[Foreign language]
Good morning, everyone, and welcome. We would like to inform you that we will start in one minute. Thank you for waiting. Welcome to the results call of the second quarter of 2024 of IRB(Re) . For those that require simultaneous translation, we do have this tool available in the platform. To access, simply click on Interpretation on the globe icon at the bottom side of the screen, and choose the language of your preference, Portuguese or English. For those that are listening to this video call in English, you have an option to mute the original audio. We inform you that this conference is being recorded, and it will be made available at the Investor Relations website, ri.irbre.com, where you have all the materials of this call. You may download the presentation also on the chat icon, in English as well.
During the presentation of the company, all participants will have their mics muted. Afterwards, we'll start the Q&A session. In order to ask a question, simply click on the Q&A icon at the bottom side of the screen, and submit your question in writing to get on the queue. Once you are announced, a request to open up your microphone will appear, and so you should open your microphone to ask questions. Questions should be asked all at once. We emphasize that the information contained in this presentation, and other declarations and statements that may be made during this call, relative to business prospects, operating and financial goals and projections, are beliefs and premises of the management of the company, as well as information that is currently available. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties, and premises, and they refer to future events.
Therefore, they depend on circumstances that may or may not occur. Investors should understand that as far as economic conditions, market conditions, and other operating factors may affect the future performance of IRB(Re), and the results may differ than the ones that are expressed in this presentation. Today, we have the presence of our executives, Mr. Marcos Falcão, CEO, Financial VP, and Director of Investor Relations of the company. Mr. Daniel Castillo, VP of Reinsurance, and Mr. Paulo Valle, General Director of IRB Asset. I'll hand it over to Mr. Marcos Falcão, President at IRB(Re), which will now start the presentation.
[Foreign language]
Good morning, everyone. Welcome to another call, results call of IRB(Re). In 2024, we deliver a result above that observed in 2023 because we cleaned up house.
In the first quarter of 2024, we had a net profit of BRL 79 million. Based on the result of over BRL 300 million, in the second quarter, we were very excited, and in April and May, we delivered BRL 60 million. And then we had the effects of the rain in southern Brazil, something that was completely unexpected in June. With the evidence and the information of the impact in Rio Grande do Sul, we made our reserves based on the best estimates. The information generated a PSL of BRL 50 million, and IBNR of BRL 107 million, BRL 257 million total in reserves. With that, we closed the second quarter with BRL 75 million. And in June, the results was only BRL 5 million.
Annually, those BRL 144 million of the first quarter still left us a little bit below, but not as far from that BRL 300 million, which we were looking at early this year. In the third quarter, we expect to have even a better visibility of the impact of the tragedy in southern Brazil, and we will reassess, in a timely fashion, our reserves based on that evidence. But at this moment, we are very comfortable as far as what was provisioned. Now, IFRS 17, in the first quarter, our net profit was BRL 237 million, and in the second quarter, BRL 194 million, closing the first semester at BRL 431 million. By the way, versus the BRL 144 million of IFRS 4.
In the next slide, we have the comparison of the underwriting results, which in the first semester, BRL 156 million, already with the impacts of Rio Grande do Sul. So the number in the second quarter was BRL 33.7 million. Next slide. These are the trends, how the business has been behaving at a longer term view. I really like to look at the accumulated numbers in 12 months. Now, in this perspective, you may observe that our focus is on profitability. We can only increase our premium if our prices are okay. So you see the issue with premiums, you see that is a downward trend. For the moment, they are stabilizing.
The underwriting result, therefore, has an upward trend, a significant upswing, which has been calmed down by the results of June and the impacts of this tragedy in Southern Brazil, which is similar to the results in the first quarter. The net result has a growing trend, and the combined index is reducing, reaching almost 100%, as you may observe. Now, I'll hand it over to Mr. Daniel Castillo, and he will shed some additional light on the impacts of Rio Grande do Sul.
[Foreign language]
Good morning, everyone. Thank you so much for being with us in yet another results call. I would like to make some additional comments about the events in Southern Brazil, in the state of Rio Grande do Sul, this tragedy which affected a great deal of the state. Let's get to some details.
