Brasil Insurance Reports 3Q11 Results
Rio de Janeiro, November 14th, 2011 – Brasil Insurance
Luis Eduardo Fischman Participações e Administração S.A. (Bovespa: BRIN3) – one of the
largest and most diversified insurance brokers in Brazil, controller of 34
Investor Relations Officer
(55 21) 3433-5060 insurance brokers with strong presence in key markets in the country –
email@example.com announces today its results for the 3rd quarter of 2011.
Our consolidated financial statements were prepared in accordance with
3Q11 Earnings Conference accounting standards generally accepted in Brazil, based on Brazilian
Call Corporate Law, IFRS and CVM regulation and fully audited by
Tuesday, November 15, 2011 Ernst&Young.
14:00 pm (BR); 11:00 am 3Q11 HIGHLIGHTS
Pro forma net income of R$ 37.9 million and EBITDA of R$ 30.6
Phone: (55 11) 3127-4999
million, including the newly acquired broker and excluding R$1.4
Password: Brasil Insurance
million in non cash expenses related to stock option plan in
12:00 pm (BR); 9:00 a.m.
Pro forma net income of R$91.7 million and EBITDA of R$85.7
million in the first nine months of 2011 including the newly acquired
brokers and R$4.6 million in non cash expenses related to stock
+1(877)317-6776 (US only)
option plan in 9M11.
+1(412) 317-6776 (Other
Pro forma net margin of 65.8% and EBITDA margin of 61.4 % in
Password: Brasil Insurance
the first nine months of 2011.
Consolidated net income and EBITDA growth of 80.7% and 38.8%
respectively over the first nine months of 2010.
Normally, third quarter represents 28% of the full year and the first
Av. Das Américas, 500 -
nine months represents 70%
Building 19 Room 301
Barra da Tijuca
Average commission of 14.8%up from 14.4% in 2Q11
Rio de Janeiro - RJ
ZIP Code: 22640-904
Commission from cross selling were 8.0% of total revenues, up
from 5% in 2Q11
Acquisition of Umbria Corretora for an estimated of R$16.5 million,
elevating total investments in acquisition in 2011 to R$145 million
in 7 acquired brokers.
BTG Pactual will act as a market maker to foment the liquidity of its
shares in the scope of BM&F Bovespa’s Novo Mercado.
During the third quarter, the Brazilian insurance market continued its double digit growth. According to
SUSEP – which includes all but health insurance – premiums grew by 20.6% in the first seven months of
2011 in comparison to the same period in 2010. ANS database, which accounts for all health related
data, has not been released yet for 2011.
2006 2007 2008 2009 2010 2011e
Other Segments VGBL
As a consequence we continue to notice insurance penetration increasing in Brazil as a percentage of
MAIN OPERATIONAL INITIATIVES
On the last quarter, we commented on the integration initiatives we had been implementing. This quarter
in São Paulo, where we have the majority of our operations, we managed to reduce the office count from
12 to 9. This not only has an important positive impact on our cost structure but also facilitates brokers
interactions on a daily basis enhancing the cross-selling opportunities.
As part of its integration initiatives, the Company has elected Banco Itaú BBA to centralize our banking
services. By the end of September, all of our brokers had accounts in Itaú and 70% of the commissions
were received through these accounts. With this initiative, we manage accounts payable and receivable
and payroll at the Holding level.
In addition to that, the brokers’ excess cash position is managed by the Holding’s treasury and is kept on
Credit Deposits with SELIC-related returns.
During the third quarter, we managed to expand the cross selling participation in our revenues from 5%
in the previous period to 8,0%. This initiative is very accretive since 90% of our clients only hold one or
two Brasil Insurance product.
This happened in part, due to the implementation of the operational hubs. With this structure, the brokers
can take advantage of a centralized negotiation and decision making process for specific insurance
needs and higher service levels thus dedicating more time to commercial activities.
