md&a - bb · Índice de comissionamento % 23.1 23.8 22.7 23.1 22.6 Índice de despesas gerais e...

2Q16

MD&A BB Seguridade Participações S.A

P R E S E N T A T I O N

The Management Discussion and Analysis – MD&A presents the economic and financial status of BB Seguridade Participações S.A. (BB

Seguridade). Directed to financial analysts, shareholders and investors, this quarterly report provides an analysis of economic and

financial indicators of BB Seguridade’s, stocks performance and other aspects considered relevant for the assessment of the company’s

performance.

Back to November 2012, Banco do Brasil S.A. (BB) announced its intention to create BB Seguridade, a wholly owned subsidiary

responsible for consolidating, under a single holding company all activities related to insurance, open-end private pension plans,

premium bonds, brokerage, and other. In the same document, BB disclosed its intention to promote an IPO of the holding company BB

Seguridade at BM&FBovespa S.A. – Bolsa de Valores, Mercadorias e Futuros.

The bookbuilding of the aforementioned public offering was concluded on April 25th

, 2013 and the price was set at R$17.00 per share.

The shares started being traded on April 29th

, 2013. In the offering, the controlling shareholder (Banco do Brasil) sold 675 million shares,

in a transaction that involved approximately R$11.5 billion, with 500 million shares sold in the base offering, 100 million in the hot issue,

and 75 million in the greenshoe. The announcement of the offering closing was published on May 17th

, 2013.

The consolidated financial statements were prepared in compliance with the International Financial Reporting Standards – IFRS.

All the analyses in this report are based on IFRS Financial Statements, but are occasionally supplemented by managerial data, besides

other information calculated based on accounting principles determined by the Superintendência de Seguros Privados – SUSEP (the

regulator of the insurance industry in Brazil).

O N - L I N E A C C E S S

This MD&A is available at BB Seguridade’s IR website, where additional information about the Company is also available such as:

corporate structure, corporate governance, historical series for download, among other important information for shareholders and

investors. The company’s website can be accessed through either http://www.bancodobrasilseguridade.com.br.

This report makes references and statements about growth estimates, earnings forecasts and future strategies regarding BB Seguridade. Such statements are based on current expectations, estimates and projections of the Management about future events and financial trends that may affect the businesses that the Group is involved in.

These forward looking statements are not guarantees of future performance and involve risks and uncertainties that could overextend the control of the management, and thus can result in balances and values different from those anticipated and discussed in this report. The expectations and projections depend on market conditions (technological changes, competitive constraints on products, prices, etc.), on the country’s macroeconomic performance (interest and exchange rates, political and economic changes, inflation, changes in tax rules, etc.) and on international markets.

Future expectations based on this report should consider the risks and uncertainties that involve the businesses of BB Seguridade. BB Seguridade has no responsibility to update any estimate contained either in this report or in reports published previously.

Tables and charts in this report shows, in addition to the accounting balances, financial and managerial figures. The changes of relative rates are calculated before rounding procedure in R$ million. The rounding method used follows the rules established by Resolution 886/66 of IBGE’s Foundation: if the decimal number is equal or greater than 0.5, it increases by one unit, if the decimal number is less than 0.5, there is no increase.

http://www.bancodobrasilseguridade.com.br/

2Q16 Earnings Conference Call

Index

1. Summary 5

2. Earnings Analysis 18

3. Balance Sheet Analysis 23

4. Underwriting and Accumulation 28

5. Distribution 105

6. Definitions 113

August 09th, 2016

Portuguese

Time: 10 am (Brasília time)

9 am (Eastern time)

Dial-in: Brazil +55-11-3137 8025

USA +1-786-837 9597

UK +44-20-3318 3776

Webcast: www.bancodobrasilseguridade.com.br

English

Time: 11:30 am (Brasília time)

10:30 am (Eastern time)

Dial-in: Brazil +55-11-3137 8025

USA +1-786-837 9597

UK +44-20-3318 3776

Webcast: www.bancodobrasilseguridade.com.br

Contacts

Investor Relations

+55 (11) 3066-9894

[email protected]

Rua Alexandre Dumas, 1671 – Térreo – Ala B Chácara Santo Antônio – São Paulo – SP CEP: 04717-903



mailto:[email protected]

BB Seguridade Participações S.A. | Management Discussion & Analysis 2Q16 5

1 . S U M M A R Y

Table 1 – Key figuresrites

Unidade 2T 15 3T 15 4T 15 1T 16 2T 16

Sumário do s resultado s

Negócios de risco e acumulação R$ mil 604,994 645,754 629,938 608,261 669,124

Negócios de distribuição R$ mil 389,035 366,069 398,996 370,508 420,448

Outros R$ mil 616 (24,165) (15,372) (21,085) (2,858)

Lucro líquido R$ mil 1,215,184 1,029,571 1,013,562 957,684 1,086,714

Lucro líquido ajustado R$ mil 994,645 987,657 1,013,562 957,684 1,086,714

RSPL ajustado¹ % 55.9 53.9 54.0 49.9 55.2

Sumário do desempenho po r segmento

Seguro s - Vida, H abitacio nal e R ural

Sinistralidade % 31.2 25.6 28.7 34.3 30.9

Índice de comissionamento % 26.4 27.0 28.3 26.3 28.0

Índice de despesas gerais e administrativas % 12.3 13.0 14.9 12.9 9.8

Índice combinado % 69.8 65.1 71.8 73.1 68.5

Índice combinado ampliado % 63.6 59.3 63.5 65.8 62.3

RSPL ajustado % 45.2 53.7 46.3 43.1 46.8

Índice de so lvência % 130.7 131.7 113.3 145.0 120.0

Seguro s - P atrimô nio e A uto mó vel

Sinistralidade % 56.9 57.2 55.3 64.2 56.6

Índice de comissionamento % 23.1 23.8 22.7 23.1 22.6

Índice de despesas gerais e administrativas % 17.8 19.8 22.5 18.7 17.8

Índice combinado % 97.7 100.3 100.3 105.6 96.8

Índice combinado ampliado % 91.2 91.3 90.4 95.9 88.9

RSPL ajustado % 12.4 11.8 13.8 5.8 13.9


P revidência

Ativos sob gestão R$ milhões 130,872 138,062 148,247 157,296 171,816

Taxa de gestão % 1.22 1.21 1.19 1.17 1.16

RSPL ajustado % 37.7 38.0 36.1 37.3 39.0


C apitalização

Reservas de capitalização R$ milhões 12,061 12,162 12,354 11,723 11,208

M argem financeira de juros p.p. 5.1 3.2 5.9 8.3 5.9

RSPL ajustado % 88.8 65.4 109.7 123.0 84.1


C o rretagem

M argem operacional % 81.3 83.7 84.1 83.1 80.1

M argem líquida % 57.8 59.1 60.7 58.7 57.7

F luxo T rimestral

¹BB Seguridade's adjusted ROAE of 2Q16, was calculated by dividing adjusted net income by the average equity of the period, both in IFRS as disclosed by the Company in its MD&A. The average shareholders’ equity was calculated as follows:

Figure in the beginning of the period: R$8,526 million based on shareholder's equity as of March, 2016, deducted of dividends to be distributed for the 1H16, according to the Payout of 80% (without interest accrual);

Figure in the end of the period: R$7.986 million, shareholder’s equity as of June, 2016.


A D J U S T E D N E T I N C O M E

Figure 1 – Adjusted net income Figure 2 – Adjusted net income | Earnings breakdown¹ (R$ million)

-5 -10 -9 1 -24 -15 -21 -3

508 544 604 605 646 630 608 669

319372

354 389 366 399 371420822

906949 995 988 1,014

9581,087

50.554.0 54.9 55.9 53.9 54.0

49.955.2

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Distribution business (R$ million)

Underwritting and accumulation businesses (R$ million)

Other (R$ million)

Adjusted ROAE (%)

621 645 653 690 720 657 629773

202261 296

304 268 357329

313822906

949995 988 1,014

958

1,087

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Non-interest operating results Net investment income

¹Calculated based on total non-interest operating result and net investment income of all BB Seguridade’s controlled and affiliate Companies, net of income taxes, considering the effective tax rate of each Company for the period under analysis.

QUARTELY ANALYSIS

In the 2Q16, the net income reached R$1.1 billion, 9.3% higher than the adjusted net income of the 2Q15. The performance in the

quarter was driven by the growth of R$82.8 million (+12.0%) in the combined non-interest operating result and, to a lesser extent, by

the expansion of R$ 9.3 million (+3.1%) in the combined net investment income, both net of tax effects.

It is worth noting that some effects occurred throughout the 12-month period analyzed, which turned both quarters not directly

comparable:

(i) the reinstatement of the PIS/PASEP and COFINS tax on financial revenues earned by the holdings BB Seguridade Participações,

BB Seguros Participações, BB Cor Participações, BB MAPFRE SH1 Participações and MAPFRE BB SH2 Participações, subject to the

non-cumulative system, in force since July 1st

, 2015;

(ii) the increase in the income tax rate, namely the social contribution (“CSLL"), which affected the results of BB Seguridade’s

affiliate companies controlled by BB MAPFRE SH1 and MAPFRE BB SH2, as well as Brasilprev, Brasilcap and IRB, from September

2015 on;

(iii) the change of BB Corretora’s tax regime to the non-cumulative system in March 2016, which led to a rise in the PIS/PASEP and

COFINS tax rates on gross revenues.

The return on average equity dropped by 0.7 p.p. YoY to 55.2% in the 2Q16.

YEAR-TO-DATE ANALYSIS

BB Seguridade net income achieved R$2.0 billion in the 1H16, 5.2% up as compared to the adjusted net income of the 1H15. The

performance is explained by the R$58.2 million increase (+4.3%) in the combined non-interest operating result along with the expansion

of R$42.4 million (+7.1%) in the combined net investment income, both net of tax effects.

As previously mentioned, the year-to-date result had its comparable basis affected by the increase in tax rates at BB Seguridade’s

controlled and affiliate Companies.


Figure 3 – Adjusted net income | Quarterly evolution breakdown (R$ million)

Figure 4 – Adjusted net income | Year-to-date evolution breakdown (R$ million)

995

83 9 1,087

2Q15 Adjusted netincome

Change in non-interestoperating result¹

Change in netinvestment income¹

2Q16 Adjusted netincome


1,944

58 42 2,044

1H15 Adjusted netincome

Change in non-interestoperating result¹

Change in netinvestment income¹

1H16 Adjusted netincome


U N D E R W R I T I N G A N D A C C U M U L A T I O N B U S I N E S S E S

Table 2 – Earnings analysis | Adjusted income statement

C hg. %

R $ tho usand 2Q15 1Q16 2Q16 On 2Q15 On 1Q16 1H 15 1H 16 On 1H 15

Equity inco me 1,001,759 966,901 1,089,192 8.7 12.6 1,958,003 2,056,092 5.0

Underwritting and accumulation businesses 604,994 608,261 669,124 10.6 10.0 1,208,958 1,277,385 5.7

Life, M ortgage Life and Rural 286,147 284,536 314,528 9.9 10.5 580,282 599,064 3.2

Property and Casualty 50,070 25,248 62,883 25.6 149.1 99,482 88,131 (11.4)

Pension Plans 157,150 167,105 181,388 15.4 8.5 322,192 348,493 8.2

Reinsurance 46,623 40,720 41,212 (11.6) 1.2 72,335 81,932 13.3

Premium Bonds 64,589 90,040 68,403 5.9 (24.0) 134,446 158,443 17.8

Dental Insurance 415 612 710 71.1 16.0 221 1,322 498.2

Distribution businesses 389,035 370,508 420,448 8.1 13.5 743,131 790,956 6.4

Other 7,730 (11,868) (380) - (96.8) 5,914 (12,249) -

G&A expenses (11,855) (20,005) (13,176) 11.1 (34.1) (23,569) (33,181) 40.8

Personnel expenses (10,137) (11,898) (10,330) 1.9 (13.2) (17,802) (22,228) 24.9

Administrative expenses (2,107) (2,139) (2,792) 32.5 30.5 (5,945) (4,931) (17.1)

Tax expenses (12) (5,974) (503) 3,938.9 (91.6) (485) (6,476) 1,234.1

Other operating income (expenses) 401 6 448 11.8 7,371.4 663 454 (31.5)

N et investment inco me 4,741 10,788 10,699 125.7 (0.8) 9,326 21,487 130.4

Financial income 4,741 48,997 10,699 125.7 (78.2) 36,284 59,696 64.5

Financial expenses - (38,209) - - - (26,958) (38,209) 41.7

A djusted net inco me 994,645 957,684 1,086,714 9.3 13.5 1,943,760 2,044,398 5.2

Quarterly F lo w C hg. % H alf -Yearly F lo w


E X T R A O R D I N A R Y E V E N T S

Table 3 – Earnings Analysis | Extraordinary events

C hg. %


A djusted net inco me 994,645 957,684 1,086,714 9.3 13.5 1,943,760 2,044,398 5.2

Extrao rdinary events 220,539 - - - - 220,539 - -

Brasilprev: reversal of provisions 220,539 - - - - 220,539 - -

N et inco me 1,215,184 957,684 1,086,714 (10.6) 13.5 2,164,299 2,044,398 (5.5)


Brasilprev – Reversal of provision: in December 2014, pursuant to resolution CNSP nº 281/13 and SUSEP Rule 462/13, Brasilprev

recorded R$1.0 billion in reversals. The amount refers to the entire balance previously recorded in Provision for Insufficiency of

Contributions and Provision for Financial Fluctuation.

Simultaneously, Brasilprev conducted its half-yearly Liability Adequacy Test, based on financial statements of December 2014, in

compliance with SUSEP rule 457/12, and recorded R$514.1 million in Supplementary Coverage Provision (PCC).

The Liability Adequacy Test assesses the obligations arising from pension plan contracts and, when found insufficient technical

provisions, the company can adopt two alternatives:

the use of unrealized gains (strategy adopted until June 2014); or

the constitution of Supplementary Coverage Provision (strategy used in December 2014).

Until June 2014, Brasilprev had been using unrealized gains to offset possible insufficiency of technical provisions identified by the

Liability Adequacy Test. In December 2014, the deadline for reversal of Other Technical Provisions (where there were allocated the

balances of Provision for Insufficiency for Contributions and Provision for Financial Fluctuations), SUSEP has allowed the use of an

alternative forward yield curve structure, to minimize the inherent volatility of the original methodology. In this context, Brasilprev

chose to occasionally use the constitution of Supplementary Coverage Provision to offset the insufficiency of technical provisions

indicated by the December 2014 Liability Adequacy Test.

On the occasion of the Liability Adequacy Test, dated as of June 2015, and due to the volatility of the forward yield curve, Brasilprev,

supported by Paragraphs 2 and 3 of article 8th

of SUSEP Rule 457/12, re-adopted the procedure which employs the unrealized gains of

guaranteeing assets on technical provisions held to maturity to offset a possible insufficiency identified by the Liability Adequacy Test.

In this context, based on the Liability Adequacy Test, dated as of June 2015, the balance of R$514.1 million of Supplementary Coverage

Provision was fully reversed, with a positive impact of R$294.1 million in Brasilprev’s net income, equivalent to a net effect of R$220.5

million in BB Seguridade’s net income.


BB MAPFRE SH1 | Life, Mortgage Life and Rural

Figure 5 – SH1 | Premiums written (R$ million) Figure 6 – SH1 | Adjusted net income and ROAE

1,553

2,175

1,542

1,867

2,094 2,098

1,497

2,097

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

288 287 277 287354

272 266317

75 80 115 95

104

129 113103

363 367392 382

457400 379

419

47.0 46.4 48.0 45.253.7

46.3 43.1 46.8

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Net investment income¹ (R$ million)

Non-interest operating result¹ (R$ million)

Adjusted ROAE (%)

¹Net of income taxes considering the Company’s effective tax rate for the period

under analysis.

QUARTELY ANALYSIS

The net income from Life, Mortgage Life and Rural business segment reached R$419.4 million in the 2Q16, 9.9% down YoY. The earnings

before taxes and profit sharing amounted to R$693.2 million, 16.3% higher YoY, justified by the improvement in the non-interest

operating result and in the net investment income.

In the 2Q16, premiums written amounted to R$2.1 billion, 12.3% higher YoY, boosted by the growth in rural insurance premiums

(+119.2%), mainly in crop insurance, and in life (+9.3%), partially offset by the drop in credit life premiums (-37.7%).

The combined ratio improved 1.3 p.p. YoY to 68.5% in the 2Q16. Such improvement was explained by the lower loss ratio in the life

segment in addition to the lower G&A ratio, partially offset by the increase in the commission ratio.


The net income from Life, Mortgage Life and Rural business segment totaled R$798.9 million year-to-date, 3.2% up YoY. The earnings before taxes and profit sharing grew by 10.2%, driven by the increase in the underwriting result along with the evolution of the net investment income.

Premiums written amounted to R$3.6 billion, 5.4% higher YoY, boosted mainly by rural (+95.7%) and life (+10.0%).

The combined ratio deteriorated 1.2 p.p. to 70.9% in the 1H16, due to the increased loss ratio in credit life and in rural, in addition to

the higher commission ratio.


MAPFRE BB SH2 | P&C

Figure 7 – SH2 | Premiums written (R$ million) Figure 8 – SH2 | Adjusted net income and ROAE

2,3632,203 2,121

2,325 2,4222,228 2,174

2,284

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

14-0.4

1 12-17 -17

-58

25

56 7298 89 116

136108

10171 71

99 10099

119

50126

9.5 9.312.6 12.4 11.8

13.8

5.8

13.9

3T14 4T14 1T15 2T15 3T15 4T15 1T16 2T16

Resultado financeiro¹ (R$ milhões)

Resultado operacional não decorrente de juros¹ (R$ milhões)

RSPL ajustado(%)

¹Net of income taxes considering the Company’s effective tax rate.

QUARTELY ANALYSIS

The net income from the P&C business segment amounted to R$125.8 million in the 2Q16, 25.6% up YoY. The performance is explained

by the 26.1% increase in the net investment income in addition to the 39.3% growth in the underwriting result, explained by the

improvement of 0.9 p.p. in the combined ratio, which was helped by the lower loss ratio as well as a lower commission ratio.

Premiums written amounted to R$2.3 billion in the 2Q16, 1.8% down YoY, dragged down by the auto insurance (-17.9%), partially offset

by the expansion of the casualty segment (+17.4%), concentrated in the independent broker channel.


Year-to-date, the net income achieved R$176.3 million, 11.4% down YoY. The performance is explained by the 2.6 p.p. deterioration in

the combined ratio, due to worsen loss and commission ratios, partially offset by the better net investment income.

In the 1H16, premiums written grew by 0.3% YoY, supported by the sales from casualty and from the segment other. In auto, premiums

written dropped by 14.1% YoY.


Brasilprev | Pension Plans

Figure 9– Brasilprev | Management fee Figure 10 – Brasilprev | Adjusted net income and ROAE

333 347 345370

418 422 430474

1.28 1.26 1.24 1.22 1.21 1.19 1.17 1.16

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Management fee (R$ million) Management fee (%)

119 121 121 130 156 133 142 166

67 80 99 7966

77 8176

186 201220 210 223 209 223

242

48.9 46.1 44.637.7 38.0 36.1 37.3 39.0

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



Adjusted ROAE (%) ¹Net of income taxes considering the Company’s effective tax rate.

QUARTELY ANALYSIS

The Pension Plans business segment achieved a net income of R$241.9 million in the 2Q16, 15.4% higher than the adjusted net income

for the 2Q15. The earnings before taxes and profit sharing amounted to R$440.8 million, 26.4% up YoY. Such improved performance is a

consequence of the higher non-interest operating result, explained by higher revenues with management fees (+28.0%) in addition to a

better cost to income ratio (-5.4 p.p.).

Pension plans contributions amounted to R$13.9 billion in the 2Q16, 29.5% up YoY. Such increase is a result of the sales strategy more

focused on sporadic contribution plans, which present higher average tickets when compared to the periodic contribution plans.

Net inflows amounted to R$9.6 billion, 30.7% higher YoY. The annualized redemption rate reached 8.4%, 0.9 p.p. down YoY. The balance

of technical reserves achieved R$171.8 billion, an increase of 31.3% in 12 months.