At exactly 83 years in 1951, in Rio Grande do Sul, in the month of May, there was some flooding that reached the capital city and other vicinities. 83 years later, in 2024, by coincidence, in the same month, the capital of the state, Porto Alegre, with more permeable soils and more construction, is reached by a new flooding, and the waters went up 5 meters above average. Between April 27 and May 2, the region received 700 millimeters of rain, which is roughly one third of the historical average for the year in the region. Dams and events were very much affected, and the situation in Rio Grande do Sul has been a real challenge involving all the different departments, so I will tell a little bit more about our role in that.
Now, in the next slide, we have some of the activities conducted. So on May fourth, we had the first meeting with the objective of assessing how we could support our customers. So we did our homework with the objective of identifying our exposure. So we called our clients to offer our support and estimate losses. For this much, we assessed our probabilities of loss and recovery, as well as coverage, and since then, we have been monitoring daily all the claims that are reported. In some cases, we anticipate payment for clients. We travel to Europe to talk to some players, and we updated our claim estimation so that they could plan on their side as well. So I would like to explain how this operation works. Just like an insurer protects himself with reinsurance, the reinsurer protects itself with retrocession.
Specifically for events like that of Rio Grande do Sul, we have a retrocession protection with a limit for maximum losses, which is called the priority for the asset lines, and this limit was already reached, which means that the payment for new claims will be recovered on the retrocession process. Therefore, we have a great protection for the claims, also on, and on the engineering side. For the remaining claims, which are primarily automobile and others, we made a provision of roughly BRL 107 million. In the second quarter, therefore, we had approximately BRL 150 million on claims, PSL. We also have our provision of claims, which is at BRL 107 million. So in total, we had an effect of BRL 257 million as a result of the floodings in Rio Grande do Sul.
Based on the results of May, in the week of the floodings, we assessed our loss in the hundreds of millions, roughly BRL 160 million. We didn't have as much visibility. After three months of the event, we are confident in stating that we are well prepared for future claims and that we have the protection to hold on. Now, on the next slide, we go back to the results in the second quarter, 2024. Now, within our strategy on concentrated in the Brazilian business, we can see the first semester of 2022, 2023 and 2024, and there's been a reduction in the international business from 2023 to 2022, and then roughly 16% in 2024.
By the same token, we can see that in the same period, we had an increase in the Brazilian business from 65% to roughly 80%. Therefore, we continue with our strategy to concentrate 70% of our business in Brazil, 20% in Latin America, and 10% in different international exposures. You may notice that our percentage of premium in Latin is still low, because the innovation in this business is only going, going to occur in the third quarter. So in the first semester, 2024, we grew by 12% in Brazil, and we diminished 35% internationally, which-...
is the equivalent of a growth in our main market, which is Brazil, at 18% in this region, while abroad, we have a reduction when compared to the second quarter, 2023, especially due to the reduction of the international portfolio. Now, on the total premium volume, we grew 3%. Again, our focus is profitability of the business.
Now, we are going to talk about our loss ratio. Loss ratio is the most relevant factor for us to achieve the expected results. In this slide, you can see that there was a reduction in the loss ratio from 77% in Q1 2023, to 65% in Q2 2024, even considering BRL 257 million in claims in Rio Grande do Sul. That's our provision. If we exclude Rio Grande do Sul, our loss ratio would have been 40%. It is worth remembering that the reinsurer's loss ratio is the result of contracts signed in the previous periods. It is fundamentally linked to risk assessment processes as they are presented, as well as the appropriate pricing of those risks, risks. On the next slide, we can see the combined index, which in Q2 2024, decreased by 1.5 percentage points.
We would like to remind you that the Combined Ratio demonstrates the health of the underwriting. This index carries the effect of previous years. The reduction indicates that we are on the right path. We can see the main components of the Combined Ratio, which are loss ratio and expense ratio. Despite the catastrophe in Rio Grande do Sul, the Combined Ratio went from 109 in the first half of 2023, to 102% in the same half of 2024. The loss ratio continues its downward trend in relation to previous periods. In the next slide, we present the key indicators of life and non-life separately. We can see that the life portfolio has been more volatile, mainly due to the expense ratio of an important account that we closed in 2022.