On the commercial front, we have successfully tested the first campaign to foster the culture among our
sales representatives on the educational financial warranties product by an incentive plan attached to an
e-learning platform. This generated several new contracts and represents an important threshold for
On that regard, we signed a contract to insure 780 thousand students in one of Brazil´s largest
universities against student default. We believe this university has great prospects to enlarge the student
base thus generating additional gains to the Company.
On the health segment, due to the cross selling, we grew our life portfolio in 55 thousand lives – 18
thousand with a large Brazilian retail company, 15 thousand with a major logistics company and 22
thousand with various other companies.
On the Affinity segment, we managed to cross sell extended and financial warranties, home, personal
accidents and funeral assistance policies, with retail stores and financial institutions. In those
opportunities, our brokers sold an excess of R$260 million in premiums for a five year contract period.
This tool was developed specially for Brasil Insurance purposes in order save time and manpower on the
auto insurance quote process. Instead of having to fill different forms for each insurance carrier, the
commercial department now has an integrated system that quotes, today, on five different carriers at the
same time. On top of that, this tool grants us the opportunity to better understand the client’s needs and
offer the best product available in the market.
It is currently being implemented on the auto-specialized brokers and later will be available for all of our
The average commission in the 3Q11 grew to 14.8% from 14.4%. As in the 2nd quarter, we had no
relevant change in the product mix.
Life Health Auto Surety Cargo Affinity P&C Pension
THIRD QUARTER FINANCIAL SUMMARY
Pro forma Gross Revenue reached R$49,2 million in 3Q11 with roughly 8% coming from cross selling
within our subsidiaries, still evidencing much room for improvement in cross selling activities throughout
Pro forma EBITDA reached R$30.6 million representing an EBITDA margin of 67.2%
Pro forma Net Income reached R$37.9 million representing a Net Margin of 83.2%
Financial Revenues added R$9.7 million to our results generated by a cash position of R$287.5million.
The net proceeds balance of our 2010 IPO are fully allocated by the Holding Company in Certificate of
Deposits and Debentures issued by first-tier Brazilian banks at an average yield of 104.2% of CDI –
Selic rate with programmed liquidity. The subsidiaries’ cash, R$34.1 million, is allocated on Credit
Deposits that pay 104.5% of the Selic rate and is subject to a 30 day lock-up prior to redemption. The
average yield rate is 104.3% of CDI.
Effective tax rate on net income over profit before taxes reached 22.3% in the 3rd. The Company
anticipates an effective tax rate on net income from continuing operations of 21.1% over Profit Before
Taxes for 2011.
On the third quarter, the Company accrued a significant sum related to deferred income and social
contribution taxes stemming from pre-operational expenses linked to our IPO. This benefits our income
statement on the quarter and will have an estimated positive impact on our effective tax rate until early
2016. This is a one-time impact amounting to R$8.7 million.
THIRD QUARTER FINANCIAL REVIEW
3Q11 Pro Forma Income Statement
PRO FORMA INCOME STATEMENT
Gross Revenues 49.186 150.488
Deductions -3.551 -11.013
Net Revenue 45.635 139.474
Cost of Services -4.337 -14.057
Gross Profit 41.298 125.417
Operating Expenses -10.864 -40.339
Salaries and Benefits -11.550 -32.654
Administrative -6.398 -19.881
Sales and Marketing -937 -2.786
Depreciation/ Amortization -218 -593
Other Operational Revenues 8.238 15.576
Operating Profit 30.434 85.078
EBITDA 30.651 85.671
EBITDA Margin 67,2% 61,4%
Financial Result 9.450 27.196
EBT 39.883 112.274
Income Tax & Social Contribution -436 -16.567
Minority Interest -1.467 -3.995
Net Income 37.980 91.712
Net Margin 83,2% 65,8%
Shares outstanding after the IPO 88,940,000
Issued due to acquisitions 1,210,130
Vested stock options 398,500
Total Shares Outstanding – Sep/11 90,549,130
The Company’s stock is listed on Bovespa’s Novo Mercado, the highest corporate governance segment
in the Brazilian market, under the ticker BRIN3. On the third quarter, the share price has decreased 9.7%
versus a 16.1% drop of the Ibovespa.