Year-to-date, the net income of the Pension Plans business segment amounted to R$464.7 million, an increase of 8.2% as compared to

the adjusted net income for the 1H15. The earnings before taxes and profit sharing reached R$847.3 million in the 1H16, 18.1% up YoY.

The better result is a consequence of the growth in the non-interest operating result, explained by higher revenues with management

fees as well as by an improved cost to income ratio, partially offset by the drop in the net investment income.

The volume of pension plans contribution grew by 13.5% YoY, with the spotlight on VGBL plans. The net inflows achieved R$13.3 billion

4.3% higher YoY, driven by the expansion of the contributions along with a 0.4 p.p. lower redemption ratio.


Brasilcap | Premium Bonds

Figure 11 – Brasilcap | Collections (R$ million) Figure 12 – Brasilcap | Net income and ROAE

1,396

2,028

1,321

1,961

1,379

1,856

1,043

1,571

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

30 44 29 27 28 19 18 25

4454 75 69

4189

11778

74

98 10597

68

109

135

103

85.1102.3 102.6

88.865.4

109.7 123.0

84.1

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


Non-interest operating results¹ (R$mill ion)

ROAE (%)


QUARTELY ANALYSIS

In the 2Q16, the net income for the Premium Bonds business segment reached R$102.6 million, 5.9% higher YoY. The earnings before

taxes and profit sharing was of R$189.2 million, 16.9% up YoY, boosted by the growth of 23.8% in the net investment income, as a result

of the wider spread.

The result with premium bonds remained flat as compared to the same period of 2015. The net revenues with premium bonds decreased 23.3%, due to the drop of 19.9% in premium bonds collection in addition to an increased average reserve quote, which was partially offset by the drop of 29.7% in the acquisition costs as well as by the 29.6% fall in the result with lottery expenses.


Premium Bonds business segment reached a net income of R$237.7 million in the 1H16, 17.8% higher YoY. The earnings before taxes

and profit sharing achieved R$437.1 million, 29.8% higher YoY, explained by the growth of 48.3% in the net investment income, due to a

1.8 p.p. wider spread along with the higher average balance of interest earning assets.

Year-to-date, the result with premium bonds dropped by 15.7% as compared to the same period of 2015. The performance was a result

of the retraction of 24.9% in the net revenues with premium bonds, due to the 20.4% decrease in premium bonds collection along with

a higher average reserve quote. The contraction of the net revenues with premium bonds was partially offset by lower expenses with

acquisition costs (-31.3%) along with the drop in the result with lottery expenses (-23.5%).


IRB | Reinsurance

Figure 13 – IRB | Premiums written (R$ million) Figure 14 – IRB | Adjusted net income (R$ million)

958849

728

1,032902

1,062982

1,200

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

-26-80

43

-6

40 4766

4588

166 87230 162 154 134 15763

86

130

224202 201 199 202

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Non-interest operating result¹ Net investment income¹


QUARTELY ANALYSIS

In the 2Q16, the Reinsurance business segment reached a net income of R$201.8 million, 9.9% lower YoY, justified by the retraction in

the net investment income. The weaker net investment income was partially offset by the better non-interest operating result,

supported by the 17.1% growth in earned premiums, the 12.8% drop in expenses with claims incurred and the expansion of the other

operating income.


The net income of the Reinsurance business segment achieved R$401.1 million in the 1H16, 13.3% higher YoY. The performance was

driven by the evolution of the non-interest operating result, driven mainly by the improvement of 2.2 p.p. in the combined ratio, as a

result of the 3.4 p.p. lower G&A ratio.


D I S T R I B U T I O N B U S I N E S S E S

BB Corretora | Brokerage

Figure 15 – BB Corretora | Brokerage revenues (R$ million) Figure 16 – BB Corretora | Adjusted net income and operating margin

563

648610

673619

658 632

728

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

319372 354

389 366399

371420

81.8 81.7 83.5 81.383.7 84.1 83.1

80.1

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Adjusted net income (R$ million) Operating margin (%)

QUARTELY ANALYSIS

The net income for BB Corretora amounted to R$420.4 million in the 2Q16, 8.1% higher YoY, driven by:

(i) the growth of 8.3% in brokerage revenues, mainly the ones arising from the Life, Mortgage Life and Rural segment in addition

to the ones from Pension Plans; and

(ii) the increase of 26.4% in the net investment income, driven by a higher volume in addition to the higher return on financial

investments.

In the quarter, the EBIT margin fell by 1.2 p.p. YoY, impacted by the higher PIS/PASEP and COFINS tax rates since March 2016.


Year-to-date, BB Corretora reported a net income of R$791.0 million, 6.4% higher YoY, explained by:

(i) the growth of 6.0% in brokerage revenues, boosted by revenues arising from Life, Mortgage Life and Rural segment in addition

to the ones from the Pension Plans segment; and

(ii) the increase of 31.1% in the net investment income, driven by the growth of both the volume and the average yield on interest

earning assets.

The EBIT margin achieved 81.5% in the 1H16, 0.9 p.p. down YoY, impacted by the higher PIS/PASEP and COFINS tax rates since March

2016.


G U I D A N C E 2 0 1 6

Year to date, BB Seguridade’s net income grew by 5.2% as compared to the same period of 2015. The performance of the second

quarter contributed significantly to the impressive acceleration of the net income growth pace, although it still remained below the

2016 guidance. The main reasons for the deviation are:

(i) the bases are not directly comparable as a consequence of the following changes in tax rules: (i) the increase of the income tax

rate, namely the social contribution (“CSLL"), which affected the results of BB Seguridade’s affiliate companies controlled by BB

MAPFRE SH1 and MAPFRE BB SH2, as well as Brasilprev, Brasilcap and IRB, from September 2015 on; (ii) the reinstatement, in

force since July 1st

, 2015, of the PIS/PASEP and COFINS tax rates on financial revenues earned by the holdings BB Seguridade

Participações, BB Seguros Participações, BB Cor Participações, BB MAPFRE SH1 Participações and MAPFRE BB SH2

Participações, which are subject to the non-cumulative system; (iii) the change of BB Corretora’s tax regime to the non-

cumulative system in March 2016, which led to a rise in the PIS/PASEP and COFINS tax rates on gross revenues;

(ii) the weaker than expected premiums of credit life insurance; and

(iii) the deterioration in the loss ratio in auto and casualty insurance.

Taking into account the increase in PIS/PASEP and COFINS tax rates on BB Corretora’s gross revenues and the likelihood of a reduction

in the base interest rate in the second half of 2016, factors that were not expected at the time the 2016 budget was built, along with an

uncertain environment for sales of credit life insurance, the Company has decided to revise its estimates for the growth in the adjusted

net income in 2016, as follows:

Table 4 – Estimates for 2016

R atioValues o bserved

1H 16

2016 P revio us

estimates

2016 R evised

estimates

BB Seguridade - Adjusted net income growth (%) 5.2 8.0 - 12.0 4.0 - 8.0


O T H E R I N F O R M A T I O N

Table 5 – Market share and ranking

Unidade 2T 15 3T 15 4T 15 1T 16 2T 16

Vida

Prêmios emitidos R$ mil 736,703 759,579 769,935 807,974 805,139

Participação de mercado % 14.6% 14.7% 14.6% 15.9% 15.5%

Posição 3º 2º 2º 2º 2º

P restamista




H abitacio nal




R ural




A uto mó vel

Prêmios emitidos R$ mil 1,340,037 1,263,275 1,222,799 1,032,637 1,100,789



D ano s




P revidência

Ativos sob gestão R$ mil 130,871,836 138,061,890 148,246,754 157,295,939 171,816,005



Contribuições R$ mil 10,749,856 7,847,432 9,892,606 7,898,302 13,922,495



C apitalização

Reservas R$ mil 12,060,959 12,161,846 12,354,369 11,723,268 11,207,605



Arrecadação R$ mil 1,961,346 1,378,614 1,856,387 1,043,471 1,570,613



F luxo T rimestral

Source: Susep | Data as of May/2016


Table 6 - Stocks | Breakdown of the shareholders’ basis

Shareho lders Shares P art icipat io n

B anco do B rasil 1 1,325,000,000 66.25%

T reasury Sto cks 1 3,393,453 0.17%

F ree F lo at 43,696 671,606,547 33.58%

Foreign 1,042 537,211,789 26.86%

Companies 3,609 100,138,444 5.01%

Individuals 39,045 34,256,314 1.71%

T o tal 43,698 2,000,000,000 100.00%

Table 7 - Stocks | Performance

Unit 2Q15 3Q15 4Q15 1Q16 2Q16

Sto ck's perfo rmance

Earnings per share R$ 0.50 0.49 0.51 0.48 0.54

Dividends per share R$ 0.00 0.87 0.00 0.82 0.00

Equity per share R$ 3.62 4.12 3.79 4.26 3.99

Closing price R$ 34.10 24.81 24.33 29.70 28.11

Annualized dividend yield¹ % 4.16 5.79 5.84 5.39 5.41

M arket capitalization R$ million 68,200 49,620 48,660 59,400 56,220

R atio s

P/E (12 month traling) x 18.57 12.93 12.33 15.02 13.90

P/BV x 9.41 6.02 6.42 6.97 7.04

B usiness data

Quantity of trade carried out 861,003 945,622 980,065 1,161,348 903,793

Average daily vo lume traded R$ million 161 134 127 155 152

Average daily vo lume traded - BM &FBovespa R$ million 6,385 5,877 5,659 5,994 6,343

Share on BM &FBovespa's average volume % 2.53 2.27 2.25 2.59 2.40

Quarterly F lo w

¹Dividend yield calculated considering the dividends reported in the last 12 months divided by the average stock price in the same period.


2 . E A R N I N G S A N A L Y S I S

E A R N I N G S B R E A K D O W N

Figure 17 – Earnings Analysis | Breakdown¹

¹Does not consider the individual results from BB Seguridade, BB Seguros and BB Cor holdings, as well as the dental plans operation when negative.

N E T I N V E S T M E N T I N C O M E

Figure 18 – Earnings Analysis | Net investment income (R$ million)

QUARTERLY ANALYSIS

In the 2Q16, the net investment income of the holding BB Seguridade grew by 125.6% YoY, explained by the increase of 122.3% in the average balance of cash and cash equivalents, along with a higher average Selic rate.


Year-to-date, the net investment income of the holding company rose 130.4% YoY, driven by the expansion of 91.2% in the cash average balance along with a higher average Selic rate.

38.5

40.6

37.0

39.1

36.2

38.8

37.9

38.6

32.9

30.0

30.7

28.8

33.9

29.2

29.1

28.9

16.9

16.4

17.2

15.8

16.5

15.2

17.1

16.6

6.0

7.1

7.3

6.5

4.5

7.0

9.2

6.3

4.3

3.9

5.2

5.0

4.9

5.8

2.6

5.8

1.5

1.9

2.7

4.7

4.1

4.0

4.2

3.8

0.04

0.06

0.07

0.06

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

Brokerage Life, Mortgage Life and Rural Pension Plans Premium Bonds Property and Casualty Reinsurance Dental Insurance Other

2 2

5 5 54

11 11

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


G E N E R A L A N D A D M I N I S T R A T I V E E X P E N S E S

Figure 19 – Earnings Analysis | General and administrative expenses (R$ million)

QUARTERLY ANALYSIS

In the 2Q16, the G&A expenses of the holding company rose by 11.1% YoY, due to:

(i) the growth of 32.5% in administrative expenses, mostly

due to the higher expenses with specialized technical

services and other administrative expenses; and

(ii) higher tax expenses, as a result of the re-establishment,

from July 2015 on, of the PIS/PASEP (0.65%) and COFINS

(4.00%) tax rates on financial revenues at the holding

level.


In the 1H16, BB Seguridade’s G&A grew 40.8% YoY, explained by:

(i) higher tax expenses, as a result of the re-establishment, from July 2015 on, of the PIS/PASEP (0.65%) and COFINS (4.00%)

tax rates on financial revenues at the holding level, besides the IOF tax payments on withdrawals of short-term financial

investments for dividend payment;

(ii) higher personnel expenses, explained by the increase in headcount, besides the migration of part of BB Corretora’s staff

to BB Seguridade, as along with the employees collective bargaining agreement.

Table 8 – Earnings Analysis | General and administrative expenses

8

12 12 12

15

1920

13

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

C hg. %


A dministrat ive expenses (2,107) (2,139) (2,792) 32.5 30.5 (5,945) (4,931) (17.1)

Specialized technical services (349) (98) (713) 104.3 627.2 (2,399) (811) (66.2)

Condominium fee (703) (877) (912) 29.7 3.9 (1,360) (1,789) 31.6

Communication (308) (292) (375) 21.7 28.5 (515) (667) 29.4

Other administrative expenses (747) (872) (792) 6.1 (9.1) (2,001) (1,664) (16.8)

P erso nnel expenses (10,137) (11,898) (10,330) 1.9 (13.2) (17,802) (22,228) 24.9

Compensation (5,615) (6,847) (5,591) (0.4) (18.4) (9,923) (12,438) 25.3

Welfare benefits (3,103) (3,413) (3,072) (1.0) (10.0) (5,317) (6,485) 22.0

Other compensation (706) (795) (881) 24.7 10.8 (1,281) (1,676) 30.8

Benefits (713) (843) (786) 10.3 (6.7) (1,281) (1,629) 27.2

T ax expenses (12) (5,974) (503) 3,938.9 (91.6) (485) (6,477) 1,234.3

COFINS (9) (1,922) (420) 4,382.7 (78.1) (29) (2,342) 7,872.3

PIS/Pasep (2) (310) (68) 2,755.2 (78.1) (6) (378) 5,828.0

IOF - (3,741) (2) - (99.9) (448) (3,743) 735.4

Other (1) (1) (13) 1,781.9 2,168.9 (2) (14) 753.7

Other o perat ing inco me (expenses) 401 6 448 11.8 7,371.4 663 454 (31.5)

G&A expenses (11,855) (20,005) (13,176) 11.1 (34.1) (23,569) (33,181) 40.8



A D J U S T E D N E T I N C O M E C O M P O S I T I O N

Figure 20 – Earnings Analysis | Non-interest operating results vs net investment income (R$ million)¹

Figure 21 – Earnings Analysis | Non-interest operating results vs net investment income (%)¹

¹Net of taxes considering the Companies effective tax rate.

Table 9 – Earnings Analysis | Non-interest operating results vs net investment income¹

C hg. %


N o n-interest o perat ing results 690,454 628,560 773,234 12.0 23.0 1,343,597 1,401,793 4 .3

Life, M ortgage Life and Rural 214,918 199,670 237,492 10.5 18.9 422,976 437,162 3.4

Property and Casualty 5,795 (28,930) 12,583 117.1 - 6,297 (16,347) -

Pension Plans 97,818 106,627 124,597 27.4 16.9 188,743 231,223 22.5

Premium Bonds 18,296 12,144 16,410 (10.3) 35.1 37,827 28,555 (24.5)

Reinsurance (362) 13,425 9,098 - (32.2) 7,522 22,522 199.4

Dental Insurance 375 559 576 53.5 3.0 109 1,135 937.5

Holdings and broker 353,615 325,064 372,478 5.3 14.6 680,122 697,542 2.6

N et investment inco me 304,191 329,125 313,480 3.1 (4.8) 600,163 642,605 7 .1

Life, M ortgage Life and Rural 71,231 84,866 77,036 8.1 (9.2) 157,307 161,902 2.9

Property and Casualty 44,275 54,178 50,300 13.6 (7.2) 93,184 104,478 12.1

Pension Plans 59,332 60,479 56,791 (4.3) (6.1) 133,449 117,270 (12.1)

Premium Bonds 46,293 77,895 51,993 12.3 (33.3) 96,619 129,888 34.4

Reinsurance 46,985 27,295 32,115 (31.6) 17.7 64,813 59,410 (8.3)

Dental Insurance 40 53 134 238.3 155.5 112 187 67.7

Holdings and broker 36,034 24,359 45,111 25.2 85.2 54,679 69,470 27.1

A djusted net inco me 994,645 957,684 1,086,714 9.3 13.5 1,943,760 2,044,398 5 .2


¹Net of taxes considering the Companies effective tax rate.

621 645 653 690 720 657 629773

202261 296

304 268 357329

313822906

949995 988 1,014

958

1,087

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


75.5 71.2 68.8 69.4 72.964.8 65.6 71.2

24.5 28.8 31.2 30.6 27.135.2 34.4 28.8

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



N O N - I N T E R E S T O P E R A T I N G R E S U L T

QUARTERLY ANALYSIS

The combined non-interest operating results amounted to R$773.2 million in the 2Q16, 12.0% higher YoY, as a result of:

(i) the growth of R$36.6 million in the operating result at BB Corretora, due to higher brokerage revenues arising mainly from the

Life, Mortgage Life and Rural and Pension Plans business segments;

(ii) the expansion of R$26.8 million in the non-interest operating result arising from the Pension Plans business segment, explained

mainly by the increase in revenues with management fees, driven by the expansion in the average balance of assets under

management; and

(iii) the growth of R$22.6 million in the non-interest operating result arising from the Life, Mortgage Life and Rural business

segment, driven mainly by the higher volume of earned premiums along with an improved combined ratio.


The combined non-interest operating results amounted to R$1.4 billion in the 1H16, 4.3% up YoY, driven mainly by:

(i) the expansion of R$52.0 million in the operating result at BB Corretora, due to higher brokerage revenues arising mainly from

the Life, Mortgage Life and Rural and Pension Plans segments;

(ii) the growth of R$42.5 million in the non-interest operating result arising from the Pension Plans business segment, mostly due

to the increase in revenues with management fees, as a result of the higher average balance of assets under management; and

(iii) the increase of R$14.2 million in the non-interest operating result arising from the Life, Mortgage Life and Rural business

segment, driven mainly by the higher volume of earned premiums.

The increase of the non-interest operating results arising from the segments above mentioned was partially offset by the drop of R$22.6

million in the non-interest operating results from the Property and Casualty business segment, due mainly to the deterioration in the

loss and commission ratios.


Figure 22 – Earnings Analysis | Average Selic rate (%) Figure 23 – Earnings Analysis | Forward yield curve (%)

Source: Bacen Source: ValorPro

QUARTERLY ANALYSIS

The combined net investment income of BB Seguridade and its controlled and affiliated companies amounted to R$313.5 million in

2Q16, 3.1% higher YoY. The improved performance was driven mainly by the growth observed in the Property and Casualty, Life,

Mortgage Life and Rural, and Premium Bonds business segments, along with BB Corretora.

The increase in the balance of interest earning assets, the higher average Selic rate and the downward shift in the forward yield curve,

which positively impacted the mark-to-market results of pre-fixed bonds, boosted the net investment income in the 2Q16. On the other

hand, the lower inflation had a negative impact on the return on inflation protected bonds classified as held to maturity.


The combined net investment income of BB Seguridade and its controlled and affiliated companies totaled R$642.6 million year-to-date,

an increase of 7.1% YoY. The growth in the net investment income came mainly from the Premium Bonds and Property and Casualty

business segments, along with BB Corretora, and is explained by the growth in the average balance of interest earning assets, the higher

average Selic rate and the downward shift in the forward yield curve, which positively impacted the mark-to-market results of the pre-

fixed bonds.

10.90 11.2112.19

13.1413.99 14.15 14.15 14.15

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

13.39 13.23

13.13 12.99 12.97

13.95

13.27

12.9412.76 12.69

13.94

12.92

12.41 12.25

12.15

13.87

13.71 13.83 13.90 13.88

DI1F17 DI1F18 DI1F19 DI1F20 DI1F21

Mar/15

Mar/16

Jun/15

Jun/16


Figure 24 – Earnings Analysis | Breakdown of financial investments by index¹

Figure 25 – Earnings Analysis | Trading portfolio by index¹

Jun/15 Jun/16 Jun/15 Jun/16

¹Considering the financial investments of BB MAPFRE SH1, MAPFRE BB SH2, Brasilprev (ex-P/VGBL) and Brasilcap weighted by BB Seguridade’s economic stake in each company.

Table 10 – Earnings Analysis | Combined financial investments¹

¹ Considering the financial investments of BB MAPFRE SH1, MAPFRE BB SH2, Brasilprev (ex. P|VGBL) and Brasilcap weighted by BB Seguridade’s economic stake in each company.

