Irregularities found in IRB Brasil Re's bonus payments; Berkshire confusion cleared

Brazil's major reinsurer IRB Brasil Re has found irregularities of approximately R$60 million ($11 million) in bonus payments and the amount of shares offered in its February and March 2020 share repurchase programmes.

An independent investigation was carried out by KPMG Assessores and Felsberg Advogados regarding the disclosure of information about the company's shareholder base.

Earlier in March, IRB ousted its CEO and CFO after its shares plunged 41 percent and Warren Buffett’s Berkshire Hathaway denied investing in the company. On March 3, Buffett’s Berkshire denied media reports about its ownership stake in IRB, saying that it has never been and does not intend to become a shareholder in IRB.

Thereafter, ratings agency AM Best placed IRB 'under review with negative implications' and downgraded its financial strength rating, citing concerns about effective governance and uncertainty regarding the outcome of its investigation.

Those responsible for the "dissemination of untrue information" about the company's shareholder base, with regards to Berkshire Hathaway, have now been identified, IRB said in a statement.

The company stated that those officers responsible for all these irregularities are no longer part of the company's staff. IRB said that they practiced these irregularities "on an individual basis, outside their mandates and their regular management powers."

IRB maintained that "all of these operations were carried out without the Board of Directors’ knowledge."

The reinsurer also verified that in February and March 2020, repurchase operations for the company's shares were carried out, which exceeded the amounts authorised by the board of directors in 2,850,000 shares.

The company presented the conclusions of all the findings to the Federal Public Prosecutor, the Securities and Exchange Commission - CVM and Brazil’s Insurance Regulator - Susep.

IRB said it will take the appropriate legal measures in order to compensate for all losses that have been caused by irregular conduct committed by the individuals involved.