IRB Brasil Re launches $430m capital raise to boost solvency

Brazil's major reinsurer IRB Brasil Re is to raise between R$2.1 billion and R$2.3 billion ($430 million) through a share issuance, in a move to boost its capital structure and increase solvency.

IRB will issue between 303,030,304 and (331,890,331) shares at a price of R$6.93 ($1.30) per share.

The company said that its shareholders Bradesco Seguros SA and Itaú Seguros SA have agreed to take part in the capital increase in the proportion of their participation in the company’s share capital of approximately 15.4 percent and 11.3 percent, respectively.

The capital raise aims to "strengthen the capital structure of the Company and increase its solvency, which will allow the implementation of other business strategies of the Company for the next years," IRB said in a statement.

The proceeds arising from the raise will contribute to the "company’s reframing to the criteria defined by the Superintendency of Private Insurance (Superintendência de Seguros Privados), for the purposes provided in the CNSP Resolution 321/2015, which provides the coverage of the Technical Provisions and the Additional Regulatory Liquidity Margin."

The reinsurer has been under particular scrutiny since its shares plunged 41 percent and Warren Buffett’s Berkshire Hathaway denied making investment in the company. The company recently concluded an independent investigation and found "irregularities" in bonus payments and the amount of shares offered in its February and March 2020 share repurchase programmes. The company also ousted its CEO and CFO in March, leading to negative rating action/downgrade by AM Best.