Pre-fix ed28.6%

Other3.5%

Mutual funds quotas0.2%

Floating20.6%

Inflation47.0%

Pre-fix ed25.2%

Other4.9%


Floating24.6%

Inflation45.0%

Pre-fix ed45.5%

Floating42.9%

Inflation3.5%


Other7.6%

Pre-fix ed34.0%

Floating50.8%

Inflation3.4%Mutual funds

quotas0.5%

Other11.4%

R $ tho usand Jun/ 15 M ar/ 16 Jun/ 16 On Jun/ 15 On M ar/ 16

T rading 9,795,363 9,125,822 10,283,594 5.0 12.7

Pre-fixed 4,452,337 3,880,028 3,494,067 (21.5) (9.9)

Floating 4,199,218 4,293,871 5,227,054 24.5 21.7

Inflation 342,221 351,359 344,593 0.7 (1.9)

M utual funds quotas 55,947 46,909 46,909 (16.2) 0.0

Other 745,640 553,655 1,170,970 57.0 111.5

A vailable fo r sale 1,973,987 2,338,347 1,100,619 (44.2) (52.9)

Pre-fixed 115,476 128,250 72,622 (37.1) (43.4)

Floating 349,678 466,115 472,142 35.0 1.3

Inflation 1,463,967 1,736,543 544,658 (62.8) (68.6)

Other 44,866 7,439 11,196 (75.0) 50.5

H eld to maturity 11,007,724 11,891,456 12,536,932 13.9 5.4

Pre-fixed 1,952,958 2,147,893 2,471,837 26.6 15.1

Floating 152,898 169,523 197,339 29.1 16.4

Inflation 8,901,867 9,574,039 9,867,756 10.9 3.1

Quarterly F lo w C hg. %


3 . B A L A N C E S H E E T A N A L Y S I S

Table 11 – Balance Sheet Analysis |Balance sheet

C A S H A N D C A S H E Q U I V A L E N T S

By the end of June 2016, the balance of cash and cash equivalents reached R$297.3 million, 128.0% up YoY. The balance of cash and

cash equivalents is mainly composed of repos.

I N V E S T M E N T S

Table 12 – Balance Sheet Analysis |Direct investments

Note: (1) Controlled companies, fully consolidated


A ssets 8,981,254 8,533,876 9,628,779 7.2 12.8

Cash and cash equivalents 130,381 303,095 297,315 128.0 (1.9)

Investments 7,096,937 8,192,062 7,739,443 9.1 (5.5)

Current tax assets 20,782 38,715 39,163 88.4 1.2

Dividends receivable 1,733,150 - 1,550,209 (10.6) -

Other assets 4 4 2,649 66,125.0 66,125.0

Liabilit ies 1,736,879 7,487 1,642,798 (5.4) 21,842.0

Dividends payable 1,731,444 5 1,635,524 (5.5) -

Current tax liabilities 9 483 191 2,023.0 (60.4)

Other liabilities 5,426 6,999 7,083 30.5 1.2

Shareho lders' equity 7,244,375 8,526,389 7,985,981 10.2 (6.3)

B alance C hg. %

T o tal

o wnership (%)

R $ tho usand Jun/ 16 Jun/ 15 M ar/ 16 Jun/ 16

Insurance, P ensio n P lans and

P remium B o nds

BB Seguros Participações Holding (1) 100.0 7,035,170 7,759,793 7,677,702

Insurance B ro kerage -

BB Cor Participações Holding (1) 100.0 61,767 432,269 61,741

A cco unting

treatmentA ctivity

Investment balance


Table 13 – Balance Sheet Analysis |BB Seguros Participações’ investments

Note: (1) Affiliated companies, booked by the equity method

Table 14 – Balance Sheet Analysis |BB Cor Participações’ investments

Note: (1) Controlled companies, fully consolidated

T o tal

o wnership (%)


Insurance

B B M A P F R E SH 1 P art icipaçõ es S.A . H o lding (1) 75.0 2,946,875 2,802,045 3,121,739

Companhia de Seguros Aliança do Brasil Insurance - - -

M APFRE Vida S.A. Insurance - - -

M A P F R E B B SH 2 P art icipaçõ es S.A . H o lding (1) 50.0 2,105,911 2,208,269 2,325,815

Aliança do Brasil Seguros S.A. Insurance - - -

Brasilveículos Companhia de Seguros Insurance - - -

M APFRE Seguros Gerais S.A. Insurance - - -

BB M APFRE Assistência S.A. Insurance - - -

P ensio n P lans - - -

B rasilprev Seguro s e P revidênciaInsurance/

P ensio n P lans(1) 75.0 1,833,477 1,745,096 1,927,155

H ealth - - -

B rasildental Operado ra de P lano s

Odo nto ló gico s S.AH ealth (1) 75.0 1,954 5,520 6,231

P remium B o nds - - -

B rasilcap C apitalização P remium B o nds (1) 66.7 433,839 402,059 470,462

R einsurance - - -

IR B R einsurance (1) 20.4 626,849 596,368 626,384

A ctivity

A cco unting

treatment

Investment balance

T o tal

o wnership (%)


Insurance bro kerage

B B C o rreto ra de Seguro s e A dm. de

B ens

Insurance

B ro ker(1) 100.0 35,001 405,483 34,976

A ctivityA cco unting

treatment

Investment balance


Figure 26 – Balance Sheet Analysis | Ownership structure at 06/30/2016


S H A R E H O L D E R ’ S E Q U I T Y

Shareholder’s equity amounted to R$8.0 billion in June 2016,10.2% higher YoY.

The paid-in capital, which amounts to R$5.6 billion, is divided into 2.0 billion common shares, without par value. The shareholders’

equity of R$8.0 billion is equivalent to a book value of R$3.99 per share.

Table 15 – Balance Sheet Analysis | Statement of changes in equity

Capital

Capital

reserve

Legal and

statutory

reserve

Treasury

stock

Retained

earnings

(losses)

Accumulate

d other

comprehensi

ve income Total

B alance o n D ecember 31, 2014 5,646,768 266 2,290,014 (266) - (12,798) 7,923,984

Transactions with stock payments - 446 - (446) - - -

Additional dividends in 2H14 - - (1,103,927) - - - (1,103,927)

Capital reserve - - 432,859 - (432,859) - -

Additional dividends proposed in 1H15 - - - - (1,731,440) - (1,731,440)

Other comprehensive income - - - - - (8,541) (8,541)

Net income for the period - - - - 2,164,299 - 2,164,299

B alance o n June 30, 2015 5,646,768 712 1,618,946 (712) - (21,339) 7,244,375

Changes in the Period - 446 (671,068) (446) - (8,541) (679,609)

B alance o n D ecember 31, 2015 5,646,768 712 2,027,573 (48,961) - (45,324) 7,580,768

Transactions with stock payments - 292 - (292) - - -

Share buyback program - - - (33,953) - - (33,953)

Capital reserve - - 408,880 - (408,880) - -

Additional dividends proposed in 1H16 - - - - (1,635,518) - (1,635,518)

Other comprehensive income - - - - - 30,286 30,286

Net income for the period - - - - 2,044,398 - 2,044,398

B alance o n M arch 31, 2016 5,646,768 1,004 2,436,453 (83,206) - (15,038) 7,985,981

C hanges in the P erio d - 292 408,880 (34,245) - 30,286 405,213


4 . U N D E R W R I T I N G A N D A C C U M U L A T I O N

L I F E , M O R T G A G E L I F E A N D R U R A L

BB Seguridade offers life, mortgage life and rural insurance through its affiliate company BB Mapfre SH1. This company was established

by a 20-year term partnership with Mapfre in 2010, and the joint operations began in 2011. BB Seguridade holds, through BB Seguros, a

74.99% economic stake in BB Mapfre SH1, composed of 100% of the preferred shares and 49.99% of the common shares. The segments

in which BB Mapfre SH1 operates is dominated by the Brazilian banks, what reflects the association of this kind of products with the

bancassurance channel.

The following topics show a brief description of the main products offered by BB Mapfre SH1:

a. Life insurance is a product focused on individuals which assures financial protection to the beneficiaries, chosen by the

policyholder, in case of death (natural or accidental), or permanent disability of the insured. If a claim occurs, the insurance

company pays the amount agreed in the insurance policy to the beneficiary. Differently from the products sold in other countries,

the life insurance sold by BB Mapfre SH1 is a term life insurance without accumulation. If the customer fails to make the monthly

payments, the coverage is suspended without any amount being reverted to the policyholder.

b. Credit life insurance is a life insurance policy intended to pay off a borrower’s loan in case of death or permanent disability of the

insured. This type of product is designed to protect both the lender and the insured dependents, preventing them to inherit this

liability. This product is already quite widespread in Brazil and it is expected to grow with the expansion of the loan portfolio. The

main beneficiary of this type of product is the lender.

c. Mortgage life insurance is an insurance policy intended to pay off a mortgage in case of death or disability of the insured. The

insurance policy gives the guarantee that his family will keep the property and the bank will receive the full payment of the

mortgage debt. A mortgage life insurance also protects against physical damage to the insured property. The premium is calculated

on a monthly basis and varies according to the outstanding loan balance and the borrower’s age.

d. Rural insurance encompasses a group of three main products: (i) the crop insurance, which protects the farmers from weather

hazards and falling prices of the crop; (ii) the rural lien insurance, which protects the asset given as collateral for a rural loan; and

(iii) the rural producer credit life insurance, which is an insurance designed for farmers intended to pay off the rural loan in case of

death of the insured.

A U T O , P R O P E R T Y A N D C A S U A L T I E S

BB Seguridade offers auto, property and casualties insurance through its affiliate Mapfre BB SH2. This company was established by a 20-

year term partnership with Mapfre Brasil signed in 2010, and the joint operations began in 2011. In this partnership BB Seguridade

holds a 50.00% economic stake in Mapfre BB SH2, being 51.0% of the preferred shares and 49.0% of the common shares.

In this segment, the insurance policies for large risks and auto require a more customized assistance and selling process, which result in

a higher concentration of sales in independent brokers than in the bancassurance channel.

The following paragraphs show a brief description of the main products offered by Mapfre BB SH2:

a. Property insurance is a type of insurance sold to individuals or companies that provides protection against risks to properties,

linked or not to loans. The main products of this segment are: home insurance (covers the risks related to a private residence),

business insurance (covers the risks related to a property that belongs to a company) and insurance for machinery and equipment

(protection to a property that belongs either to individuals or companies).

b. Auto insurance is an insurance policy designed to provide protection for vehicles, of commercial or particular use, against theft,

physical damage and/or bodily injury resulting from traffic collisions, besides other assistances provided to the policy holder. The

auto insurance market is dynamic and competitive, what benefit the client to shop around for the best price before closing the

deal. Besides that, the renewal of this kind of policies occur on an yearly basis, what makes easier for the competitors to go after

the clients and makes it difficult to establish and strengthen a long term relationship with costumers, unlike other segments.

c. DPVAT is a mandatory insurance in Brazil that covers personal injury caused by vehicles to passengers, drivers or pedestrians.

DPVAT offers coverage for three natures of damage: death, permanent disability, and reimbursement for medical and hospital

expenses. DPVAT is funded by vehicles owners through annual payments. Out of the amount collected, 45% is transferred to the

Ministry of Health (SUS), to fund the hospital care victims of traffic accidents across the country, and 5% are transferred to the

Ministry of Cities, for exclusive use in programs directed to the prevention of traffic accidents. The remaining 50% are directed to

the payment of claims.


P E N S I O N P L A N S

BB Seguridade operates in the private pension plans segment through its affiliate Brasilprev, in partnership with the American company

Principal Financial Group (PFG). Brasilprev was established in 1993 as a partnership between Banco do Brasil and a group of insurance

companies. After going through a series of corporate restructuring, within 1999-2000, PFG, through its subsidiary in Brazil, Principal

Financial Group do Brasil, acquired an economic stake in the company and established a partnership with Banco do Brasil. In 2010, BB

Seguros and PFG renewed their partnership, extending it for 23 years more. As a result of this new agreement, Banco do Brasil

increased its stake in Brasilprev from 49.99% to 74.99%. Pension plans are growing in popularity in Brazil, due to increasing life

expectancy, level of financial education and tax benefits for individuals.

Brasilprev has three main sources of revenue: the load fee, charged on contributions and redemptions, the management fees on assets

under management, and the premiums paid to cover risks.

Nowadays, there are three types of private pension plans in Brazil: Free Benefit Generator Plan (PGBL), Free Benefit Generator Life Plan

(VGBL), and traditional plans, which are no longer sold. The private pension plans in Brazil are described as follows:

a. Free Benefit Generator Plan (PGBL): is recommended for people who declare income taxes in the complete form, as the

contributions are tax deductible up to the limit of 12% of the annual gross taxable income. In this modality, in case of redemption

or benefit received, the income taxes are calculated on the amount redeemed or income received.

In Brazil, there are two alternatives for an individual to present the tax statements, the simple form or the complete form. In the

complete form, a Brazilian citizen can inform not only the income but also deductible expenses, such as expenses with health

insurance, education, investments in PGBL, and other.

In addition, the participant may choose to be taxed either in the progressive tax system or in the regressive tax system when buying

a pension plan.

In the progressive tax system, the annuity is taxed when money is received according to the “Tabela Progressiva Mensal” (Montlhy

Progressive Table) made available by the Brazilian Internal Revenue Service. The tax brackets can vary from zero to 27.5% according

to the annual wages with adjustment in the income tax declaration. Redemptions are taxed at 15% regardless the amount

redeemed, with adjustment in the income tax declaration according to the Monthly Progressive Table.

In the regressive tax system, in the event of redemption or annuity received, tax is withheld and is definitive, with no possibility of

adjustment in the annual tax statement. The rates are determined by the length of stay of each inflow in the plan, starting at 35%,

with gradual reduction every two years, reaching a level of 10% after 10 years.

b. Free Benefit Generator Life Plan (VGBL): is recommended for those who declare income taxes in the simplified form or is

exempt, since the contributions are not tax deductible. As in PGBL, the customer can choose either the progressive or the

regressive tax system. In this modality, the tax benefit is that in case of redemption or annuity received, income tax will be

charged on interest earned only. Another advantage of the VGBL is its simplicity of the procedure for the inheritance

transmission, being suitable for customers who wish to make a succession planning. In this product, the customer can

determine who will be the beneficiaries after his death and, unlike other assets, funds invested in VGBL are not part of the

inventory, which is a procedure with legal costs and attorney's fees that can consume from 6% to 20% of the wealth received

by the heirs.

c. Traditional Plan: guarantees a fixed interest of 6% plus inflation (IGP-M) or Taxa Referencial (TR) per year. These plans are no

longer sold and account for R$9.0 billion of the assets under management of Brasilprev.

P R E M I U M B O N D S

BB Seguridade offers premium bonds through its affiliate company Brasilcap, in a partnership with Icatu and Aliança da Bahia. Premium

bonds are very peculiar to the Brazilian market, but there are also quite similar products in United Kingdom and in Spain.

Premium bonds are mainly sold through the bancassurance channel and it is an alternative way to accumulate reserves, with term and

interest rate previously determined, entitling the bondholder to participate in lotteries. Premiums are distributed through periodic

draws, being most frequent the usage of a combination of numbers in pre-determined series, based on the Brazilian Official Lottery.

Depending on the type of premium bond and the payment method chosen, the load fee and lottery quotas can exceed 10% of the

amount collected. The amount intended to cover lottery, administrative expenses, and operational and acquisition costs are covered by

these quotas.

In case of early redemption, the bondholder must obey a grace period (12 months in most products). Beyond the grace period, penalties

will be applied if the bondholder decides for early redemption, which will decrease as the bond approaches to maturity.


R E I N S U R A N C E

The reinsurance industry in Brazil has been growing substantially since the market became opened in April 2008. With the approval of

the Complementary Law No. 126/2007, the state monopoly over reinsurance ceased to exist and a 40% market reserve for reinsurers

based in Brazil became effective in March 2011.

In some cases, due to contract or regulation, reinsurance becomes mandatory, and according to SUSEP data, the main risks covered

today are P&C, financial, rural and transportation.

BB Seguridade operates in the reinsurance industry through IRB-Brasil Resseguros S.A.. Founded in 1939, IRB used to have a monopoly

over reinsurance in Brazil until 2007.

In 2013, BB Seguridade, through its subsidiary BB Seguros Participações acquired a stake in IRB, entering the Brazilian reinsurance

market. After that, IRB went through a process of privatization and capital increase. At the end of this process, BB Seguros became the

holder of 20.51% of IRB’s total economics, and became part of its control block, together with the Brazilian Federal Government,

Bradesco Auto Re, Itaú Seguros, Itaú Vida e Previdência and Fundo de Investimentos em Participações Caixa Barcelona.

On December 29th

, 2014, it was approved in Extraordinary General Meeting, the amendment of IRB’s Bylaws to change the number of

stocks from 1.035.663 to 1.040.000, in order to include 4.337 treasury stocks. Therefore, the BB Seguro’s stake in IRB was changed from

20.51% to 20.43%.

The income statement, financial information, balance sheet and performance ratios on BB Seguridade’s affiliates presented in this report, are influenced by the investor company accounting entries, e.g., changes in goodwill. Therefore, the statements are not necessarily reconcilable with those published by the Companies.


4 . 1 L I F E , M O R T G A G E L I F E A N D R U R A L

E A R N I N G S A N A L Y S I S

Table 16 – Life, Mortgage Life and Rural |Income statement

C hg. %


P remiums writ ten 1,866,794 1,496,845 2,096,620 12.3 40.1 3,408,878 3,593,465 5.4

Changes in technical reserves - premiums (268,315) 361,891 (216,618) (19.3) - (225,870) 145,273 -

Earned premiuns 1,598,479 1,858,736 1,880,002 17.6 1.1 3,183,008 3,738,738 17.5

Revenue of po licies issuance 2,907 6,049 3,372 16.0 (44.2) 6,662 9,421 41.4

Claims incurred (531,331) (877,276) (874,922) 64.7 (0.3) (1,284,000) (1,752,198) 36.5

Acquisition costs (399,235) (449,869) (469,817) 17.7 4.4 (787,152) (919,686) 16.8

Result with reinsurance (28,291) 141,843 154,573 - 9.0 124,027 296,416 139.0

Administrative expenses (69,077) (93,118) (88,936) 28.7 (4.5) (143,590) (182,054) 26.8

Tax expenses (51,236) (62,762) (57,157) 11.6 (8.9) (102,613) (119,919) 16.9

Other operating income (expenses) (65,541) (64,085) (18,665) (71.5) (70.9) (95,080) (82,750) (13.0)

Underwrit ing result 456,675 459,518 528,452 15.7 15.0 901,262 987,970 9.6



Financial expenses (40,936) (55,129) (66,826) 63.2 21.2 (79,057) (121,955) 54.3

Equity income (7,526) (7,740) (7,729) 2.7 (0.1) (15,170) (15,469) 2.0

Operat ing result 596,128 642,255 688,979 15.6 7.3 1,211,298 1,331,234 9.9

Gains or losses on non-current assets (4) (187) 4,186 - - 3 3,999 133,209.2

Earnings befo re taxes and pro f it

sharing596,124 642,068 693,165 16.3 8.0 1,211,301 1,335,233 10.2

Taxes (210,869) (260,592) (269,959) 28.0 3.6 (429,853) (530,551) 23.4

Profit sharing (3,673) (2,043) (3,781) 2.9 85.0 (7,635) (5,824) (23.7)

N et inco me 381,582 379,433 419,425 9.9 10.5 773,812 798,857 3.2



To provide a better analysis, the following table shows a managerial view built considering the reallocation of the result with

reinsurance to the other accounts that compose the Income Statement. This reallocation allows the analysis of the performance ratios

already considering the reinsurance effects.