When we look at the non-risk portfolio, we see that it's more stable, with a combined ratio of 99%, despite the events in the south, in Rio Grande do Sul. Now I turn the floor back to Falcão, who's going to talk about our finances.
Thank you, Daniel. On the next slide, we present the company's administrative expenses in a slightly different way. Please compare the expenses in the first semester. We, deducting depreciation and contingency, would be comparing BRL 131 million in the first half with BRL 128 million in the first half of 2024. There was a reduction, therefore, by BRL 3 million in discretionary expenses. Another way is to look at current expenses plus personnel, and in relation to the premiums. The percentage is in the region of 6.4% in Q2 2024.
Our target is to look at the expenses that we can manage, and try and have the lowest possible expenses. This will make us more competitive, but we can also increase the premiums. This is another driver of this index. On the next slide, we show the evolution of technical provisions for claims, IBNR and OCR, in relation to earned premiums. As you can see, we are very comfortable with these indicators, and they have been trending nicely. On the next slide, we analyze as well the floating, which is a measure used internationally, where we look at the volume of reserves that we invest to have our financial results. As you can see here, this has also trended upwards since 2020 up to now. Now, I turn the floor over to Paulo Valle, the VP of Assets, and he's going to talk about our investment portfolio.
[Foreign language]
Good morning, Falcão. We closed Q2 2024 with a financial and equity result of BRL 166 million, above the BRL 142 million recorded in Q1 2024, and also higher than the results of Q2 2023. This is despite lower CDI in this quarter. As for the assets under management, the volume grew to BRL 9.1 billion, up from BRL 8.5 billion in the second quarter of 2023. However, if we exclude a temporary difference of BRL 400 million, resulting from the receipt of funds from a specific contract in June for payment in July, we would currently have financial assets worth BRL 8.7 billion, which is what we actually manage.
We obtained good results in the portfolio, especially due to a net position in dollars in the second half of June, as well as the good performance of the private credit fund in the quarter. We can see in the highlight in the graph, that the exchange rate variation in Q2 2024 generated a positive result of BRL 52 million. On the next slide, you will see that we ended June with BRL 9.1 billion in investments. And as I said previously, BRL 400 million have already left the cash position in July. The allocation of funds in general can be divided as 60% of assets in Brazil and 40% abroad, which has also a link to our financial obligations. Of this 60% in Brazil, 36% are post-fixed public bonds linked to the Selic or repo operations.
The 17% are linked to inflation, with a large part being used to back our debentures and actuarial liabilities, and 6% in private bonds, mostly linked to CDI or inflation. Of the 40% we hold offshore, approximately 20% are Brazilian sovereign bonds, 13% are American and Canadian T-bonds due to contractual requirements, and approximately 6% are time deposits and certificates of deposit in different currencies to back our obligations. It is worth highlighting the low credit risk and the low market risk in the portfolio. Our portfolio is made up of onshore financial investments, invested in sovereign bonds with triple A ratings and duration of approximately 1.5 years. Our offshore assets are basically concentrated in sovereign bonds with BB institutions, with a duration of less than 1 year. On this slide, we show the historical profitability of our assets.
Onshore, we separate the portfolio into two parts: active management, 74% of the portfolio, BRL 4.1 billion, with a profitability of approximately 102% of the CDI in Q2 2024. Then passive management, 26% of the portfolio, BRL 1.4 billion, basically made up by assets linked to inflation for the hedging mentioned above, and other assets with less liquidity. In Q2 2024, the passive management portion has had its performance impaired and had the profitability of 25% of the CDI, due to the annual revaluation of our interest in Shopping Maia, in Guarulhos, and due to the drop of INEPAR in May, another impact of BRL 7 million.
These assets represent less than 1% of our reserves, and the gain with the foreign exchange variation has offset the profitability, BRL 52 million, versus a negative impact of BRL 13 billion, approximately. I now turn the floor over to Paulo.
