital sufficiency index of approximately 150%. “Not exactly where it should be, but the company is generating capital again to replace this (as long as it doesn’t increase premiums too much)”, he ponders.
However, although capital sufficiency and reserve coverage are now less of a concern, they still place a limit on the possible pace of growth. “This is not a problem, as even our conservative numbers still find enough upside to classify IRB as a buy,” says Citi.
The bank also raised the target price for IRB from R$44 to R$47, a potential increase of 25.6% in relation to Thursday’s closing (4). “We believe that the catalysts would have a lesser impact of El Niño on claims and, in general, a faster return to profitability”, he highlights.
Citi considers, however, that the reinsurer may suffer some impact from the loosening of monetary policy. “If interest rates reach lower levels than expected, they could put even more pressure on results”, he notes.
Fábio Lemos, partner at Fatorial Investimentos, also reinforces the expectation of growth for the company, especially in relation to premiums. “Furthermore, one of the market’s main concerns, which is the issue of solvency, has improved quarter by quarter,” he adds.
IRB (IRBR3): restructuring may be working, says Genial
In a report following the release of IRB’s 4Q23 balance sheet, analysts at Genial Investimentos pointed out that although the company’s profit was below projections, this suggests that the restructuring process may be working, which should bring more positive future results.
In the fourth quarter of 2023, IRB’s net profit was R$37.9 million, reversing a net loss of R$38.8 million recorded in the same period last year.
Year-to-date, IRB had a net profit of R$114.2 million, compared to a loss of R$630.3 million recorded in the same period in 2022.
“Although profits fell short of projections, the company demonstrates a trajectory of improving profitability, suggesting that the restructuring process may be having an effect and that we can envisage more positive results in the coming quarters”, wrote analysts Eduardo Nishio, Wagner Biondo and Felipe Oller, from Genial Investimentos.
The broker estimates a profit of R$323 million for 2024, a little weaker than the implicit profit projected by tax credits, but expects subsequent years to be slightly above the implicit values using the tax credit basis. “Thus, we see that the company must begin to gradually improve its results and return to delivering profitability at more attractive levels in the long term”, he continues.
In the fourth quarter, the company obtained a positive underwriting result of R$105.1 million, compared to a negative result of R$152.8 million in 4Q22. Furthermore, this quarter, underwriting results in Brazil were positive at R$254.4 million, compared to R$26.4 million in 4Q22.
Abroad, the subscription result was negative at R$149.3 million in the fourth quarter of 2023, compared to a negative result of R$179.2 million in the same period in 2022. The total IRB issued premium was R$1.575 billion in the fourth quarter of 2023, compared to R$1.789 billion in 4Q22.
The premium issued in Brazil totaled around R$1.305 billion in the period, an increase of 4.9% compared to the same period in 2022, “in line with the strategy of focusing on the local market. The Property and Life segments had a positive impact on the volume of premiums issued”, informed the IRB.
The premium issued abroad was R$270.3 million in 4Q23, a drop of 50.4% compared to 4Q22.
For the year 2024, Genial expects a slight recovery in premiums issued, reflecting the gradual recovery in the company’s growth. “Furthermore, we believe that maintaining the quality of the portfolio and stricter criteria for issuing new premiums will continue to contribute to the reduction of the accident rate, reaching 70% y/y”, write the analysts.
“We also anticipate a possible reduction in volatility in the financial result, as foreign exchange positions migrate to CDI, reducing exposure to risks abroad”, add the analysts about the IRB.
*With information from Estadão Conteúdo