Table 17 – Life, Mortgage Life and Rural | Managerial income statement

Retained premiums = Premiums written + premiums ceded to reinsurance Changes in technical provisions = Changes in technical provisions + changes in technical provisions on reinsured operations Retained claims = Claims incurred + recovery of indemnity claims + recovery of claims expenses + changes in provisions for claims IBNR + salvages and reimbursed assets + changes in provision for claims IBNER provisions for claims to be settled + changes of expenses related to IBNR + changes in estimates for salvages and reimbursed assets + provisions for claims to be settled

C hg. %


P remiums writ ten 1,866,794 1,496,845 2,096,620 12.3 40.1 3,408,878 3,593,465 5.4

Premiums ceded to reinsurance (33,491) (113,056) (285,166) 751.5 152.2 (94,362) (398,222) 322.0

R etained premiums 1,833,303 1,383,788 1,811,454 (1.2) 30.9 3,314,516 3,195,243 (3.6)


R etained earned premiuns 1,509,912 1,710,722 1,679,136 11.2 (1.8) 2,975,174 3,389,858 13.9


Claims retained (471,054) (587,419) (519,480) 10.3 (11.6) (952,138) (1,106,899) 16.3



Tax expenses (51,236) (62,762) (57,157) 11.6 (8.9) (102,613) (119,919) 16.9


Underwrit ing result 456,676 459,518 528,451 15.7 15.0 901,263 987,968 9.6




Equity income (7,526) (7,740) (7,729) 2.7 (0.1) (15,170) (15,469) 2.0


Gains or losses on non-current assets (4) (187) 4,186 - - 3 3,999 133,209.2


sharing596,125 642,068 693,165 16.3 8.0 1,211,302 1,335,233 10.2

Taxes (210,869) (260,592) (269,959) 28.0 3.6 (429,853) (530,551) 23.4

Profit sharing (3,673) (2,043) (3,781) 2.9 85.0 (7,635) (5,824) (23.7)

A djusted net inco me 381,583 379,433 419,425 9.9 10.5 773,814 798,858 3.2




Figure 27 – Life, Mortgage Life and Rural | Adjusted net income and ROAE

QUARTERLY ANALYSIS

In the 2Q16, the net income arising from the Life, Mortgage Life and Rural business segment amounted to R$419.4 million, 9.9% up YoY. The performance was impacted by the increase in the income tax rate, namely social contribution (“CSLL"), from 15% to 20%, since September 2015, pursuant to Law 13,169/15.

Earnings before taxes and profit sharing reached R$693.2 million, 16.3% up YoY explained by:

(i) the growth in operating results, in line with the increase in earned premiums and the improvement in the combined ratio; and

(ii) the increase in net investment income, driven by the expansion in the average balance of financial investments.

The annualized return on average equity reached 46.8%, 1.6 p.p. up YoY.

¹Net of taxes considering the Company’s effective tax rate.


In the 1H16, the net income arising from the Life, Mortgage Life and Rural business segment reached R$798.9 million, 3.2% up as

compared to the same period of 2015. The performance was hit by the increase in the income tax rate, namely social contribution

(“CSLL"), as previously explained.

Earnings before taxes and profit sharing registered an increase of 10.2%, explained by:

(i) the growth in operating results due to the higher earned premiums; and

(ii) the increase in net investment income, supported by the expansion in the average balance of financial investments.

Table 18 – Life, Mortgage Life and Rural | Managerial performance ratios

¹ Performance ratios calculated based on the managerial income statement, considering the reinsurance effects. ² It considers adjustments which can impact the performance ratios, detailed in the corresponding section, where applicable.

288 287 277 287354

272 266317

75 80 115 95

104

129 113103

363 367392 382

457400 379

419

47.0 46.4 48.0 45.253.7

46.3 43.1 46.8

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



Adjusted ROAE (%)

C hg. (p.p.)

% 2Q15 1Q16 2Q16 On 2Q15 On 1Q16 1H 15 1H 16 On 1H 15

P erfo rmance rat io s

Loss ratio 31.2 34.3 30.9 (0.3) (3.4) 32.0 32.7 0.7

Commission ratio 26.4 26.3 28.0 1.5 1.7 26.5 27.1 0.7

G&A ratio 12.3 12.9 9.8 (2.5) (3.0) 11.5 11.3 (0.1)

Combined ratio 69.8 73.1 68.5 (1.2) (4.6) 69.7 70.9 1.1

A djusted perfo rmance rat io s ¹ ²

Loss ratio 31.2 32.7 30.9 (0.3) (1.8) 32.0 31.8 (0.2)


G&A ratio 13.2 12.9 11.5 (1.6) (1.3) 12.5 12.2 (0.3)

Combined ratio 70.6 71.5 70.2 (0.4) (1.3) 70.7 70.9 0.2

Other rat io s

Expanded combined ratio 63.6 65.8 62.3 (1.3) (3.5) 62.8 64.1 1.2

Income tax rate 35.4 40.6 38.9 3.6 (1.6) 35.5 39.7 4.2

Adjusted ROAE 45.2 43.1 46.8 1.6 3.6 44.7 42.8 (1.9)

Quarterly F lo w C hg. (p.p.) H alf -Yearly F lo w


U N D E R W R I T I N G R E S U L T

Figure 28 – Life, Mortgage Life and Rural | Underwriting result QUARTERLY ANALYSIS

In the 2Q16, the underwriting result grew by 15.7% YoY, driven by the 11.2% increase in earned premiums and the 1.2 p.p. improvement in the combined ratio. Such improvement in the combined ratio is explained by the lower loss and G&A ratios, partially offset by a higher commission ratio.


In the 1H16, the underwriting result came 9.6% higher as compared to the same period of 2015, justified by the increase in the volume of earned premiums, partially offset by the 1.1 p.p. deterioration in the combined ratio, due to higher loss and commission ratios.


Figure 29 – Life, Mortgage Life and Rural | Net investment income (R$ million)

QUARTERLY ANALYSIS

In the 2Q16, the net investment income grew by 14.5% YoY, justified by the expansion of the average volume of financial investments, partially offset by the contraction in the net interest margin, as a result of the increase in the average yield on pending claims and obligations with insurance and reinsurance operations.


In the 1H16, the net investment income grew by 10.3% YoY, explained by the increase in the average volume of financial investments, partially offset by the contraction in the net interest margin.

432 450 445 457

554

426460

528

71.0 69.8 69.7 69.8 65.171.8 73.1 68.5

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Underwriting result (R$ mill ion) Combined ratio (%)

109122

178

147 157

197 190168

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


U N D E R W R I T I N G R E S U L T A N A L Y S I S

P R E M I U M S W R I T T E N

Figure 30 – Life, Mortgage Life and Rural | Premiums written QUARTERLY ANALYSIS

In the 2Q16, premiums written amounted to R$2.1 billion, 12.3% higher YoY, boosted by the increase in premiums arising from rural, mainly in crop insurance, as well as in life, partially offset by the fall in credit life.

Retained premiums fell by 1.2% YoY, as a result of the larger share of the crop insurance in the mix of premiums written, as this segment presents a higher volume of premiums ceded to reinsurance.


In the 1H16, premiums written amounted to R$3.6 billion, 5.4% up as compared to the 1H15, with a higher concentration in rural and in life insurance.

Figure 31 – Life, Mortgage Life and Rural | Premiums written in the bancassurance channel (R$ million)

Figure 32 – Life, Mortgage Life and Rural | Premiums written in other channels (R$ million)

Table 19 – Life, Mortgage Life and Rural | Breakdown of premiums written

Figure 33 – Life, Mortgage Life and Rural | Breakdown of premiums written (%)

Figure 34 – Life, Mortgage Life and Rural | Breakdown of retained premiums (%)

1,453

2,126

1,481 1,833 1,758 1,9341,384

1,811

99

49

61

33 336164

113

2851,553

2,175

1,542

1,867 2,094 2,098

1,497

2,097

93.6 97.7 96.1 98.2

84.0

92.2 92.486.4

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Retained premiums (R$ million) Premiums ceded (R$ million)

Retention rate (%)

1,342

1,993

1,257

1,655

1,896 1,929

1,194

1,879

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

210

182

285

212198

168

303

218

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

C hg. %


Life 736,703 807,974 805,139 9.3 (0.4) 1,466,044 1,613,113 10.0

Credit Life 666,829 161,816 415,122 (37.7) 156.5 1,098,690 576,938 (47.5)

M ortgage Life 47,889 52,345 54,027 12.8 3.2 94,717 106,372 12.3

Rural 347,937 375,143 762,620 119.2 103.3 581,309 1,137,763 95.7

DPVAT 67,181 99,129 59,262 (11.8) (40.2) 167,676 158,391 (5.5)

Other 255 437 450 76.4 3.1 443 887 100.1

T o tal 1,866,794 1,496,845 2,096,619 12.3 40.1 3,408,878 3,593,464 5.4


46.035.1

47.339.5 36.3 36.7

54.038.4

3.6

1.7

6.5

3.62.6 1.8

6.6

2.8

22.2 45.028.0

35.7

16.731.3

10.8

19.8

3.02.3 3.0 2.6

2.3

1.2 3.5

2.6

25.215.4 15.1 18.6

42.129.0 25.1

36.4

0.4

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Life DPVAT Credit Life Mortgage Life Rural Other

49.135.5

48.940.1 43.1 39.7

58.244.3

3.9

1.8

6.8

3.7 3.11.9

7.2

3.3

23.746.0

29.136.4

19.9 33.9

11.6

22.8

2.92.2 2.9 2.5

2.51.2 3.4

2.5

20.4 14.1 12.3 17.431.3 23.3 19.5 27.1

0.4

-0.1

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Life DPVAT Credit Life Mortgage Life Rural Other


C H A N G E S I N T E C H N I C A L R E S E R V E S - P R E M I U M S

Table 20 – Life, Mortgage Life and Rural | Changes in technical reserves – premiums

R E T A I N E D E A R N E D P R E M I U M S

Figure 35 – Life, Mortgage Life and Rural | Retained earned premiums (R$ million)

QUARTERLY ANALYSIS

In the 2Q16, the retained earned premiums increased 11.2% YoY, driven mainly by life and rural insurance.

YEAR-TO-DADE ANALYSIS

In the 1H16, retained earned premiums grew by 13.9% as compared to the same period of 2015, with a higher concentration in life, rural and, to a lesser extent, in credit life insurance.

Table 21 – Life, Mortgage Life and Rural | Breakdown of retained earned premiums

C hg. %


Provision for unearned premiums (250,896) 398,990 (174,171) (30.6) - (177,804) 224,818 -

Provision for benefits to be granted (except

VGBL and VRGP)- - - - - (276) - -

Provision for administrative expenses -

DPVAT(551) (1,594) (175) (68.1) (89.0) (1,674) (1,769) 5.7

Provision for technical surplus 1,786 4,402 (225) - - (5,460) 4,177 -

Complementary provisions of contributions - (32,355) (21,418) - (33.8) - (53,772) -

Other provisions (except VGBL and VRGP) (18,654) (7,553) (20,628) 10.6 173.1 (40,656) (28,181) (30.7)

C hange in technical reserves -

premiums(268,315) 361,891 (216,618) (19.3) - (225,870) 145,273 -


1,489 1,491 1,465 1,510 1,589 1,5101,711 1,679

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

C hg. %


Life 703,215 833,156 799,323 13.7 (4.1) 1,367,657 1,632,478 19.4

Credit Life 388,446 381,407 383,920 (1.2) 0.7 744,921 765,327 2.7

M ortgage Life 50,680 47,529 45,204 (10.8) (4.9) 98,451 92,733 (5.8)

Rural 300,694 350,679 392,255 30.5 11.9 597,716 742,934 24.3

DPVAT 66,630 97,536 59,086 (11.3) (39.4) 166,002 156,622 (5.7)

Other 247 416 (652) - - 427 (236) -

T o tal 1,509,912 1,710,722 1,679,136 11.2 (1.8) 2,975,174 3,389,858 13.9



R E T A I N E D C L A I M S

Figure 36 – Life, Mortgage Life and Rural | Retained claims QUARTERLY ANALYSIS

In the 2Q16, the loss ratio improved by 0.3 p.p. YoY, as a result of lower claims in life and in credit life, partially offset by the increase in claims in rural.


In the 1H16, the loss ratio worsened by 0.7 p.p. as compared to the same period of 2015, largely explained by the increase in claims in the credit life insurance in the 1Q16, driven mainly by the late accounting of additional expenses for claims amounting to R$27.8 million, due to reported claims which were not fully processed because of registration mismatches.

Setting this effect apart, the loss ratio would have been 31.8% in the 1H16, 0.2 p.p. lower YoY.

¹Segregates the effects of the reversal of provisions for claims incurred but not enough reported (IBNER), the accounting of reported claims related to previous periods in the non-contributory product and the reversal of provisions for technical surplus.

Table 22 – Life, Mortgage Life and Rural | Breakdown of retained claims

472

367

481 471407 433

587519

31.7

24.6

31.2

25.628.7

34.330.9

27.3

28.9

32.8

32.7

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Retained claims (R$ mil lion) Loss ratio (%)

Adjusted loss ratio¹ (%)

C hg. %


C laims incurred (531,331) (877,277) (874,922) 64.7 (0.3) (1,284,000) (1,752,198) 36.5

Expenses with claims (546,823) (851,366) (1,004,345) 83.7 18.0 (1,291,370) (1,855,711) 43.7

Changes in provisions for claims IBNR (11,995) (62,751) (41,897) 249.3 (33.2) (53,593) (104,648) 95.3

Changes in provisions for claims IBNER (7,569) 4,358 128,814 - 2,855.8 (1,523) 133,172 -

Recovery of claims - Coinsurance 37,456 38,863 53,993 44.1 38.9 73,957 92,856 25.6

Recovery of claims - Reinsurance 60,276 289,858 355,441 489.7 22.6 331,862 645,299 94.4

Salvage 325 528 56 (82.8) (89.4) 371 584 57.2

Reimbursements (18) - 669 - - 12 669 5,274.7

Assistance services (5,001) (7,160) (7,579) 51.6 5.9 (12,957) (14,739) 13.7

Other 2,293 251 (4,632) - - 1,103 (4,381) -

R etained claims (471,054) (587,419) (519,480) 10.3 (11.6) (952,138) (1,106,899) 16.3

A djustments - 27,822 - - - - 27,822 -

Claims in credit life related to previous

periods - 27,822 - - - - 27,822 -

A djusted retained claims (471,054) (559,597) (519,480) 10.3 (7.2) (952,138) (1,079,077) 13.3



A C Q U I S I T I O N C O S T S

Figure 37 – Life, Mortgage Life and Rural | Acquisition costs QUARTERLY ANALYSIS

In the 2Q16, the commission ratio reached 28.0%, 1.6 p.p. higher YoY, largely explained by the increase in the ratio of the credit life and rural insurance.


In the 1H16, commission ratio reached 27.1%, 0.6 p.p. higher than the ratio reported in the same period last year.

¹Segregates the effects of the reversal of provisions related to acquisition costs in the segment other and the reversal of provisions for technical surplus

Table 23 – Life, Mortgage Life and Rural | Acquisition costs

389 387 388 399429 427 450 470

26.1 26.0

26.7 27.1 26.5 26.4 27.0 28.3 26.3 28.0

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Acquisition costs (R$ million) Commission ratio (%)

Adjusted commission ratio¹ (%)

C hg. %


Commission charged on premiums written (486,084) (317,277) (468,193) (3.7) 47.6 (856,636) (785,470) (8.3)

Agency commission (3,803) (187) (1,687) (55.6) 800.8 (8,787) (1,875) (78.7)

Commissions recovered - Coinsurance 4,883 5,743 5,469 12.0 (4.8) 9,608 11,212 16.7

Change in deferred acquisition costs 120,164 (108,737) 30,476 (74.6) - 131,206 (78,262) -

Other acquisition costs (34,395) (29,411) (35,881) 4.3 22.0 (62,543) (65,292) 4.4

A cquisit io n co sts (399,235) (449,869) (469,817) 17.7 4.4 (787,152) (919,686) 16.8



G E N E R A L & A D M I N I S T R A T I V E E X P E N S E S

Figure 38 – Life, Mortgage Life and Rural | G&A expenses QUARTERLY ANALYSIS

In the 2Q16, the G&A ratio improved by 2.5 p.p. YoY due to the reduction in other operating income (expenses). This line was impacted by changes in the provision for loans losses, which presented reversals in both 2Q16 (R$28.9 million) and 2Q15 (R$13.1 million) recorded in the impairment line.

By segregating the effect of the reversals of provision for loan losses, the G&A ratio would have presented an improvement of 1.7 p.p. YoY.


In the 1H16, the G&A ratio improved by 0.1 p.p. as compared to the same period of 2015. Both periods presented reversals in the provision for loan losses, recorded in the impairment line, in a total amount of R$28.9 million for the 1H16 and of R$29.8 million for the 1H15. By setting apart these reversals, the G&A ratio would have been 0.3 p.p. lower as compared to the 1H15.

¹Segregates the effects of the transfer of resources between Grupo Segurador BB MAPFRE’s companies in order to adequate the allocation of the insurance segments, the constitutions and reversals of provisions for loan losses, the reinforcement in contributions to the Rural Insurance Stability Fund (FESR) and the reversal of provisions for technical surplus.

72 82 75 69 86126

93 89

83

152

30 6665

4064

19

42

54

5151

5559 63

57

198

288

155186

206225 220

165

13.3

19.3

10.612.3 13.0

14.9

9.810.3

14.1

11.713.2 13.4

15.8

12.911.5

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Tax expenses (R$ million)

Other operating income (expenses) (R$ million)

Administrative expenses (R$ million)

G&A ratio (%)

Adjusted G&A ratio¹ (%)


Table 24 – Life, Mortgage Life and Rural | General & Administrative expenses

C hg. %


A dministrat ive expenses (69,076) (93,118) (88,936) 28.8 (4.5) (143,590) (182,054) 26.8

Personnel (32,692) (37,684) (33,567) 2.7 (10.9) (67,428) (71,250) 5.7

Outsourcing (18,365) (23,701) (23,603) 28.5 (0.4) (38,156) (47,304) 24.0

Location and operation (10,761) (23,792) (20,195) 87.7 (15.1) (20,418) (43,987) 115.4

Institutional advertisement and publicity (2,930) (1,580) (2,866) (2.2) 81.4 (5,744) (4,445) (22.6)

Releases (44) (497) (38) (14.2) (92.4) (499) (535) 7.2

Other administrative expenses (3,113) (3,200) (6,043) 94.2 88.8 (6,374) (9,245) 45.0

DPVAT administrative expenses (1,171) (2,664) (2,624) 124.1 (1.5) (4,970) (5,288) 6.4

Other o perat ing inco me (expenses) (65,543) (64,085) (18,665) (71.5) (70.9) (95,080) (82,750) (13.0)

FESR contributions (30,819) (45,222) (34,710) 12.6 (23.2) (51,452) (79,931) 55.4

Charging expenses (4,248) (8,454) (5,968) 40.5 (29.4) (10,917) (14,421) 32.1

Civil contingencies (9,508) (3,406) (5,617) (40.9) 64.9 (14,017) (9,024) (35.6)

Events expenses (2,603) (917) (1,336) (48.7) 45.6 (4,226) (2,253) (46.7)

Endomarketing (6,378) - (7,101) 11.3 - (6,378) (7,101) 11.3

Social contributions (136) (126) (12) (90.9) (90.2) (279) (138) (50.4)

Impairment 13,012 (140) 41,091 215.8 - 26,061 40,951 57.1


T ax expenses (51,236) (62,762) (57,157) 11.6 (8.9) (102,612) (119,919) 16.9

COFINS (42,751) (52,240) (48,198) 12.7 (7.7) (85,519) (100,438) 17.4

PIS (7,032) (8,555) (7,365) 4.7 (13.9) (13,982) (15,919) 13.9

Inspection fee (1,050) (1,455) (1,455) 38.6 - (2,101) (2,911) 38.6

Other tax expenses (403) (512) (139) (65.6) (72.9) (1,012) (652) (35.6)

G&A (185,854) (219,965) (164,757) (11.4) (25.1) (341,283) (384,724) 12.7

A djustments (13,100) - (28,900) 120.6 - (29,800) (28,900) (3.0)

Reversal o f provision for loan losses (13,100) - (28,900) 120.6 - (29,800) (28,900) (3.0)

A djusted G&A expenses (198,954) (219,965) (193,657) (2.7) (12.0) (371,083) (413,624) 11.5



Life Insurance

Table 25 – Life Insurance | Key figures

QUARTERLY ANALYSIS

Life insurance premiums reached R$805.1 million in the 2Q16, 9.3% up YoY. The increase was observed in both the bancassurance and the independent broker channel, which grew 9.2% and 9.6% respectively.


In the 1H16, life insurance premiums reached R$1.6 billion, 10.0% up as compared to the same period of 2015, with higher premiums

written in both the bancassurance (+10.0%) and the independent broker (+10.3%) channels.