[Foreign language]
First of all, I'm talking about risk because Thaís Peters, our risk manager, has become a mother very recently, and she is on maternity leave. We are going to have a new risk director. We released a communication to the market today, and this is Ms. Eduarda de la Rocque. She's a very experienced person in the market of risk. She had been working with us as a consultant, as helping us to develop the risk management area, and she's now going to become a director of the risk area.
First of all, we are going to talk about the sufficiency of adjusted net worth in relation to the minimum capital required. On the left graph, we see that the indicator reached BRL 808.20 million, an increase by 54%, which means a sufficiency of 182%. This is mainly due to the drop of the minimum capital required. This dropped quarter-on-quarter, and it went from BRL 1.4 billion in Q2 2023, to BRL 1 billion in Q2 2024. This drop had to do with the underwriting risk capital requirement, especially due to the decrease in retained claims in the moving average of the last 12 months. The remaining portions of the capital requirement remained stable in the period. The company has therefore improved, and this impact the capital requirements.
Loss ratio is also lower, therefore we need less capital, and sufficiency improves. On the next slide, we look at the second regulatory indicator, which assesses the amount of assets qualified by SUSEP to cover our actuarial commitments. The technical provisions coverage ended Q2 2024 with a sufficiency of BRL 609 million. The increase relative to Q1 had to do with the receipt of court-ordered payments, the Precatórios, which made a positive impact on this indicator. In regulatory terms, we feel very comfortable. It's a very comfortable position with a good outlook ahead of us. Then, we have a slide where we compare and we see our results from IFRS 17, from that perspective. The net income was BRL 194 million, vis-à-vis a loss of BRL 37 million in Q2 2023.
We also saw an increase in revenue by BRL 57 million due to the greater writing of premiums, essentially in property and life. Reinsurance expenses increased by BRL 572 million, due mainly to the losses in Rio Grande do Sul. It is worth highlighting that the company has retro for most of these claims. So it is possible to see a variation in the net income by BRL 765 million. And finally, the financial result increased by BRL 136 million, mainly due to the quarter's exchange rate variation, as Paulo explained. Also, the company's management continues to be based on the methodology IFRS 4, which is the methodology adopted by SUSEP. IFRS 17 is very different from IFRS 4. It's a new methodology, and we will report under both methods so that everybody feels comfortable with these numbers.
On the next slide, I would like to show a little bit, pardon, of what we have been doing in terms of ESG. There are two things I would like to highlight, two programs that make us proud. We have a Young Apprentice Program, which has been running for over 20 years, and we hire youngsters between 16 and 20 years old in a situation of social vulnerability. In the last 10 years, 100 young people had their first professional experience at IRB. We currently have 10 young people between 16 and 20, 71% are women, and 90% are non-white. The other is an inclusion program for people with disabilities. This program is for people with hearing impairment, and we have 10 people in different areas and different hierarchical levels.
We have a company that assists us with sign language interpreter at meetings, and some of our employees already master sign language. We work on different corporate topics. It's always very good to have these people with us, developing and being integrated.
In conclusion, just a little bit of the next events that are coming down the pike. So these slides we disclosed in June, the report of sustainability that we put out. In July, we did the kickoff of our budget after the international contracts renovations. We were awarded as a Great Place to Work, one of the 50 best companies to work in. And today, we are disclosing the results. So the next relevant event for the semester, in October, we're going to renew the retrocession contract, so that'll be very intensive work after the flood is in Rio Grande do Sul. In November, we'll be back here on the 12th to disclose the results for the third quarter.
In early December, we want to make an investor day, which will shed some light on the events of Rio Grande do Sul and the impacts, and with that, we'll have some visibility for 2025. With that being said, we can open up for Q&A. Thank you very much, everyone.
[Foreign language]
Now, we will begin the Q&A session. As a reminder, in order to ask your questions, you should click on the Q&A button at the bottom side of the screen and submit your questions in writing to get in the queue. As you are announced, a request to open your mic will show up in your screen, at which point, you should open up your microphone to ask your questions. We request, please, that questions should be made all at once. First question from Ricardo, an analyst from BTG.