Average daily trading volume on 3Q11 stood at R$4.4 million. Our total shareholder base has expanded
to 370 from 340 in the second quarter. Our individuals’ base has also expanded from 5 individuals on the
first quarter to 30.
On November 7th, the Company acquired 99.97% of Umbria Corretora for an estimated total price of R$
16.5 million. Umbria, headquartered in São Paulo, is a firm that operates mainly in the health, life and
auto segments. The broker sold approximately R$50 million in insurance premiums in 2010.
The acquisition abovementioned was made based on a R$7 million upfront cash and BRIN3 stock
payment. In addition to that, the selling partners are subject to a four year earn out structure that varies
according to pre-established net income levels.
A special shareholders’ meeting to discuss this acquisition will be called in December.
Altogether in 2011, Brasil Insurance acquired 7 insurance brokers that accounted for a total investment,
including the expected earn outs installments estimate, of R$ 145 million.
On November 10th, the Company announced that BTG Pactual will act as a market maker to foment the
liquidity of its shares in the scope of BM&F Bovespa’s Novo Mercado.
The agreement entered between the parties will be valid for 12 months, being automatically renewed for
equal period if there is no manifestation by either party to the contrary.
ABOUT BRASIL INSURANCE
Brasil Insurance (Bovespa:BRIN3) is one of the leaders of insurance brokerage in Brasil. Through its
more than 30 offices in the country, the Company delivers substantial value to our clients via innovative
and effective risk management and workforce productivity solutions. It currently comprises 34 brokerage
companies covering health, life, auto, P&C and affinity groups therefore providing for virtually 100% of
our client´s insurance necessities.
We believe to be poised to achieve the top brokerage position in the short term due to our full portfolio of
products and technical expertise of our brokerage team.
CONFERENCE CALL DETAILS
November 15th, 2011 November 15th, 2011
12.00 pm (Brasilia Time) 2.00 pm (Brasilia Time)
Phone: +1(877) 317-6776 (US Only) Phone: +55(11) 3127-4999
+1(412) 317-6776 (Non-US) Code: Brasil Insurance
Code: Brasil Insurance
Visit www.brinsurance.com.br/ir for more information on Brasil Insurance.
I – Balance Sheet
II – Income Statement
III – Cash Flow Statement
Appendix I – Balance Sheet
September 30th, 2011 September 30th, 2011
Holding Consolidated Holding Consolidated
Current Assets Current Liabilities
Cash and Cash Equivalents 184 6.035 Loans and Financing - 83
Financial Securities 287.557 321.677 Suppliers 38 834
Accounts Receivable 0 23.119 Related Parties - 475
Acc. Receivable - Covert Part. Agreements 4.201 10.081 Payroll and Social Charges 216 3.671
Tax Receivable 9.800 10.223 Income Tax and Social Contribution 4.402 14.056
Other 184 5.526 Taxes Payable 193 5.445
301.926 376.661 Proposed Dividends 24 496
Clients - 639
Non Current Assets Acc. Payable from Acquisitions 18.731 18.731
Long Term Receivables 0 2 Other Current Liabilities - 2.154
Accounts Receivable 0 15.361 23.605 46.582
Financial Assets 0 3.077
Accounts Receivable 5.981 5.981 Non current liabilities
Diferred Income Tax and Social Contribution 261 261 Loans and Financing - 23
Related Parties 0 1.259 Suppliers - 131
Other financial Assets Related Parties 300 617
Income Tax and Social Contribution - -
Investments 201.507 205 Taxes Payable - 2.124
Fixed Assets 255 2.574 Provisions for Contingencies - 482
Intangibles 195 132.027 Acc. Payable from Acquisitions 43.759 43.759
208.199 160.747 Other 115 557
Total Assets 510.124 537.408
Capital 340.307 340.307
Capital Reserve 10.518 10.518
Stocks in Treasury (5) (5)
Accumulated Profit 9.966 9.966
Net Income 81.560 81.560
Non-Controlling Interest - 788
Total Liabilities and Equity 510.124 537.408
Appendix II – Income Statement
Appendix III – Cash Flow Statement