Figure 39 – Life Insurance | Premiums written (R$ million) Figure 40 – Life Insurance | Breakdown of premiums written (%)

Figure 41 – Life Insurance | Premiums written in bancassurance channel (R$ million)

Figure 42 – Life Insurance | Premiums written in other channels (R$ million)

C hg. %


P remiums writ ten 736,703 807,974 805,139 9.3 (0.4) 1,466,044 1,613,113 10.0

Premiums ceded to reinsurance (2,003) (2,025) (1,885) (5.9) (6.9) (7,137) (3,910) (45.2)

R etained premiums 734,700 805,949 803,254 9.3 (0.3) 1,458,907 1,609,203 10.3


Earned premiums 703,215 833,156 799,323 13.7 (4.1) 1,367,657 1,632,478 19.4

Retained claims (248,463) (247,090) (245,288) (1.3) (0.7) (470,957) (492,378) 4.5


Underwrit ing margin 229,420 333,212 293,900 28.1 (11.8) 456,051 627,112 37.5


714764

729 737 760 770808 805

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

78.582.4

74.8 80.5 81.283.0

74.880.4

21.5 17.625.2 19.5 18.8 17.0

25.2 19.6

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Bancassurance Other channels

561

630

546593

617 639604

648

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

153

134

184

144 143131

204

158

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


Figure 43 – Life Insurance | Underwriting margin (R$ million) Figure 44 – Life Insurance | Underwriting margin by distribution channel (%)

QUARTERLY ANALYSIS

The underwriting margin for life insurance rose 4.1 p.p. YoY to 36.8% in the 2Q16. The improved margin is explained by the decrease of

4.6 p.p. in the loss ratio, with better results in both the bancassurance and the independent broker channels.


In the 1H16, the underwriting margin reached 38.4%, 5.1 p.p. up YoY, justified by the 4.3 p.p. drop in the loss ratio, with improvements

in both distribution channels, as well as the 0.8 p.p. fall in the commission ratio in the bancassurance channel.

Figure 45 – Life Insurance | Loss ratio (%) Figure 46 – Life Insurance | Commission ratio (%)

225

303

227 229

271 264

333

294

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

32.0

42.0

34.132.6

36.2 37.040.0

36.8

37.4

50.8

35.2 36.1

41.042.8 43.5

39.2

14.6

2.9

30.5

18.8 18.3

12.7

25.227.5

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Total Bancassurance Other channels

36.2

24.7

33.5 35.332.0 29.8 29.7 30.7

28.5

14.1

28.4 29.424.6 21.5

23.8 25.2

61.4

72.2

49.8

59.3 60.364.6

54.4 51.8

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


31.733.3 32.4

32.0 31.833.2

30.3

32.5

34.135.1 36.3

34.6 34.535.7

32.7

35.6

24.025.0

19.7

21.9 21.522.7

20.4 20.7

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



Credit Life Insurance

Table 26 – Credit Life Insurance | Key figures

QUARTERLY ANALYSIS

Credit life insurance premiums written amounted to R$415.1 million in the 2Q16, 37.7% down YoY. The underwriting margin grew by

0.7 p.p. YoY to 47.9%, boosted by the improvement of 3.1 p.p. in the loss ratio, partially offset by the 2.4 p.p. deterioration in the

commission ratio.


In the 1H16, credit life premiums written amounted to R$576.9 million, 47.5% down as compared to the same period of 2015. The

underwriting margin reached 42.7%, 8.5 p.p. down YoY, largely explained by the deterioration in the loss ratio observed in the first

quarter of the year, which was negatively impacted by the accounting of R$27.8 million in claims that had incurred in previous periods

but have not been reported due to mismatches in client data.

By setting apart this effect, the loss ratio in the 1H16 would have been of 23.5%, 3.6 p.p. higher than in the 1H15, resulting in a 4.8 p.p.

drop in the underwriting margin.

Figure 47 – Credit Life Insurance | Premiums written (R$ million)

Figure 48 – Credit Life Insurance | Underwriting margin

Figure 49 – Credit Life Insurance | Loss ratio (%) Figure 50 – Credit Life Insurance | Commission ratio (%)

¹Segregates the effects of the accounting of the accounting of reported claims related to previous periods in the non-contributory product

C hg. %


P remiums writ ten 666,829 161,816 415,122 (37.7) 156.5 1,098,690 576,938 (47.5)

Premiums ceded to reinsurance (114) (835) (1,247) 997.8 49.3 (343) (2,083) 506.9

R etained premiums 666,715 160,981 413,874 (37.9) 157.1 1,098,347 574,855 (47.7)


Earned premiuns 388,446 381,407 383,920 (1.2) 0.7 744,921 765,327 2.7

Retained claims (97,216) (123,684) (84,247) (13.3) (31.9) (148,389) (207,931) 40.1


Underwrit ing margin 183,278 143,109 183,786 0.3 28.4 381,268 326,895 (14.3)


345

979

432

667

350

656

162

415

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

148

207 198183

221

186

143

184

40.1

54.7 55.547.2

55.248.8

37.5

47.9

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Underwriting margin (R$ million) Underwriting margin (%)

33.5

14.4

25.0

21.6

32.4

21.9

13.4

21.1

16.1

25.1

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Loss ratio Adjusted loss ratio¹

26.424.2

30.1

27.828.7

29.6 30.1 30.2

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


Rural Insurance

Table 27 – Rural Insurance | Key figures

QUARTERLY ANALYSIS

In the 2Q16, premiums written in the rural segment amounted to R$762.6 million, 119.2% up YoY. Crop insurance was the one

recording the highest growth in the period, justified by an early release of working capital loans for the crop season 2016/2017, starting

in February 2016, unlike 2015 when loans followed the regular flow of the crop season which starts in July. Among other segments, rural

lien grew by 28.3% and credit life for farmers grew by 4.7%.


Year-to-date, premiums written in the rural segment amounted to R$1.1 billion, 95.7% up YoY. Crop insurance recorded the highest

increase in the period, 770.0% (retained premiums: +919.9%), justified by the early release of working capital loans for the crop season

2016/2017, as previously mentioned, while rural lien premiums written grew 15.6% (retained premiums: +14.7%) and credit life for

farmers increased 14.3% (retained premiums: +14.3%).

Figure 51 – Rural Insurance | Premiums written (R$ million) Figure 52 – Rural Insurance | Breakdown of premiums written (%)

Figure 53 – Rural Insurance | Underwriting margin Figure 54 – Rural Insurance | Underwriting margin by product (%)

C hg. %


P remiums writ ten 347,937 375,143 762,620 119.2 103.3 581,309 1,137,763 95.7


R etained premiums 318,920 269,765 490,665 53.9 81.9 500,974 760,430 51.8

Changes in technical reserves - premiums (18,226) 80,914 (98,410) 439.9 - 96,742 (17,496) -

Earned premiuns 300,694 350,679 392,255 30.5 11.9 597,716 742,934 24.3

Retained claims (59,279) (120,888) (132,062) 122.8 9.2 (171,969) (252,951) 47.1


Underwrit ing margin 182,044 154,203 173,368 (4.8) 12.4 307,626 327,571 6.5


12752 43 20

490

222157

387144161

113 144

186

193

112

185

113117

77178

194

193

105

187

73

1

6

11

2

1

4

391334

233

348

881

609

375

763

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Crop Rural lien Credit life for farmers Other

32.4

15.7 18.35.7

55.6

36.4 41.950.8

36.9

48.3 48.3

41.4

21.1

31.729.8

24.3

28.9 35.1 33.0

51.2

22.131.7 28.0 24.5

1.8 1.0 0.4 1.7 1.2 0.3 0.2 0.5

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Crop Rural lien Credit life for farmers Other

216

170

126

182

219

181154

173

67.456.8

42.3

60.5 64.451.5

44.0 44.2

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


78.1

33.6

-25.7

41.0

70.7

29.1

-7.0

-25.7

68.7

67.4 66.0 69.368.0

60.057.3

71.1

59.0 63.8

54.359.6 61.8

56.9 55.758.7

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Crop Rural lien Credit life for farmers


QUARTERLY ANALYSIS

The underwriting margin of the rural segment reached 44.2% in the 2Q16, 16.3 p.p. down YoY, as a result of the 14.0 p.p. deterioration

in the loss ratio, concentrated in crop insurance, due to a higher frequency of claims due to atypical climate events that affected mostly

the corn, coffee beans, soybeans and rice crops. Historically, the first quarter of the year tends to have a higher frequency of claims in

crop insurance, mainly in January and February, due to climate events such as the El Niño. In 2016, unlike previous years, more severe

claim reports occurred in March, April, May and June.


In the 1H16, the underwriting margin of the rural segment reached 44.1%, 7.4 p.p. down YoY, as a result of the higher loss ratio,

especially in crop insurance, due to atypical damages related to the El Niño climate event, which were more concentrated in the second

quarter this year.

Figure 55 – Rural Insurance | Loss ratio (%) Figure 56 – Rural Insurance | Commission ratio (%)

6.7 11.916.7

11.69.1

13.7 15.412.0

3.6

41.8

103.9

41.4

10.0

50.7

83.8

100.7

12.5

22.7

37.9

19.7

15.0

27.7

34.5 33.7

21.9

18.5

22.7

18.7

20.1

28.0

30.816.9

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Rural lien Credit life for farmers Crop Total

18.4

24.6

21.8

17.619.3 20.2

23.225.0

9.5

14.1

11.312.0 11.9 12.0 11.9 12.0

34.3

24.4

29.0 28.829.1 29.4 28.9 29.3

20.1

20.5 19.8

19.720.6 20.9

21.6 22.1

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Crop Rural lien Credit life for farmers Total


Mortgage Life Insurance

Table 28 – Mortgage Life Insurance | Key figures

QUARTERLY ANALYSIS

In the 2Q16, mortgage life premiums amounted to R$54.0 million, 12.8% up YoY. The underwriting margin reached 70.3% in the

quarter, 3.6 p.p. down as compared to 2Q15, due to the deterioration of 1.0 p.p. in the loss ratio and of 2.7 p.p. in the commission ratio.


Year-to-date, mortgage life premiums amounted to R$106.4 million, 12.3% up YoY. Underwriting margin reached 68.1%, 6.3 p.p. down

YoY, justified by the deterioration of the loss ratio, as a result of a higher frequency of claims concentrated in the first quarter of the

year, and by the 1.7 p.p. increase in the commission ratio.

Figure 57 – Mortgage Life Insurance | Premiums written (R$ million)

Figure 58 – Mortgage Life Insurance | Underwriting margin

Figure 59 – Mortgage Life Insurance | Loss ratio (%) Figure 60 – Mortgage Life Insurance | Commission ratio (%)

C hg. %


P remiums writ ten 47,889 52,345 54,027 12.8 3.2 94,717 106,372 12.3


R etained premiums 45,545 47,549 45,061 (1.1) (5.2) 88,191 92,610 5.0

Changes in technical reserves - premiums 5,135 (20) 143 (97.2) - 10,260 123 (98.8)

Earned premiuns 50,680 47,529 45,204 (10.8) (4.9) 98,451 92,733 (5.8)

Retained claims (7,772) (10,824) (7,352) (5.4) (32.1) (14,757) (18,176) 23.2


Underwrit ing margin 37,473 31,366 31,794 (15.2) 1.4 73,224 63,160 (13.7)


4650

47 48 48

25

52 54

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

3329

36 37 35

13

31 32

79.3 74.2 74.8 73.9 78.8

53.866.0 70.3

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


11.3

13.8 14.6 15.3

10.2

33.2

22.8

16.3

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

9.4

12.010.5 10.7 11.0

13.0

11.2

13.4

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


DPVAT

Table 29 – DPVAT | Key figures

Other

Table 30 – Other | Key figures

C hg. %


P remiums writ ten 67,181 99,129 59,262 (11.8) (40.2) 167,676 158,391 (5.5)

R etained premiums 67,181 99,129 59,262 (11.8) (40.2) 167,676 158,391 (5.5)

Changes in technical reserves - premiums (551) (1,594) (175) (68.1) (89.0) (1,674) (1,769) 5.7

Earned premiuns 66,630 97,536 59,086 (11.3) (39.4) 166,002 156,622 (5.7)

Retained claims (58,306) (84,882) (50,505) (13.4) (40.5) (145,988) (135,387) (7.3)

Acquisition costs (978) (1,388) (830) (15.2) (40.2) (2,375) (2,218) (6.6)



C hg. %


P remiums writ ten 255 437 450 76.4 3.1 443 887 100.1

Premiums ceded to reinsurance (13) (22) (1,112) 8,190.2 4,958.7 (22) (1,134) 5,167.8

R etained premiums 242 415 (662) - - 422 (247) -

Changes in technical reserves - premiums 5 2 10 92.9 525.5 5 11 115.5

Earned premiums 247 416 (652) - - 427 (236) -

Retained claims (19) (51) (26) 36.4 (48.8) (77) (77) (0.9)

Acquisition costs (165) (88) (82) (50.4) (6.7) (275) (169) (38.3)

Underwrit ing margin 63 278 (760) - - 75 (482) -




Figure 61 – Life, Mortgage Life and Rural | Net investment income (R$ million)

QUARTERLY ANALYSIS

In the 2Q16, the net interest income grew by 7.8% YoY, explained by the expansion of the average balance of financial investments, partially offset by the compression of the net interest margin.

Adjusted interest revenues grew by 19.7%, as a result of the increase in both the average balance of financial investments and the average rate of return of these investments. The average balance of earning assets grew by 13.8% while the average yield rose by 0.2 p.p., due to both a higher average Selic rate and the downward shift move of the forward yield curve.

Adjusted interest expenses grew by 66.6%, as a result of the increase in the average balance and in the average yield on interest bearing

liabilities. The average balance of interest bearing liabilities grew by 19.5%, while the average yield increased by 2.1 p.p., as a result of a

higher yield on pending claims and obligations with insurance and reinsurance operations.


In the 1H16, the net interest income grew by 7.2% YoY, explained by the growth in the average balance of financial investments,

partially offset by a retraction in the net interest margin.

Adjusted interest revenues grew by 16.3%, as a result of the increase in the average balance of financial investments, while the average

return on these investments remained stable. The average yield on held to maturity financial investments presented a contraction,

justified by the drop in inflation rates, while the yield on mark to market financial investments rose by 1.3 p.p..

Adjusted interest expenses grew by 57.5%, as a result of the increase in both the average balance of interest bearing liabilities as well as

the increase in the average yield on pending claims and obligations with insurance and reinsurance operations.

Table 31 – Life, Mortgage Life and Rural | Financial income and expenses¹

¹Managerial view

109122

178

147 157

197 190168

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

C hg. %


A djusted interest revenues 190,097 248,728 227,530 19.7 (8.5) 409,466 476,257 16.3

Revenues with mark to market financial

investments 121,344 182,763 158,805 30.9 (13.1) 257,534 341,568 32.6

Revenues with held to maturity financial

investments 53,875 48,711 49,894 (7.4) 2.4 121,940 98,605 (19.1)

Judicial deposits 10,981 12,235 14,903 35.7 21.8 21,130 27,138 28.4

Receivables from insurance and

reinsurance operations 3,897 5,019 3,927 0.8 (21.7) 8,863 8,946 0.9

A djusted interest expenses (38,493) (52,400) (64,123) 66.6 22.4 (73,967) (116,523) 57.5

Pending claims (15,798) (28,620) (26,558) 68.1 (7.2) (32,710) (55,178) 68.7

Judicial provisions (10,153) (10,827) (11,615) 14.4 7.3 (20,183) (22,442) 11.2

Obligations with insurance and reinsurance

operations (12,542) (12,954) (25,950) 106.9 100.3 (21,074) (38,904) 84.6

N et interest inco me 151,604 196,327 163,407 7.8 (16.8) 335,499 359,734 7.2



Table 32 – Life, Mortgage Life and Rural | Quarterly figures - Volume and rate analysis¹

¹ Calculated with the same methodology of the parts. Due to the different weights of the elements which compose it, the total does not reflect the sum of the parts.

Table 33 – Life, Mortgage Life and Rural | Quarterly figures - Earning assets - average balance and interest rates

Table 34 – Life, Mortgage Life and Rural | Quarterly figures - Interest bearing liabilities - average balance and interest rates

R $ tho usand A verage vo lume A verage rate N et change

Earning assets

M ark to M arket financial investments 19,833 17,628 37,461

Held to maturity financial investments 3,896 (7,877) (3,981)

Judicial deposits 1,504 2,419 3,922

Receivables from insurance and reinsurance operations 962 (932) 30

T o tal 27,550 9,883 37,433

Interest bearing liabilit ies

Pending claims (4,967) (5,793) (10,760)

Judicial provisions (877) (585) (1,462)

Obligations with insurance and reinsurance operations (5,150) (8,259) (13,408)

T o tal (10,452) (15,178) (25,630)

2Q16/ 2Q15

R $ millio nA verage

balance

Interest

revenues

A nnualized

rate (%)

A verage

balance

Interest

revenues

A nnualized

rate (%)

Earning assets

M ark to M arket financial investments 3,850 121 13.7 4,400 159 15.2

Held to maturity financial investments 1,671 54 14.0 1,812 50 11.5

Judicial deposits 725 11 6.4 807 15 7.6

Receivables from insurance and reinsurance operations 472 4 3.5 625 4 2.5

T o tal 6,718 190 12.2 7,644 228 12.4

2Q15 2Q16


balance

Interest

expenses

A nnualized

rate (%)

A verage

balance

Interest

expenses

A nnualized

rate (%)


Pending claims 1,579 (16) 4.1 1,942 (27) 5.4

Judicial provisions 609 (10) 6.7 659 (12) 6.9

Obligations with insurance and reinsurance operations 249 (13) 19.3 310 (26) 29.5

T o tal 2,437 (38) 6.4 2,911 (64) 8.5

2Q15 2Q16


Table 35 – Life, Mortgage Life and Rural | Year-to-date figures - Volume and rate analysis¹


Table 36 – Life, Mortgage Life and Rural |Year-to-date figures - Earning assets - average balance and interest rates

Table 37 – Life, Mortgage Life and Rural | Year-to-date figures - Interest bearing liabilities - average balance and interest rates


Earning assets

M ark to M arket financial investments 56,296 27,738 84,034

Held to maturity financial investments (401) (22,933) (23,335)

Judicial deposits 2,744 3,264 6,008

Receivables from insurance and reinsurance operations 2,557 (2,474) 83

T o tal 60,395 6,396 66,791


Pending claims (6,730) (15,738) (22,468)

Judicial provisions (1,734) (524) (2,259)

Obligations with insurance and reinsurance operations (2,043) (15,787) (17,829)

T o tal (12,215) (30,341) (42,556)

1H 16/ 1H 15


balance

Interest

revenues

A nnualized

rate (%)

A verage

balance

Interest

revenues

A nnualized

rate (%)

Earning assets

M ark to M arket financial investments 3,881 258 14.2 4,646 342 15.5


Judicial deposits 719 21 6.2 800 27 7.0

Receivables from insurance and reinsurance operations 351 9 5.3 492 9 3.7

T o tal 6,748 409 12.9 7,728 476 12.9

1H 15 1H 16


balance

Interest

expenses

A nnualized

rate (%)

A verage

balance

Interest

expenses

A nnualized

rate (%)


Pending claims 1,515 (33) 4.4 1,725 (55) 6.4

Judicial provisions 603 (20) 6.8 654 (22) 6.9

Obligations with insurance and reinsurance operations 209 (21) 19.7 221 (39) 32.6

T o tal 2,327 (74) 6.5 2,600 (117) 8.9

1H 15 1H 16


Table 38 – Life, Mortgage Life and Rural | Financial investment portfolio

Figure 62 – Life, Mortgage Life and Rural | Breakdown of financial investments by index (%)

Figure 63 – Life, Mortgage Life and Rural | Breakdown of mark to market financial investments by index (%)


T rading 2,143,181 1,943,107 3,534,045 64.9 81.9

Pre-fixed 177,876 134,897 330,813 86.0 145.2

Floating 1,300,302 1,476,196 2,032,268 56.3 37.7

Inflation 3,343 796 795 (76.2) (0.1)

Other 661,660 331,218 1,170,170 76.9 253.3

A vailable fo r sale 1,879,010 2,291,477 1,030,807 (45.1) (55.0)

Pre-fixed 48,153 48,862 35,057 (27.2) (28.3)