Ricardo, we're going to open up your microphone. You have the floor, please.
[Foreign language]
Good morning, everyone.
Thank you so much for taking my question. I have three questions on my side. So we saw a strong growth during the quarter. We saw good premiums in Brazil, and looking forward, you have a separate plan recently, which shows a good growth, and it can come in handy with the premiums in the rural side. And as we see, there's a regain in share with the partnership with Brasilseg. Now, if you combine all of that with the international premiums becoming more and... or rather less and less relevant, our expectation is that there will be an acceleration in the growth in premiums in the next semester.
I wanna know if that is a reasonable estimation, if there could be a substantial growth on the premiums on the second semester and moving into next year. My second question is: when I look at this information and the impacts on Rio Grande do Sul, we see lower levels, roughly 40% in your figures. So I wanna know if this is a recurring level and what explains this sharp drop that we observed. And finally, in the insurance sector, speaking about the loss ratio, by the way, and also the interest for the product increases in that situation. I wanna know if that is true for reinsurance as well.
So in other words, after the floodings in Rio Grande do Sul, having this relevant loss impact, I wanna know if the appetite for the reinsurance product has increased in the last few months. Thank you.
[Foreign language]
Ricardo, Falcão, good mo ning.
[Foreign language]
Hey, Falcão. Good morning.
[Foreign language]
Right. So I'll start answering, and I'll hand it over to Castillo. In regards to your general question, I think that, you know, our mindset is that we don't have an anxiety to grow in premium. But we are eager to maintain our discipline in terms of pricing. What we believe in is that initially, when there is a price increase, people are resistant to it at first. So price elasticity is actually decreasing. It starts really high at this point in time. That's why we haven't grown quite as much on premium.
We have grown in geography, which will be explained in a second, but what we see is a price elasticity. Now, the insurance business also faced this problem. Some businesses found this problem in the ag sector due to the past events, you know, due to the repricing we saw last year. And the production of this, of these companies, as they reported, you know, the whole market has seen that. You know, there was a loss, there was a bit of a problem with that elasticity. What we believe in, given our international experience in speaking to our international peers, is that this price elasticity is decreasing. We expect that our prices will be better accepted moving forward. So the speed with which this will happen, Ricardo, we don't know.
But again, we are not going to focus on growing premiums if we have to lower prices. We don't lower prices in any, any event. I'll hand it over to Daniel now. He will make some comments about the business questions.
[Foreign language]
And Ricardo, about price as well, we are going through a period where we were wondering if the hard market was going to continue or not, and the catastrophe in Rio Grande do Sul has shown that a lot of people were uncovered, and it showed that there is a lot of demand for coverage for similar events, for climate catastrophes. And with that, we believe that the market, the hard market, will maintain. But like Falcão said very well, we are only going to develop the business if there is profitability on the other side of it.
Our objective is not to increase the premium to the detriment of our profitability. Now, with regards to your question about the loss ratio at 40%, you're asking if that is recurring or not, and you did some math, and I imagine you have excluded Rio Grande do Sul, which is the right thing to do. And this 40% is the result of a loss ratio this year that is very positive, very much so. We are running the business well. The agri insurance is going very well. So yeah, that number is very low. We don't see... I mean, this is not a normal loss ratio. We don't expect that it will stay at 40%.
As far as the appetite for the product, which is your third question, no, of course, I mean, events such as the catastrophe in Rio Grande do Sul creates a number of opportunities. It's going to allow us to make a lot of changes in our situation. For example, having a limit per event, which is a condition that didn't exist in Brazil before, because Brazil was not considered to be a country prone to having climate catastrophes, so that should change the conditions. And I mean, without question, there will be a lot of opportunity to go around. But when it, when it comes to Rio Grande do Sul, we, we usually say that maybe 5%-10% of the economic loss was covered. Now, imagine the room for opportunity that exists if we develop our business further in there. I hope I answered your question.
[Foreign language]
Yes, absolutely. Thank you.
[Foreign language]
Next question, from Daniel Vaz, from Safra. Daniel, you may open up your microphone. You have the floor.
[Foreign language]
Good morning, Falcão. Good morning, Castillo. Congratulations on the results. I have two questions, if I may. First, related to the provision you made, BRL 107 million. I want to know what you have seen in this one month and a half that we already have on Q3. How much is that provision going to pan out? Is that going to be enough for the claims you're going to liquidate? I mean, considering the IBNR, are you going to... Is there going to be any additional allocation on Q3? That's one question. And number two, as far as the window on renewal, I want to understand the repricing aspect in that renewal. What have you observed?
We heard Falcão talking about the price elasticity aspect, which is on a downward trend. So what can we expect from, you know, as far as the premium increase in the 12- to 18-month window? Pricing is higher, so you have your combined ratio, your target, and if you may confirm, that is 95%. So what difficulties have you seen in that renegotiation, and what can we expect for 2025? You know, from an analyst perspective, what can we model based on? So yeah, thank you.
[Foreign language]
Hey, Daniel, good morning. Thank you for your questions. I'll answer the first one, and the toughest one, I'll hand it over to Castillo. So the IBNR of BRL 107 million that we had starting the quarter, you asked about the Q3.
So, on July, given the evidence that we have, that was more than enough. August is still too early to tell. We believe that we are doing well, and we think we are well provisioned on that. But obviously, if some event happens in August or September, we are not going to hesitate to increase provision if necessary. It's important to understand that, you know, we have had at least 70% of the impact from Rio Grande do Sul, and if there is anything, it will be on Q3 and Q4. Now, that 30%, there's people here inside that feel are going to be even lower. So I'm being conservative here. Now, Daniel, our estimation is that we are well provisioned, but of course, if there are additional evidence coming up, we are going to provision accordingly.
But the impact, we feel, you know, it's behind us. So, Daniel?
[Foreign language]
Yes, Daniel Castillo here.
As you know, and as we have said time and time again, our strategy is to have 70% of our business in Brazil, 20% in LATAM, and 10% in the rest of the world. So LATAM is definitely in our sights. Last year, we pretty much focused on mapping opportunities in LATAM. The LATAM business is renewed, especially in July, and if, you know, there's some things renewing on September and October, but most of it is in July. Now, this past July, we made a lot of analysis as far as the business we mapped last year, and this renewal actually panned out quite well. Not only did we renew, but we actually started new business, both in contracts as well as other.
It's important to say that our objective in Latin America is to be a leader in this market. Just like Falcão said, we see this, you know, it's the same story for Latin America. We are only going to do business in LATAM when we understand our exposure and if we can price right to reach the profitability we desire. I hope that answered your question, Daniel.
Perfect. So clear, [Foreign language].
Thank you so much. Congrats once again.
[Foreign language]
Next question from Gabriel Gusan, from Citi. Gabriel, we'll open up your microphone. You have the floor.
[Foreign language]
Good morning, everyone. I just wanted to understand something with regards to the impact of Rio Grande do Sul in the second semester and try to extrapolate that a little bit to the third quarter. You mentioned that number 70%. That means that you already received 70% of the payment, or you have received and provisioned that already, and you were expecting 70% of the total amount? And still on that topic, the thing about retrocession, which you are supposed to receive, is that already accounted for on the quarter? You have those provisions, BRL 257 million, is that considered in the calculation?
Can you shed a little, you know, some light so we get an understanding, please?
[Foreign language]
Gabriel, good morning, this is Falcão. Well, 70%, I'm being conservative at that, by the way. There is an ongoing discussion here, and again, this number is based on the total visibility of the event. So this is just an educated guess, so to say. So 70% may be conservative. I would focus on that for the estimates, but there are people in the business that believe that 80% is already past us. So it's around this ballpark, 70%-80%, we believe it's behind us. So everything that we reported as far as PSL and IBNR is net. So this is already accounted for. I mean, there's nothing else to consider.