Floating 333,961 417,960 369,584 10.7 (11.6)

Inflation 1,490,255 1,851,769 641,490 (57.0) (65.4)

Other 6,642 (27,114) (15,323) - (43.5)

H eld to maturity securit ies 1,702,760 1,808,819 1,815,278 6.6 0.4

Pre-fixed 430,677 451,583 432,894 0.5 (4.1)

Floating 122,824 136,178 140,963 14.8 3.5

Inflation 1,149,260 1,221,058 1,241,421 8.0 1.7

T o tal 5,724,951 6,043,403 6,380,130 11.4 5.6

B alance C hg. %

17.0 16.6 12.5 11.5 11.2 10.2 10.5 12.5

44.4 39.1 36.430.7 34.8

29.133.6 39.9

31.733.8 44.5

46.249.0

46.150.9 29.5

6.9 10.6 6.6 11.7 5.014.6

5.018.1

Sep/14 Dec/14 Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16

Pre-fixed Floating Inflation Other

6.9 8.3 7.3 5.6 5.5 4.7 4.3 8.0

66.855.6 49.3

40.6 46.137.2

44.752.6

15.320.2 33.8

37.141.3

38.1

43.7 14.1

10.9 15.9 9.616.6

7.120.0

7.2

25.3


Pre-fixed Floating Inflation Other


B A L A N C E S H E E T A N A L Y S I S

Table 39 – Life, Mortgage Life and Rural | Balance sheet

Table 40 – Life, Mortgage Life and Rural | Receivables from insurance and reinsurance operations


A ssets 13,786,809 14,924,580 15,478,783 12.3 3.7

Cash 62,017 171,159 107,590 73.5 (37.1)

Financial assets 5,724,951 6,043,403 6,380,130 11.4 5.6

Receivables from insurance and reinsurance operations 2,990,501 3,402,366 3,571,895 19.4 5.0

Reinsurance and retrocession - technical reserves 327,903 805,425 893,757 172.6 11.0

Securities and credits receivable 1,753,855 1,417,924 1,402,284 (20.0) (1.1)

Other 5,490 2,481 9,405 71.3 279.0

Prepaid expenses 9,745 32,699 22,650 132.4 (30.7)

Deferred costs 1,505,799 1,565,827 1,596,303 6.0 1.9

Investments 657,951 657,905 657,786 (0.0) (0.0)

Fixed assets 27,459 82,415 87,989 220.4 6.8

Intangible 721,137 742,976 748,994 3.9 0.8

Liabilit ies 10,220,311 11,551,217 11,679,101 14.3 1.1

Accounts payable 716,747 686,526 869,834 21.4 26.7

Obligations with insurance and reinsurance operations 1,414,549 1,837,779 1,545,560 9.3 (15.9)

Technical reserves - insurance 7,359,037 8,272,461 8,486,568 15.3 2.6

Third party deposits 112,976 101,218 112,406 (0.5) 11.1


Shareho lders' equity 3,566,498 3,373,364 3,799,682 6.5 12.6

B alance C hg. %


Receivable premiums 2,665,735 2,590,927 2,829,404 6.1 9.2

Operations with insurance companies 33,297 99,117 156,268 369.3 57.7

Premiums 16,480 16,966 15,287 (7.2) (9.9)

Claims paid 13,601 78,203 136,998 907.2 75.2

Other receivables 3,215 3,947 3,983 23.9 0.9

Operations with reinsurance companies 338,633 741,256 534,427 57.8 (27.9)

Premiums - - - - -

Claims paid 280,957 413,785 411,219 46.4 (0.6)

Other receivables 57,676 327,471 123,207 113.6 (62.4)

Other operating receivables 44,815 41,914 81,553 82.0 94.6

Impairment (91,979) (70,848) (29,757) (67.6) (58.0)

R eceivables fro m insurance and reinsurance

o perat io ns2,990,501 3,402,366 3,571,895 19.4 5.0

B alance C hg. %


Table 41 – Life, Mortgage Life and Rural | Reinsurance and retrocession – technical reserves

Table 42 – Life, Mortgage Life and Rural | Securities and credits receivable


Deferred premiums - PPNG 78,647 303,247 369,995 370.5 22.0

Deferred premiums - RVNE 6,380 8,258 8,617 35.1 4.3

Other deferred premiums (145) (145) (145) - -

IBNR claims 30,992 24,507 39,893 28.7 62.8

Pending claims 196,696 412,135 400,151 103.4 (2.9)

Provision for related expenses 2,812 2,852 3,485 23.9 22.2

Other provision 12,522 54,571 71,762 473.1 31.5

R einsurance and retro cessio n - technical reserves 327,903 805,425 893,757 172.6 11.0

B alance C hg. %


Securities and credits receivable 500,101 108,908 98,744 (80.3) (9.3)

Other tax and social security receivables 122,469 98,878 89,966 (26.5) (9.0)

Receivable tax and social security - tax loss 172,651 185,312 180,948 4.8 (2.4)

Receivable tax and social security - temporary adjustements 197,644 198,666 180,394 (8.7) (9.2)

Prepaid income tax and social contributions - - - - -

Tax and judicial deposits 741,993 806,963 831,668 12.1 3.1

Other receivables 24,342 19,236 20,604 (15.4) 7.1

Impairment (5,345) (40) (40) (99.3) -

Securit ies and credits receivable 1,753,855 1,417,924 1,402,284 (20.0) (1.1)

B alance C hg. %


Table 43 – Life, Mortgage Life and Rural | Accounts payable

Table 44 – Life, Mortgage Life and Rural | Obligations with insurance and reinsurance operations


Payable liabilities 116,584 116,501 135,795 16.5 16.6

Deferred taxes 284,059 276,349 273,753 (3.6) (0.9)

Social securities and taxes payable 12,965 14,685 12,581 (3.0) (14.3)

Labor charges 15,092 11,401 13,436 (11.0) 17.8

Taxes and contributions 265,800 195,214 317,772 19.6 62.8

Other accounts payable 22,248 72,376 116,498 423.6 61.0

A cco unts payable 716,747 686,526 869,834 21.4 26.7

B alance C hg. %


Premiums to return 4,112 80,101 35,221 756.5 (56.0)


Operations with reinsurance companies 422,431 910,171 545,646 29.2 (40.1)

Insurance and reinsurance brokers 808,727 665,204 736,538 (8.9) 10.7

Other operating obligations 158,194 148,364 190,817 20.6 28.6

Obligat io ns with insurance and reinsurance

o perat io ns1,414,549 1,837,779 1,545,560 9.3 (15.9)

B alance C hg. %


S O L V E N C Y

Table 45 – Life, Mortgage Life and Rural | Solvency¹

¹ Information based on the accounting principles of SUSEP (SUSEP GAAP).


M apfre Vida

A djusted shareho lders' equity (a) 298,559 289,128 303,671 1.7 5.0

M inimum capital required (b) 175,600 171,669 178,179 1.5 3.8

Additional capital for underwritting risk 157,820 154,624 160,289 1.6 3.7

Additional capital for credit risk 27,847 26,977 28,338 1.8 5.0

Additional capital for operating risk 2,171 1,940 2,003 (7.7) 3.2

Benefit o f correlation between risks (12,239) (11,873) (12,451) 1.7 4.9

C apital adequacy (a) - (b) 122,959 117,460 125,493 2.1 6.8

So lvency rat io (a) / (b) - % 170.0 168.4 170.4 0.4 p.p. 2.0 p.p.

A liança do B rasil

A djusted shareho lders' equity (a) 1,656,765 1,739,846 1,358,498 (18.0) (21.9)

M inimum capital required (b) 1,320,511 1,227,370 1,206,967 (8.6) (1.7)

Additional capital for underwritting risk 1,186,044 1,123,894 1,085,482 (8.5) (3.4)

Additional capital for credit risk 201,065 149,953 177,658 (11.6) 18.5

Additional capital for operating risk 22,205 21,486 22,619 1.9 5.3

Benefit o f correlation between risks (88,803) (67,964) (78,793) (11.3) 15.9

C apital adequacy (a) - (b) 336,253 512,477 151,532 (54.9) (70.4)

So lvency rat io (a) / (b) - % 125.5 141.8 112.6 -12.9 p.p. -29.2 p.p.

T o tal B B M apfre SH 1




Additional capital for credit risk 228,912 176,931 205,995 (10.0) 16.4





C hg. %B alance


4 . 2 P R O P E R T Y A N D C A S U A L T Y


Table 46 – Property and Casualty | Income statement

C hg. %


P remiums writ ten 2,324,756 2,173,922 2,283,537 (1.8) 5.0 4,445,260 4,457,459 0.3

Changes in technical reserves - premiums (127,706) 65,702 59,670 - (9.2) (78,615) 125,372 -

Earned premiuns 2,197,050 2,239,624 2,343,207 6.7 4.6 4,366,645 4,582,831 5.0


Claims incurred (1,253,277) (1,297,163) (1,286,609) 2.7 (0.8) (2,672,964) (2,583,772) (3.3)


Result with reinsurance (120,503) (263,887) (216,006) 79.3 (18.1) (100,658) (479,893) 376.8


Tax expenses (43,629) (43,463) (45,918) 5.2 5.6 (95,818) (89,381) (6.7)

Other operating income (expenses) (97,159) (67,896) (75,411) (22.4) 11.1 (191,114) (143,307) (25.0)

Underwrit ing result 44,811 (105,251) 62,400 39.3 - 56,305 (42,851) -


Financial income 172,897 156,929 132,438 (23.4) (15.6) 477,102 289,367 (39.3)

Financial expenses (36,637) 34,778 39,333 - 13.1 (182,678) 74,111 -

Equity income (1,594) (915) (806) (49.4) (11.9) (3,130) (1,721) (45.0)

Operat ing result 179,477 85,542 233,364 30.0 172.8 347,599 318,906 (8.3)

Gains or losses on non-current assets (603) (224) 897 - - (611) 673 -


sharing178,874 85,318 234,261 31.0 174.6 346,988 319,579 (7.9)

Taxes (62,631) (37,095) (97,062) 55.0 161.7 (126,772) (134,157) 5.8

Profit sharing (16,103) 2,272 (11,432) (29.0) - (21,253) (9,160) (56.9)

N et inco me 100,140 50,495 125,767 25.6 149.1 198,963 176,262 (11.4)



To provide a better analysis, the following table shows a managerial view built considering the reallocation of the result with

reinsurance to the other accounts that compose the Income Statement. This reallocation allows the analysis of the performance ratios

already considering the reinsurance effects.

Table 47 – Property and Casualty | Managerial income statement¹

¹ In accordance with Susep Rule 508, since 2016 the accouting of expenses with sales representatives changed from “other operating income (expenses)” to “acquisition costs”. Therefore, the managerial income statement of 2015 was adjusted for analysis purposes.

Retained premiums = Premiums written + premiums ceded to reinsurance Changes in technical provisions = Changes in technical provisions + changes in technical provisions on reinsured operations Retained claims = Claims incurred + recovery of indemnity claims + recovery of claims expenses + changes in provisions for claims IBNR + salvages and reimbursed assets + changes in provision for claims IBNER provisions for claims to be settled + changes of expenses related to IBNR + changes in estimates for salvages and reimbursed assets provisions for claims to be settled.

C hg. %


P remiums writ ten 2,324,756 2,173,922 2,283,537 (1.8) 5.0 4,445,260 4,457,459 0.3

Premiums ceded reinsurance (299,181) (418,109) (444,280) 48.5 6.3 (595,350) (862,389) 44.9



R etained earned premiuns 1,910,103 1,893,827 1,938,816 1.5 2.4 3,811,279 3,832,643 0.6


Claims retained (1,086,833) (1,215,253) (1,098,222) 1.0 (9.6) (2,218,257) (2,313,475) 4.3

Acquisition costs (440,888) (437,902) (438,806) (0.5) 0.2 (859,572) (876,708) 2.0


Tax expenses (43,629) (43,463) (45,918) 5.2 5.6 (95,818) (89,381) (6.7)

Other operating income (expenses) (73,777) (67,896) (75,411) 2.2 11.1 (139,954) (143,307) 2.4

Underwrit ing result 44,811 (105,251) 62,402 39.3 - 56,304 (42,849) -


Financial income 172,897 156,929 132,438 (23.4) (15.6) 477,102 289,367 (39.3)

Financial expenses (36,637) 34,778 39,333 - 13.1 (182,678) 74,111 -

Equity income (1,594) (915) (806) (49.4) (11.9) (3,130) (1,721) (45.0)

Operat ing result 179,477 85,542 233,364 30.0 172.8 347,598 318,906 (8.3)

Gains or losses on non-current assets (603) (224) 897 - - (611) 673 -


sharing178,874 85,318 234,261 31.0 174.6 346,987 319,579 (7.9)

Taxes (62,631) (37,095) (97,062) 55.0 161.7 (126,772) (134,157) 5.8

Profit sharing (16,103) 2,272 (11,432) (29.0) - (21,253) (9,160) (56.9)

A djusted net inco me 100,140 50,495 125,767 25.6 149.1 198,962 176,262 (11.4)




Figure 64 – Property and Casualty | Adjusted net income and ROAE

QUARTERLY ANALYSIS

In the 2Q16, the net income from the Property and Casualty business segment reached R$125.8 million, 25.6% up YoY. The performance is explained by the growth of 26.1% in the net investment income and by the 39.3% increase in the underwriting result, boosted by a 0.9 p.p. improvement in the combined ratio.

The annualized return on average equity reached 13.9% in the 2Q16, 1.5 p.p. higher YoY.


Year-to-date, the net income reached R$176.3 million, an 11.4% drop YoY, explained by the growth of 2.6 p.p. in the combined ratio due to the deterioration in both loss and commission ratios, partially offset by the improvement in the net investment income.

The annualized return on average equity reached 9.8%, 2.6 p.p. lower as compared to the 1H15.

¹Net of taxes considering the Company’s effective tax rate.

Table 48 – Property and Casualty | Managerial performance ratios

¹ Performance ratios calculated based on the managerial income statement, considering the reinsurance effects.

² It considers adjustments which can impact the performance ratios, detailed in the corresponding section, where applicable.

14-0.4

1 12-17 -17

-58

25

56 7298 89 116

136108

10171 71

99 10099

119

50126

9.5 9.312.6 12.4 11.8

13.8

5.8

13.9

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



Adjusted ROAE (%)

C hg.

(p.p.)

% 2Q15 1Q16 2Q16 On 2Q15 On 1Q16 1H 15 1H 16 On 1H 15

P erfo rmance rat io s¹

Loss ratio 56.9 64.2 56.6 (0.3) (7.5) 58.2 60.4 2.2

Commission ratio 23.1 23.1 22.6 (0.4) (0.5) 22.6 22.9 0.3

G&A ratio 17.8 18.7 17.8 (0.0) (0.9) 17.9 18.2 0.3

Combined ratio 97.7 105.6 96.8 (0.9) (8.8) 98.5 101.1 2.6

A djusted perfo rmance rat io s ¹ ²

Loss ratio 56.9 63.2 62.8 5.9 (0.3) 58.2 63.0 4.8


G&A ratio 17.8 18.7 18.3 0.5 (0.4) 17.9 18.5 0.6

Combined ratio 97.7 104.6 104.2 6.6 (0.4) 98.5 104.4 5.9

Other rat io s¹

Expanded combined ratio 91.2 95.9 88.9 (2.2) (6.9) 91.5 92.4 0.9

Income tax rate 35.0 43.5 41.4 6.4 (2.0) 36.5 42.0 5.4

Adjusted ROAE 12.4 5.8 13.9 1.6 8.1 12.5 9.8 (2.6)



U N D E R W R I T I N G R E S U L T

Figure 65 – Property and Casualty | Underwriting result QUARTERLY ANALYSIS

The underwriting result reached R$62.4 million in the 2Q16, 39.3% up YoY, explained by the 0.9 p.p. improvement in the combined ratio, as a result of lower loss and commission ratios, especially in casualty insurance.


In the 1H16, the underwriting result came negative in R$42.8 million, against a positive result of R$56.3 million in the 1H15. The performance was impacted by the deterioration of 2.6 p.p. in the combined ratio, explained by the increase in the loss ratio in both auto and casualty insurance segments.

¹Adjustments segregate the effects from the reallocation of the insurance segments, the strengthening and reversions of provision loan losses and the strengthening and reversions of IBNR and IBNER provisions.


Figure 66 – Property and Casualty | Net investment income (R$ million)

QUARTERLY ANALYSIS

In the 2Q16, net investment income grew by 26.1% YoY, driven by the increase in the average balance of financial investments as well as a higher return on interest earning assets.


In the 1H16, net investment income grew by 23.5% as compared to the same period of 2015, justified by the increase in the average balance of financial investments, as well as the higher average yield on interest earning assets.

4019 11

45

-5 -6

-105

6297.8 98.9

100.3

100.3

105.6

96.898.6

100.1 99.497.7

99.0

101.7

104.6

104.2

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Underwriting result (R$ mill ion) Combined ratio (%)

Adjusted combined ratio¹ (%)

92 100

158

136

183

206192

172

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


U N D E R W R I T I N G R E S U L T A N A L Y S I S

P R E M I U M S W R I T T E N

Figure 67 – Property and Casualty | Premiums written QUARTERLY ANALYSIS

In the 2Q16, premiums written totaled R$2.3 billion, 1.8% down YoY, explained by the retraction in the auto segment, partially offset by the increase in casualty insurance, concentrated in the independent broker channel.

The retention rate dropped 6.6 p.p. YoY, due to the increased share of the casualty segment in the sales mix of the quarter, which normally presents a higher volume of premiums ceded to reinsurance.


Year-to-date, premiums written grew by 0.3% as compared to the 1H15, supported by sales in both casualty and other segments. In auto insurance, premiums written dropped by 14.1% YoY.

Figure 68 – Property and Casualty | Premiums written in the bancassurance channel (R$ million)

Figure 69 – Property and Casualty | Premiums written in other channels (R$ million)

Table 49 – Property and Casualty | Breakdown of premiums written

Figure 70 – Property and Casualty | Breakdown of premiums written (%)

Figure 71 – Property and Casualty | Breakdown of retained premiums (%)

2,019 1,970 1,824 2,026 1,940 1,890 1,756 1,839

343 233296

299 481337 418 444

2,3632,203 2,121

2,325 2,4222,228 2,174 2,284

85.589.4 86.0 87.1

80.184.9

80.8 80.5

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Retained premiums (R$ million) Premiums ceded (R$ mill ion)

Retention rate (%)

739680

633688 701

630

511559

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

1,6241,523 1,488

1,6371,720

1,5981,663

1,724

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

C hg. %


Auto 1,340,037 1,032,637 1,100,789 (17.9) 6.6 2,483,112 2,133,426 (14.1)

Casualties 780,198 880,931 916,232 17.4 4.0 1,525,263 1,797,163 17.8

DPVAT 85,416 125,912 85,032 (0.5) (32.5) 207,977 210,944 1.4

Other 119,104 134,443 181,483 52.4 35.0 228,908 315,926 38.0

T o tal 2,324,756 2,173,922 2,283,536 (1.8) 5.0 4,445,260 4,457,458 0.3


55.258.6 53.9 57.6

52.254.9

47.5 48.2

34.332.7

35.1 33.639.5

36.240.5 40.1

7.4 6.5 5.2 5.1 5.5 6.8 6.2 7.9

3.1 2.2 5.8 3.7 2.9 2.1 5.8 3.7

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Auto Casualties Other DPVAT

64.6 65.5 62.6 66.2 65.1 64.9 58.8 59.8

23.225.2

24.7 23.8 24.5 24.626.4 25.7

8.6 6.96.0

5.8 6.8 8.07.6 9.8

3.6 2.5 6.7 4.2 3.6 2.5 7.2 4.6

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Auto Casualties Other DPVAT


C H A N G E S I N T E C H N I C A L R E S E R V E R S - P R E M I U M S

Table 50 – Property and Casualty | Changes in technical reserves – premiums

R E T A I N E D E A R N E D P R E M I U M S

Figure 72 – Property and Casualty | Retained earned premiums (R$ million)

QUARTERLY ANALYSIS

In the 2Q16, retained earned premiums increased by 1.5% YoY, boosted by casualty and other segments, partially offset by the weak performance in auto. Earned premiums were positively impacted in the 2Q16 by a reversal of provisions for unearned premiums, in the total amount of R$58.3 million, as a result of accountability adjustments along with the change in the risk-term of insurance policies hired to cover consortium groups, from yearly to monthly.


In the 1H16, retained earned premiums grew by 0.6%, boosted by the increase in both casualty and other segments, partially offset by

the weak performance in auto insurance.

Table 51 – Property and Casualty | Breakdown of retained earned premiums

C hg. %


Provision for unearned premiums (126,260) 77,597 60,522 - (22.0) (75,040) 138,120 -

Provision for administrative expenses -

DPVAT(139) (1,072) (138) (1.0) (87.1) (470) (1,209) 157.4

Provision for technical surplus (1,307) (10,824) (715) (45.3) (93.4) (3,105) (11,538) 271.6

C hange in technical reserves -

premiums(127,706) 65,702 59,670 - (9.2) (78,615) 125,372 -


1,794 1,8111,901 1,910 1,860 1,891 1,894 1,939

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

C hg. %


Auto 1,237,502 1,156,284 1,143,410 (7.6) (1.1) 2,430,015 2,299,694 (5.4)

Casualties 466,862 472,713 545,791 16.9 15.5 925,119 1,018,504 10.1

DPVAT 85,279 124,840 84,894 (0.5) (32.0) 207,508 209,734 1.1

Other 120,459 139,991 164,720 36.7 17.7 248,637 304,711 22.6

T o tal 1,910,103 1,893,827 1,938,816 1.5 2.4 3,811,279 3,832,643 0.6



R E T A I N E D C L A I M S

Figure 73 – Property and Casualty | Retained claims QUARTERLY ANALYSIS

In the 2Q16, the loss ratio dropped 0.3 p.p. YoY, driven by the improvement in casualty and other segments, partially offset by the 4.1 p.p. deterioration in the auto insurance.

It is worth noting that the improvement in the loss ratio was positively impacted by:

(i) the R$58.3 million reversal in provisions for unearned premiums, as a result of accountability adjustments and along with a change in the risk-term of insurance policies hired to cover consortium groups, from yearly to monthly; and

¹Adjustments segregate the effects from the strengthening and reversions of IBNR and IBNER provisions.

(ii) the R$83.5 million reversal of IBNER and IBNR provisions, as a result of changes in the methodology of calculation, that began

to incorporate estimates of revenues with salvages, in addition to the increase in claims in the first semester, which led to the

reversals of these provisions, since once reported, claims automatically become part of the provision for claims to be settled.

Setting apart these effects, the loss ratio would have been of 62.8%, 5.9 p.p. higher YoY.


In the 1H16, the loss ratio worsened by 2.2 p.p. as compared to the same period of 2015, justified by the increase in claims in both auto

and casualty segments, partially offset by the improvement in the loss ratio in the other segment.

In the semester, in addition to the reversals mentioned in the quarterly analysis, the IBNR and IBNER provisions were strengthened by

R$18.5 million in the first quarter, with an impact in the loss ratio. Setting apart these effects, the loss ratio would have been of 63.0%,

4.8 p.p. higher as compared to the 1H15.

Table 52 – Property and Casualty | Breakdown of retained claims

1,009 1,0421,131 1,087 1,064 1,045

1,2151,098

55.3

64.2

56.6

56.2 57.659.5

56.9 57.2 58.063.2

62.8

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Retained claims (R$ million) Loss ratio (%)

Adjusted loss ratio¹ (%)

C hg. %


C laims incurred (1,253,277) (1,297,163) (1,286,608) 2.7 (0.8) (2,672,964) (2,583,772) (3.3)

Expenses with claims (1,300,085) (1,260,705) (1,387,052) 6.7 10.0 (2,728,792) (2,647,757) (3.0)

Changes in provisions for claims IBNR (34,347) (70,971) (25,214) (26.6) (64.5) (46,265) (96,186) 107.9

Changes in provisions for claims IBNER 11,758 (25,448) 20,837 77.2 - (31,730) (4,612) (85.5)

Changes of expenses related to IBNR (126) (23) 116 - - 101 93 (7.7)

Recovery of claims - Coinsurance 17,134 14,051 (19,193) - - 22,665 (5,142) -

Recovery of claims - Reinsurance 166,444 81,910 188,387 13.2 130.0 454,708 270,297 (40.6)

Salvage 70,840 77,840 92,577 30.7 18.9 152,935 170,418 11.4

Reimbursements 26,510 35,051 37,535 41.6 7.1 50,819 72,586 42.8

Change in estimates of salvaged and

reimbursement12,575 198 58,599 366.0 29,530.1 26,721 58,797 120.0

Assistance services (57,535) (67,156) (64,814) 12.7 (3.5) (119,417) (131,969) 10.5

R etained claims (1,086,833) (1,215,253) (1,098,222) 1.0 (9.6) (2,218,257) (2,313,475) 4.3

A djustments - 18,518 (83,506) - - - (64,988) -

Strengthening of IBNR and IBNER

provisions- 18,518 - - - - 18,518 -

Reversal of IBNR and IBNER provisions - - (83,506) - - - (83,506) -

A djusted retained claims (1,086,833) (1,196,735) (1,181,728) 8.7 (1.3) (2,218,257) (2,378,463) 7.2




Figure 74 – Property and Casualty | Acquisition costs QUARTERLY ANALYSIS

In the 2Q16, the commission ratio dropped by 0.5 p.p. YoY. The improvement was concentrated in the bancassurance channel, partially offset by the deterioration in the independent broker channel.

Setting apart the effect of the reversal of the provision for unearned premiums, amounting to R$58.3 million, the commission ratio would have been of 23.3%, 0.2 p.p. higher as compared to the 2Q15, explained by the increase in the independent broker channel as well as the increased share of the casualty segment in the sales mix, which present higher commission ratio when compared to the other segments.


In the 1H16, the commission ratio increased by 0.3 p.p. as compared to the 1H15. When adjusting the ratio by the reversal of the

provision for unearned premiums, the increase would have been of 0.7 p.p. The performance is explained by the increase in the

commission ratio for the independent broker channel, as well as the increased share of the casualty segment in the sales mix, which

present a higher commission ratio when compared to other segments.

Table 53 – Property and Casualty | Acquisition costs

400428 419 441 443 429 438 439

22.323.6

22.023.1 23.8

22.7 23.1 22.6

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


C hg. %


Comission charged on premiums written (342,310) (316,722) (323,496) (5.5) 2.1 (650,881) (640,218) (1.6)

Agency commission (40,414) (30,521) (47,410) 17.3 55.3 (66,665) (77,931) 16.9

Commissions recovered - Coinsurance 844 1,545 344 (59.2) (77.7) 1,939 1,889 (2.6)

Change in deferred acquisition costs 12,716 (32,672) (15,042) - (54.0) (5,085) (47,714) 838.3

Other acquisition costs (71,724) (59,533) (53,202) (25.8) (10.6) (138,880) (112,734) (18.8)

A cquisit io n co sts (440,888) (437,902) (438,806) (0.5) 0.2 (859,572) (876,708) 2.0




Figure 75 – Property and Casualty | G&A expenses QUARTERLY ANALYSIS

In the 2Q16, the G&A ratio remained flat as compared to the same

period of 2015. Segregating the effect of the reversal of provision

for unearned premiums, which boosted the earned premiums in

the period, the ratio would have reached 18.3%, 0.5 p.p. higher

YoY. The increase in the G&A ratio is largely explained by higher

expenses with outsourcing and charging.


In the 1H16, the G&A ratio came 0.3 p.p. higher YoY, due to the increase in the administrative expenses line, mostly given to the growth in location and operation expenses due to higher rental costs.

¹Adjustments segregate the effects from the reallocation of the insurance segments and the strengthening and reversions of provisions for loan losses.

Table 54 – Property and Casualty | General & Administrative expenses

214 214 224 222 226 242 242 223

89 61 66 74103

12368 75

4448 52 44

4060

43 46

346323

343340

369

426

354 344

19.317.8 18.0

17.819.8

22.5

18.7

17.8

20.1 19.0

18.6

21.218.3

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Tax expenses (R$ million)

Other operating income (expenses) (R$ million)

Administrative expenses (R$ million)

G&A ratio (%)

Adjusted G&A ratio¹ (%)

C hg. %


A dministrat ive expenses (222,134) (242,247) (222,897) 0.3 (8.0) (446,384) (465,142) 4.2

Personnel (123,744) (126,815) (115,597) (6.6) (8.8) (241,453) (242,412) 0.4

Outsourcing (43,338) (48,718) (47,824) 10.4 (1.8) (93,012) (96,542) 3.8

Location and operation (52,865) (62,082) (54,687) 3.4 (11.9) (102,629) (116,769) 13.8

Institutional advertisement and publicity (4,324) (1,942) (3,271) (24.4) 68.4 (6,985) (5,212) (25.4)

Releases (238) (647) (46) (80.9) (93.0) (832) (693) (16.7)

Other administrative expenses 2,376 (2,043) (1,472) - (27.9) (1,472) (3,513) 138.6

Other o perat ing inco me (expenses) (73,777) (67,896) (75,411) 2.2 11.1 (139,954) (143,307) 2.4

FESR contributions - 0 2 - 455.5 - 2 -

Charging expenses (6,300) (12,784) (9,828) 56.0 (23.1) (15,202) (22,613) 48.8

Civil contingencies 4,276 (2,051) 4,984 16.6 - (3,642) 2,933 -

Events expenses (4,000) (430) (3,825) (4.4) 789.3 (7,012) (4,255) (39.3)

Endomarketing (3,680) (14) (4,628) 25.8 31,970.8 (3,683) (4,643) 26.0

Social contributions (668) (325) - - - (1,366) (325) (76.2)

Impairment (8,867) (17,200) (4,015) (54.7) (76.7) (13,564) (21,215) 56.4

Other operating income (expenses) (54,539) (35,091) (58,101) 6.5 65.6 (95,485) (93,192) (2.4)

T ax expenses (43,629) (43,462) (45,919) 5.2 5.7 (95,818) (89,381) (6.7)

COFINS (34,291) (32,638) (35,040) 2.2 7.4 (75,385) (67,679) (10.2)

PIS (5,661) (5,391) (5,552) (1.9) 3.0 (12,419) (10,943) (11.9)

Inspection fee (2,112) (2,779) (2,779) 31.6 0.0 (4,225) (5,558) 31.6

Other tax expenses (1,565) (2,654) (2,548) 62.8 (4.0) (3,789) (5,202) 37.3

G&A (339,541) (353,606) (344,226) 1.4 (2.7) (682,157) (697,830) 2.3



Auto Insurance

Table 55 – Auto Insurance | Key figures

QUARTERLY ANALYSIS

In the 2Q16, auto insurance premiums written amounted to R$1.1 billion, 17.9% down YoY, largely impacted by the reduction in the

sales of brand new cars, which resulted in the 8.0% drop in the insured fleet. The fall in premiums written was also impacted by the

sales mix of the 2Q15, when the increased sales of the multi-annual modality anticipated part of the 2016 issuances.


In the 1H16, premiums written dropped by 14.1% YoY, impacted by the reduction in the sales of brand new cars along with the fact that

the 1H15 sales mix presented increased sales of the multi-annual modality in the bancassurance channel, which anticipated part of the

2016 issuances.

Figure 76 – Auto Insurance | Premiums written (R$ million) Figure 77 – Auto Insurance | Insured fleet (thousand)

Figure 78 – Auto Insurance | Premiums written in bancassurance channel (R$ million)

Figure 79 – Auto Insurance | Premiums written in other channels (R$ million)

C hg. %


P remiums writ ten 1,340,037 1,032,637 1,100,789 (17.9) 6.6 2,483,112 2,133,426 (14.1)

Premiums ceded to reinsurance (104) (790) 4 - - (1,412) (786) (44.3)



Earned premiuns 1,237,502 1,156,284 1,143,410 (7.6) (1.1) 2,430,015 2,299,694 (5.4)

Retained claims (769,788) (826,216) (757,778) (1.6) (8.3) (1,547,702) (1,583,994) 2.3

Acquisition costs (208,215) (203,686) (192,229) (7.7) (5.6) (401,084) (395,914) (1.3)

Underwrit ing margin 259,500 126,382 193,403 (25.5) 53.0 481,230 319,785 (33.5)


1,305 1,2901,143

1,3401,263 1,223

1,0331,101

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

2,825 2,870 2,879 2,889 2,850 2,806 2,759 2,659

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

551 532

473513 527

460

376403

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

754 758

670

827

736763

657697

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


Figure 80 – Auto Insurance | Underwriting margin (R$ million) Figure 81 – Auto Insurance | Underwriting margin by distribution channel (%)

QUARTERLY ANALYSIS

In the 2Q16, the underwriting margin in the auto segment dropped by 4.1 p.p. YoY. The retraction is explained by the increase in the

loss ratio, as a result of the higher frequency of robbery and theft in the period. The commission ratio remained stable presenting a 0.5

p.p. increase in the independent broker channel which was offset by the 1.0 p.p. drop in the bancassurance channel.


Year-to-date, the underwriting margin reached 13.9%, 5.9 p.p. down as compared to the 1H15, justified by the 5.2 p.p. increase in the

loss ratio, largely explained by the higher frequency of theft and robbery in the period.

In the 1H16, the commission ratio reached 17.2%, 0.7 p.p. up YoY, concentrated in the independent broker channel.

Figure 82 – Auto Insurance | Loss ratio (%) Figure 83 – Auto Insurance | Commission ratio (%)

210196

222

259

209

264

126

193

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

18.216.5

18.621.0

17.4

21.3

10.9

16.9

28.0

22.523.9

26.3 25.7

31.6

19.4

22.6

11.6 12.715.1

17.7

12.015.0

5.9

13.6

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


65.665.4 65.2

62.265.1

61.2

71.5

66.3

61.8 65.0

60.562.0

56.8

68.4

65.2

68.165.5 65.4

63.3

67.1

63.9

73.2

66.9

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


16.3

18.0

16.216.8 17.5 17.5 17.6

16.8

10.2

12.111.1

13.212.3 11.6 12.2 12.2

20.321.9

19.5 19.020.8 21.1 20.8

19.5

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



Casualty Insurance

Table 56 – Casualty Insurance | Key figures

QUARTERLY ANALYSIS

In the 2Q16, casualty insurance premiums written amounted to R$916.2 million, 17.4% up YoY, boosted by higher sales of large risks

insurance in the independent broker channel. The premiums written in the bancassurance channel decreased 11.0% YoY.


In the 1H16, casualty insurance premiums written amounted to R$1.8 billion, 17.8% higher as compared to the 1H15, concentrated in

the independent broker channel which grew 26.4%. In the semester, premiums in the bancassurance channel decreased 12.9%.

Figure 84 – Casualty Insurance | Premiums written (R$ million) Figure 85 – Casualty Insurance | Breakdown of premiums written (%)

Figure 86 – Casualty Insurance | Premiums written in bancassurance channel (R$ million)

Figure 87 – Casualty Insurance | Premiums written in other channels (R$ million)

C hg. %


P remiums writ ten 780,198 880,931 916,232 17.4 4.0 1,525,263 1,797,163 17.8


R etained premiums 481,790 464,068 472,325 (2.0) 1.8 932,363 936,394 0.4

Changes in technical reserves - premiums (14,928) 8,644 73,466 - 749.9 (7,244) 82,110 -

Earned premiuns 466,862 472,713 545,791 16.9 15.5 925,119 1,018,504 10.1

Retained claims (209,904) (249,639) (235,022) 12.0 (5.9) (417,552) (484,661) 16.1


Underwrit ing margin 87,381 42,671 117,631 34.6 175.7 189,380 160,302 (15.4)


811

720 745780

956

805881

916

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

77.0 79.7 78.7 77.7 81.9 79.084.7 83.1

23.0 20.3 21.3 22.3 18.1 21.015.3 16.9

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Other channels Bancassurance

187

146159

174 173 169

135

155

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

625574 586 606

783

636

746 762

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


Figure 88 – Casualty Insurance | Underwriting margin QUARTERLY ANALYSIS

In the 2Q16, the underwriting margin in the casualty segment rose 2.9 p.p. YoY, justified by the improvement of 1.9 p.p. in the loss ratio along with the 0.9 p.p. decrease in the commission ratio.

In the quarter, the underwriting margin was impacted by:

(i) the reversal of IBNER and IBNR provisions, which amounted to R$50.2 million, as a result of an increase in claims notices in the first semester, which led to a reversal of these provisions, since once reported, these claims automatically become part of the provision for claims to be settled; and

(ii) the reversal of R$58.3 million in provisions for unearned premiums related to the warranty risk insurance hired for consortium

groups, due to the change in the risk-term of this insurance, from yearly to monthly.


In the 1H16, the underwriting margin in the casualty segment reached 15.7%, 4.7 p.p. down YoY. The performance was impacted by the

deterioration in both loss and commission ratios.

Figure 89 – Casualty Insurance | Loss ratio (%) Figure 90 – Casualty Insurance | Commission ratio (%)

105

87

10287

105 105

43

118

27.4

20.322.3

18.722.6 22.3

9.0

21.6

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


29.1

43.6 45.3 45.040.4

46.1

52.8

43.1

22.9

32.0 33.6 34.0 32.5

43.4

49.9

2.0

33.5

49.2 51.0 50.344.0

47.2

53.9

63.4

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


43.5

36.1

32.4

36.3 37.1

31.6

38.2

35.4

39.1

42.6

39.9 40.1 40.0 39.9

44.5

34.1

46.7

33.0

28.8

34.5 35.7

28.1

35.8

36.0

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



DPVAT

Table 57 – DPVAT | Key figures

Other

Table 58 – Other | Key figures

C hg. %


P remiums writ ten 85,416 125,912 85,032 (0.5) (32.5) 207,977 210,944 1.4

R etained premiums 85,416 125,912 85,032 (0.5) (32.5) 207,977 210,944 1.4

Changes in technical reserves - premiums (137) (1,072) (138) 0.5 (87.1) (469) (1,209) 158.0

Earned premiuns 85,279 124,840 84,894 (0.5) (32.0) 207,508 209,734 1.1

Retained claims (74,798) (108,879) (72,582) (3.0) (33.3) (182,800) (181,462) (0.7)

Acquisition costs (1,244) (1,763) (1,191) (4.2) (32.5) (2,941) (2,954) 0.4



C hg. %


P remiums writ ten 119,104 134,443 181,483 52.4 35.0 228,908 315,926 38.0

Premiums ceded to reinsurance (669) (457) (377) (43.7) (17.6) (1,038) (834) (19.7)

R etained premiums 118,434 133,986 181,106 52.9 35.2 227,870 315,092 38.3

Changes in technical reserves - premiums 2,025 6,005 (16,386) - - 20,768 (10,381) -

Earned premiuns 120,459 139,991 164,720 36.7 17.7 248,637 304,711 22.6

Retained claims (32,343) (30,518) (32,839) 1.5 7.6 (70,203) (63,358) (9.8)

Acquisition costs (61,852) (52,051) (52,249) (15.5) 0.4 (137,360) (104,300) (24.1)

Underwrit ing margin 26,263 57,422 79,632 203.2 38.7 41,073 137,054 233.7




Figure 91 – Property and Casualty | Financial investments return over the CDI¹ (%)

QUARTERLY ANALYSIS

In the 2Q16, the net investment income grew by 26.1% YoY, driven by the higher average return on interest earning assets as well as the higher average balance of financial investments. The increase in the average yield is directly linked to a higher average Selic rate, partially offset by lower inflation indexes, which negatively impacted the yield on inflation protected securities classified as held to maturity.


In the 1H16, net investment income grew by 23.5%, justified by the expansion in the average balance of financial investments as well as the higher yield on interest earning assets.

¹Change calculated based on the daily Selic rate and the daily return measured on the company´s financial investments, net of management fee.