And again, we got into the third quarter with BRL 106 million of IBNR. Just like I said before, we believe that this is well provisioned, and we believe we have a good visibility for the complete month of July and a piece of August as well. So at this point, we have no reason to believe we need additional provisions. And just to... go ahead. Yeah, if I may, I just wanted to add something here. Now, similar catastrophic events like we had in Rio Grande do Sul, usually the larger part is communicated immediately. So what can happen is there is a small part, a small, you know, number of claims that is not considered, which is already reserved for. So that BRL 106 million is precisely to cover those claims.
So if there is anything on different departments, we are duly, you know, we have the armor for that. Great, now it is clear. Now, if I may perhaps change gears here. We saw the premium dropping in the semester. We heard a little bit about the renewal window. That was a positive one, and we also heard about the, with the, with the retention, which is close to BRL 1 billion, which is not, you know, as strong a number. We were expecting maybe BRL 1.2 billion, BRL 1.3 billion throughout the quarters. So to piggyback on that, we see that you have a better capital situation at the moment, both capital as well as provision coverage. So in light of all of that, with all of these improvements, can we expect a faster growth on premium, both retained and issued? Gabriel.
Gabriel.
We would like to grow premiums-
... but we are going to maintain prices. That is, our reinsurance has to be bought. We are not going to lower our prices to sell more. I expected that premiums would have grown more, but again, the price elasticity was higher than expected, but the trend is upwards. I have nothing more specific to say, but we are going to preserve profitability. And in terms of projecting the premiums, we got it wrong in our budget. Our premiums are below what we budgeted for. We are trying to grow premiums, and we want people to get used to the prices. Thank you!
[Foreign language]
The next question is from Eduardo Nishio, from Genial Investimentos. Your microphone is now open, Eduardo.
Good morning. Can you all hear me? Hello?
Good day. Y es, Eduardo, we can hear you.
[Foreign language]
Yes. Good morning, Falcão, Castillo, Valle.
I would like to go back to the claims in Rio Grande do Sul. It's going to be important in the second semester as well. As for the BRL 257 million that you provisioned, most of it in June, they are linked with the soft guidance you gave relative to the impact of BRL 180 million, the net impact on Q1. So you're probably at the higher limit of the provisioning within your expectations. That is, in the second semester, we are not expecting a huge variation. Is this what you expect as well? You mentioned that, but I just wanted to confirm. And then the other question, I want to tag along the previous question, about what a loss ratio would be at more normal levels.
You excluded Rio Grande do Sul, and loss ratio was between 40% and 50%, which is very good. But could you tell us what you would expect in terms of a more normalized, so to speak, loss ratio? And then the commissioning. You finalized this contract that was hurting the commissioning, which was about 30%, and your run rate without that was 22%. In Q3 or Q4, are we going to see 22%, and is this drop going to be gradual, or are we going to see the impact already in Q3?
[Foreign language]
Thank you for your questions, Eduardo. I'm going to take the last one first. In terms of commissioning, the commissioning is going to behave as you said. By canceling this contract, the number will go back to 22%. 20, 22%, as you said.
Then your second question was about the provisioning for the Rio Grande do Sul losses. There is an offset there in terms of the results because of the profitability of the other portfolios. There's a low loss ratio, allowed us to have greater profitability, which offset the impact of Rio Grande do Sul. And as I said before, when we gave the, the guidance in relation to Rio Grande do Sul, the call was on May the fifteenth, and the event had happened 10 days before that. So I think we were brave in giving a guidance, and we are in the upper part of the guidance, but we are still within the range that we expected.
From the evidence that we have available, we feel comfortable not only with our provisions to face the bill up to the end of the year. And I'll pass the floor on to Daniel to talk about loss ratio. If we exclude Rio Grande do Sul, the loss ratio is in the region of 40%, but this is not the typical sinistrality or loss ratio. We are having very good results in the rural and property areas, which are really good. If you ask me how much I would expect, I would expect 60% in terms of loss ratio, which would be acceptable, and we would still be profitable. As regards the provision of BRL 257, this is net of retrocession. So how does that work? We have good retrocession for property, mortgage, this is like a franchise....
So we pay the franchise, and then above that limit, we retrocede it. If there are new claims in property, this will go through retrocession. And then we have automobiles and cars, and we have created this provision of BRL 106 million. So we think we are very well protected to face any future load. Congratulations for the results. There are many questions that were sent by email. I'm going to try and answer most of them just now altogether. The first question is about dividends, which is a recurring question. So first of all, just to be clear, in terms of accounting method, we use IFRS 4. Our accumulated losses under IFRS 4 is in the region of BRL 240 million. For us to start paying dividends, we should have accumulated profit, not losses.
So once we start making a profit, we will start paying dividends. I don't believe this is going to happen before the beginning of 2025, so I would say between Q2 and Q3 next year, we should be running a profit. This is what we expect. The other question has to do with the retrocession. We have talked about it today. The renewal of retrocessions will be a challenge in October because of the catastrophic events, but we are working hard to do the best we can. But Brazil now is in the radar because of the climate events, so the retrocession is, we'll price that. We don't have visibility on that yet. I think we would be able to give you more color next quarter. What about M&A? We do see possibilities.
We have more capital available, and we have tax losses which are accumulated, so this would be beneficial if we decide to go into an M&A process. In terms of international premiums, Daniel has answered that. We are leaders in Latam and Brazil, and when we go internationally, we follow our partners. Again, nothing's going to change. 70% in Brazil, 20% in Latin America, and 10% in other markets. We are not there yet, but this is our target. And then we have an SSPE, [Andrina]. This is market which is in its infancy. It's an innovation. It's in the back burner, but we might issue our DRS, but it doesn't depend on us only. There will be no impact in our numbers. It's just a huge instrument. We believe in this instrument, but this should mature in the next few years, not months.
The next question is about VOEPASS. I think it's an important subject to talk about. Whenever there is a significant claim in Brazil, we are involved, given our footprint in the market. In terms of VOEPASS, we have provisioned BRL 14 million in Q3 for civil liability. Our share was 5% in the panel of reinsurers of this contract. There are two very nice questions about the culture of insurance. We have the purpose of protecting society, but it's also frustrating. We look at what happened in Rio Grande do Sul, and only 10% of the economic losses, at most, was insured. It's not enough for Brazil, but unfortunately, Brazilians don't include insurance in their expenses, in their fundamental expenses, and we try to participate in forums, in debates, we produce material to educate people.
The government has been supportive of our initiative to develop an insurance culture, and we hope that will improve. And then a question about Brasília. We have been lobbying with the federal, state, and municipal government to foster programs to protect society. It could be risk management, could be products designed to protect the population. It's very cheap to protect people's assets. It's much cheaper than just providing assistance to people. We have been working in Brasília, in the capital of Brazil. We have been working there for eight months, lobbying the government, and we are now accelerating this initiative so that we can have a delivery very shortly. With this, we end the Q&A session. Oh, there is one now about our financial results. And there is a question about the exchange rate variation and its gain.
We have a portfolio for assets and liabilities, and then a directional portfolio, and it worked in the last quarter. It's not something we do on a regular basis, but we act on an ad hoc basis. We are very conservative, and we want to create more alpha in our portfolio. Just a short comment. We had a positive result by BRL 52 million, BRL 29 million in June alone. In June, it has become clear now, we make an investment according to our liability. We work with a basket of over 50 currencies. The liability is posted in its original currency, and we invest in time deposits and certificates of deposit to neutralize the exchange variation. There was an appreciation of the real in June, and the maturities of the time deposits are usually after 3 months.
So those maturities in June, we decided to roll these investments throughout the month, and we benefited from the depreciation rather than the appreciation of the real. But this is a position we no longer hold. We are neutral again. So in relation of the question whether we expect a reverse effect in July, no, we don't, because we have offset our exposure in different currencies.
[Foreign language]
The Q&A session is now ended. The conference call of IRB(Re) is now ended. The investor relations department remains available to take any questions you might have. Thank you so much for participating, and have a lovely day. Thank you.