Table 59 – Property and Casualty | Financial investments portfolio

Figure 92 – Property and Casualty | Breakdown of financial investments by index (%)

Figure 93 – Property and Casualty | Breakdown of mark to market financial investments by index (%)

93.3 98.6

130.6

106.097.3

106.8 102.9 101.7

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


T rading 1,473,121 1,696,184 2,331,329 58.3 37.4

Pre-fixed 154,123 - - - -

Floating 820,425 1,086,513 1,745,520 112.8 60.7

Inflation 441 451 490 11.3 8.9

Other 498,133 609,221 585,319 17.5 (3.9)

A vailable fo r sale 1,074,726 1,184,966 595,864 (44.6) (49.7)

Pre-fixed 158,733 183,216 92,667 (41.6) (49.4)

Floating 198,482 305,373 389,982 96.5 27.7

Inflation 637,740 640,832 67,841 (89.4) (89.4)

Other 79,771 55,544 45,374 (43.1) (18.3)

H eld to maturity securit ies 1,522,357 1,561,836 1,646,356 8 .1 5.4

Pre-fixed 633,703 617,914 631,198 (0.4) 2.1

Floating 121,586 134,806 183,261 50.7 35.9

Inflation 767,068 809,117 831,896 8.5 2.8

T o tal 4,070,204 4 ,442,987 4 ,573,549 12.4 2.9

B alance C hg. %

44.637.5 29.1

28.0 28.726.5

34.450.7

20.024.4

22.8 23.3 19.3 20.3

18.0

15.8

18.5 23.933.8 34.5 37.8 38.9 32.6

19.7

16.8 14.2 14.3 14.2 14.2 14.3 15.0 13.8


Floating Pre-fixed Inflation Others

62.352.3 40.9

40.0 40.036.7

48.3

73.0

9.515.3

11.5 12.3 7.3 8.8

6.4

3.22.5 10.4

24.6 25.030.6 32.2

22.3 2.3

25.7 22.0 23.0 22.7 22.1 22.3 23.1 21.5


Floating Pre-fixed Inflation Others



Table 60 – Property and Casualty | Balance sheet

Table 61 – Property and Casualty | Receivables from insurance and reinsurance operations


A ssets 14,258,088 14,741,062 14,484,008 1.6 (1.7)

Cash 282,384 208,719 167,962 (40.5) (19.5)


Receivables from insurance and reinsurance operations 4,335,529 4,285,776 3,972,081 (8.4) (7.3)

Reinsurance and retrocession - technical reserves 1,980,272 2,152,134 2,163,390 9.2 0.5

Securities and credits receivable 1,539,206 1,682,799 1,652,805 7.4 (1.8)

Other 352,757 334,354 348,404 (1.2) 4.2

Prepaid expenses 26,207 25,537 16,763 (36.0) (34.4)

Deferred costs 774,740 756,598 739,546 (4.5) (2.3)

Investments 264,998 258,585 258,618 (2.4) 0.0

Fixed assets 119,934 110,064 89,714 (25.2) (18.5)

Intangible 511,857 483,509 501,176 (2.1) 3.7

Liabilit ies 10,965,566 11,243,854 10,751,720 (2.0) (4.4)

Accounts payable 747,568 756,274 740,426 (1.0) (2.1)

Obligations with insurance and reinsurance operations 1,720,664 1,567,807 1,270,426 (26.2) (19.0)

Technical reserves - insurance 7,632,888 8,057,850 7,963,607 4.3 (1.2)

Third party deposits 254,347 192,063 110,455 (56.6) (42.5)

Other liabilities 610,099 669,859 666,805 9.3 (0.5)


B alance C hg. %


Receivable premiums 3,303,579 3,204,831 3,164,516 (4.2) (1.3)

Operations with insurance companies 144,197 130,992 106,241 (26.3) (18.9)

Premiums 68,506 81,596 56,582 (17.4) (30.7)

Claims paid 25,630 31,700 32,165 25.5 1.5

Other receivables 50,061 17,695 17,495 (65.1) (1.1)

Operations with reinsurance companies 804,625 1,012,280 641,089 (20.3) (36.7)

Premiums - - - - -

Claims paid 700,893 722,428 599,755 (14.4) (17.0)

Other receivables 103,733 289,853 41,334 (60.2) (85.7)

Other operating receivables 179,021 122,030 243,418 36.0 99.5

Impairment (95,893) (184,356) (183,184) 91.0 (0.6)

R eceivables fro m insurance and reinsurance

o perat io ns4,335,529 4,285,776 3,972,081 (8.4) (7.3)

B alance C hg. %


Table 62 – Property and Casualty | Reinsurance and retrocession – technical reserves

Table 63 – Property and Casualty | Securities and credit receivable

Table 64 – Property and Casualty | Accounts payable

Table 65 – Property and Casualty | Obligations with insurance and reinsurance operations


Deferred premiums - PPNG 582,604 777,449 757,919 30.1 (2.5)

Deferred premiums - RVNE 134,095 137,883 146,072 8.9 5.9

IBNR claims 92,804 102,762 105,570 13.8 2.7

Pending claims 1,149,443 1,109,750 1,128,698 (1.8) 1.7

Provision for related expenses 21,327 24,291 25,131 17.8 3.5

R einsurance and retro cessio n - technical reserves 1,980,272 2,152,134 2,163,390 9.2 0.5

B alance C hg. %


Securities and credits receivable 225,415 225,159 209,073 (7.2) (7.1)

Other tax and social security receivables 42,836 66,012 71,421 66.7 8.2

Receivable tax and social security - tax loss 321,377 334,507 332,086 3.3 (0.7)

Receivable tax and social security - temporary adjustements 228,480 278,025 251,060 9.9 (9.7)

Tax and judicial deposits 693,558 731,194 746,542 7.6 2.1

Other receivables 36,914 55,617 63,426 71.8 14.0

Impairment (9,374) (7,715) (20,803) 121.9 169.6

Securit ies and credits receivable 1,539,206 1,682,799 1,652,805 7.4 (1.8)

B alance C hg. %


Payable liabilities 348,686 381,584 256,346 (26.5) (32.8)

Deferred taxes 53,208 52,245 51,593 (3.0) (1.2)

Social securities and taxes payable 199,733 218,749 192,799 (3.5) (11.9)

Labor charges 42,036 39,746 46,906 11.6 18.0

Taxes and contributions 48,769 15,859 62,508 28.2 294.1

Other accounts payable 55,136 48,090 130,275 136.3 170.9

A cco unts payable 747,568 756,274 740,426 (1.0) (2.1)

B alance C hg. %


Premiums to return 16,109 28,157 18,154 12.7 (35.5)


Operations with reinsurance companies 1,109,101 987,839 715,583 (35.5) (27.6)

Insurance and reinsurance brokers 340,700 308,714 323,944 (4.9) 4.9

Other operating obligations 137,950 103,439 55,890 (59.5) (46.0)

Obligat io ns with insurance and reinsurance o perat io ns 1,720,664 1,567,807 1,270,426 (26.2) (19.0)

B alance C hg. %


S O L V E N C Y

Table 66 – Property and Casualty | Solvency¹

¹ Information based on the accounting principles adopted by SUSEP.


B rasilveí culo s

A djusted shareho lders' equity (a) 564,532 536,072 492,138 (12.8) (8.2)

M inimum capital required (b) 480,374 456,871 444,336 (7.5) (2.7)

Additional capital for underwritting risk 430,604 409,483 398,409 (7.5) (2.7)

Additional capital for credit risk 66,236 62,393 60,195 (9.1) (3.5)

Additional capital for operating risk 13,118 12,891 12,670 (3.4) (1.7)

Benefit o f correlation between risks (29,584) (27,896) (26,938) (8.9) (3.4)



A liança do B rasil Seguro s

A djusted shareho lders' equity (a) 204,522 212,789 211,165 3.2 (0.8)






C apital adequacy (a) - (b) 77,404 90,721 89,993 16.3 (0.8)

So lvency rat io (a) / (b) - % 160.9 174.3 174.3 13.4 p.p. -0.1 p.p.

M A P F R E Seguro s Gerais

A djusted shareho lders' equity (a) 1,379,188 1,651,179 1,925,756 39.6 16.6

M inimum capital required (b) 1,014,912 1,036,194 1,041,404 2.6 0.5

Additional capital for underwritting risk 874,921 888,235 893,331 2.1 0.6






T o tal M A P F R E B B SH 2

A djusted shareho lders' equity (a) 2,148,242 2,400,040 2,629,060 22.4 9.5






C apital adequacy (a) - (b) 525,837 784,906 1,022,149 94.4 30.2


C hg. %B alance


4 . 3 P E N S I O N P L A N S


Table 67 – Pension Plans | Income statement

C hg. %


Inco me and premiums co ntribut io n 10,749,856 7,898,302 13,922,494 29.5 76.3 19,223,589 21,820,796 13.5

Provision for benefits to be granted (10,706,286) (7,850,075) (13,872,139) 29.6 76.7 (19,140,037) (21,722,214) 13.5

N et revenue with co ntribut io ns and

VGB L premiums43,570 48,227 50,355 15.6 4.4 83,552 98,582 18.0

M anagement fee 370,450 430,217 474,295 28.0 10.2 715,007 904,512 26.5

Changes in other technical reserves 35,301 (11,041) (30,732) - 178.3 (28,234) (41,773) 48.0

Expenses with benefits, redemptions and

claims(70,493) (21,325) (13,636) (80.7) (36.1) (37,273) (34,961) (6.2)


Earned premiums 49,958 46,703 54,075 8.2 15.8 99,790 100,778 1.0

Contributions to cover risks 49,572 49,311 49,225 (0.7) (0.2) 99,679 98,536 (1.1)

Changes in technical reserves -premiums 386 (2,608) 4,850 1,156.5 - 111 2,242 1,913.7

Gro ss inco me 330,646 387,345 436,817 32.1 12.8 642,640 824,162 28.2

Administrative expenses (74,678) (79,291) (83,570) 11.9 5.4 (145,532) (162,861) 11.9

Tax expenses (31,055) (35,928) (38,679) 24.5 7.7 (59,596) (74,607) 25.2

Other operating income (expenses) (6,064) (10,621) (10,074) 66.1 (5.1) (12,918) (20,695) 60.2

R esult with pensio n plans and

insurance218,849 261,506 304,495 39.1 16.4 424,594 565,999 33.3

N et investment inco me 129,824 145,029 136,230 4.9 (6.1) 293,077 281,259 (4.0)

Financial income 3,634,397 5,512,078 5,129,648 41.1 (6.9) 6,735,090 10,641,726 58.0

Financial expenses (3,504,573) (5,367,049) (4,993,418) 42.5 (7.0) (6,442,013) (10,360,467) 60.8

Equity income - - - - - - - -

Operat ing result 348,673 406,534 440,724 26.4 8.4 717,670 847,258 18.1

Gains or losses on non-current assets 50 - 85 70.8 - 67 85 27.5


sharing348,723 406,534 440,809 26.4 8.4 717,737 847,343 18.1

Taxes (136,196) (180,466) (195,757) 43.7 8.5 (281,804) (376,223) 33.5

Profit sharing (3,000) (3,246) (3,186) 6.2 (1.8) (6,335) (6,432) 1.5

A djusted net inco me 209,527 222,822 241,866 15.4 8.5 429,598 464,688 8.2

One-o ff events 294,091 - - - - 294,091 - -

Reversal o f technical provisions 514,056 - - - - 514,056 - -

Reversal o f technical provisions - impact on

financial results- - - - - - - -

Tax expenses on one-off events (23,904) - - - - (23,904) - -

Taxes on one-off events (196,061) - - - - (196,061) - -

N et inco me 503,618 222,822 241,866 (52.0) 8.5 723,689 464,688 (35.8)




Figure 94 – Pension Plans | Adjusted net income and ROAE QUARTERLY ANALYSIS

The net income of the Pension Plans business reached R$241.9 million in the 2Q16, 15.4% higher YoY. When compared to the 2Q15, the performance was impacted by the increase of the income tax rate, namely the social contribution (“CSLL"), from 15% to 20%, since September 2015, pursuant to Law 13,169 / 15.

The earnings before taxes and profit sharing was of R$440.8 million in the quarter, 26.4% higher YoY. The growth was supported by the improvement in the non-interest operating result, driven by both the higher revenues with management fees and a better cost to income ratio.

The annualized return on average equity reached 39.0% in the 2Q16, 1.3 p.p. higher when compared to the same period of 2015.

¹ Net of taxes considering the effective tax rate


In the 1H16, the net income reached R$464.7 million, 8.2% up YoY,. The performance was impacted by the increase in the income tax rate, namely the social contribution (“CSLL”), as previously discussed.

The earnings before taxes and profit sharing reached R$847.3 million in the semester, equivalent to an 18.1% growth as compared to the same period of 2015. The improvement of this line came from the increase in the non-interest operating result, explained by higher revenues with management fees as well as a better cost to income ratio, partially offset by the lower net investment income.

The annualized return on average equity reached 37.0% in the 1H16, 1.6 p.p. lower YoY, impacted by a higher earnings retention after the 2Q15, in order to be prepared for the capital requirement for market risk, which inflated the basis for the average equity calculation when compared to the 1H15.

Table 68 – Pension Plans | Performance ratios

119 121 121 130 156 133 142 166

67 80 99 7966

77 8176

186 201220 210 223 209 223

242

48.9 46.1 44.637.7 38.0 36.1 37.3 39.0

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



Adjusted ROAE (%)

C hg. (p.p.)

% 2Q15 1Q16 2Q16 On 2Q15 On 1Q16 1H 15 1H 16 On 1H 15

Commission ratio 0.9 1.3 0.7 (0.2) (0.6) 1.0 0.9 (0.1)

Load fee 0.4 0.6 0.4 (0.0) (0.2) 0.4 0.5 0.0

M anagement fee 1.22 1.17 1.16 (0.06) (0.01) 1.23 1.16 (0.07)

Redemption ratio 9.3 9.2 8.4 (0.9) (0.7) 9.2 8.8 (0.4)

Cost to income ratio 52.8 50.2 47.4 (5.4) (2.8) 52.7 48.7 (4.0)

Income tax rate 39.1 44.4 44.4 5.4 0.0 39.3 44.4 5.1

Adjusted ROAE 37.7 37.3 39.0 1.3 1.7 38.6 37.0 (1.6)



R E S U L T W I T H P E N S I O N P L A N S A N D I N S U R A N C E

Figure 95 – Pension Plans | Result with pension plans and insurance and Cost to income ratio

QUARTERLY ANALYSIS

The result with pension plans and insurance grew by 39.1% YoY, driven mainly by the increase of 28.0% in revenues with management fees, as a result of the expansion in the volume of assets under management.

The cost to income ratio reached 47.4% and improved 5.4 p.p. YoY.


In the 1H16, the result with pension plans and insurance grew by 33.3% YoY, boosted by the increase of 26.5% in revenues with management fees, as a result of the 31.3% expansion in the volume of assets under management over the last twelve months

The cost to income ratio improved 4.0 p.p. YoY to 48.7%.


Figure 96 – Pension Plans | Net investment income (R$ million) QUARTERLY ANALYSIS

Net investment income grew by 4.9% YoY, mostly explained by the increase in the average balance of earning assets classified as held to maturity.


In the 1H16, the net investment income fell 4.0% YoY, mostly driven by the 0.7 p.p. contraction in the spread between the company’s earning assets and its interest bearing liabilities.

200 200 206 219

270238

262

304

51.8 54.3 52.6 52.847.4

54.250.2

47.4

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Result with pension plans and insurance (R$ million) Cost to income ratio (%)

111

130

163

130

112

134145

136

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


R E S U L T W I T H P E N S I O N P L A N S A N D I N S U R A N C E A N A L Y S I S

I N C O M E A N D P R E M I U M S C O N T R I B U T I O N

Figure 97 – Pension Plans | Income and premiums contribution (R$ million)

QUARTERLY ANALYSIS

Pension plans contributions grew 29.5% YoY to R$13.9 billion in the 2Q16. Such performance is a consequence of the strategy adopted by the Company to focus on sporadic contribution plans in the period, which present a higher average ticket when compared to the periodic contribution plans. In the quarter, sporadic pension plans outstanding increased by 88.5 thousand while periodic pension plans outstanding increased by 13.2 thousand.

VGBL plans, the main source of contributions, accounted for 95.4% of the total raised in the quarter, and increased its share by 1.4 p.p. YoY.


In the 1H16, pension plans contributions grew by 13.5% YoY, with the main highlight being VGBL plans. The sales in the period

presented a higher concentration in sporadic contribution products, which led to a 2.9 p.p. increase over the last twelve months in the

share of these plans in total pension plans outstanding .

Figure 98 – Pension Plans | Contributions breakdown (%) Figure 99 – Pension Plans | Pension plans outstanding (%)

7,152

9,4668,474

10,750

7,847

9,893

7,898

13,922

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

91.2 89.1 92.7 94.0 91.9 89.5 92.3 95.4

7.1 9.6 5.9 4.9 6.6 9.3 6.2 3.81.7 1.3 1.4 1.1 1.5 1.2 1.4 0.8

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

VGBL PGBL Traditional

82.7 81.8 81.1 79.8 79.1 78.3 78.4 76.9

17.3 18.2 18.9 20.2 20.9 21.7 21.6 23.1


Periodic contribution Sporadic contribution


N E T I N F L O W S

Figure 100 – Pension Plans | Net inflows and redemption ratio Figure 101 – Pension Plans | Active plans and CPFs (thousand)

QUARTERLY ANALYSIS

In the 2Q16, net inflows achieved R$9.6 billion, 30.7% higher YoY. The annualized redemption ratio reached 8.4% in the quarter, 0.9 p.p.

lower YoY. The increase in net inflows was mainly given to an improved redemption ratio, in addition to the 29.5% increase in

contributions, in line with a higher concentration of sales in sporadic contribution plans.


In the 1H16, net inflows amounted to R$13.3 billion, 4.3% up YoY, as a result of higher contributions and a 0.4 p.p. lower redemption

ratio.

4,357

6,635

5,441

7,317

4,307

5,770

3,739

9,566

9.1 9.3 9.0 9.3 9.2 9.5 9.28.4

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Net inflows (R$ million) Annualized redemption ratio (%)

3,552 3,6503,781 3,903 4,001 4,097

4,2444,376

1,756 1,779 1,815 1,853 1,872 1,889 1,908 1,939


Active plans CPFs


Table 69 – Pension Plans | Changes in technical reserves and provisions for insurance and pension plans

Table 70 – Pension Plans | Changes in technical reserves and provisions for insurance and pension plans by product


B enefits to be granted

Init ial balance 117,151,210 145,163,667 154,099,072 31.5 6.2

Constitution 6,658,884 14,369,548 9,570,507 43.7 (33.4)

Reversal (97,540) (10,706,997) (125,100) 28.3 (98.8)

Restatement 4,364,119 5,272,853 4,930,207 13.0 (6.5)

F inal balance 128,076,672 154,099,072 168,474,686 31.5 9.3

B enefits granted

Init ial balance 1,666,811 1,981,309 2,079,483 24.8 5.0

Constitution 207,729 376,054 88,146 (57.6) (76.6)

Reversal (167,805) (364,887) (63,432) (62.2) (82.6)

Restatement 67,541 87,007 61,613 (8.8) (29.2)

F inal balance 1,774,277 2,079,483 2,165,810 22.1 4.2

Other pro visio ns

Init ial balance 1,509,641 1,101,778 1,117,384 (26.0) 1.4

Constitution 51,520 98,900 268,354 420.9 171.3

Reversal (557,188) (104,166) (236,984) (57.5) 127.5

Restatement 16,914 20,873 26,754 58.2 28.2

F inal balance 1,020,887 1,117,384 1,175,508 15.1 5.2

T o tal P ro visio ns 130,871,836 157,295,939 171,816,005 31.3 9.2

B alance C hg. %


P |VGB L R eserves

Init ial balance 111,925,002 139,681,869 148,474,744 32.7 6.3

Constitution 7,723,636 14,704,561 9,808,442 27.0 (33.3)

Reversal (102,623) (10,944,937) (196,666) 91.6 (98.2)

Restatement 3,246,094 5,033,251 4,688,732 44.4 (6.8)

F inal balance 122,792,109 148,474,744 162,775,252 32.6 9.6

T radit io nal R eserves

Init ial balance 8,402,660 8,564,886 8,821,196 5.0 3.0

Constitution 111,752 139,941 118,951 6.4 (15.0)

Reversal (708,524) (231,113) (229,235) (67.6) (0.8)

Restatement 273,838 347,481 329,842 20.5 (5.1)

F inal balance 8,079,727 8,821,195 9,040,754 11.9 2.5

T o tal P ro visio ns 130,871,836 157,295,939 171,816,005 31.3 9.2

B alance C hg. %


M A N A G E M E N T F E E

Figure 102 – Pension Plans | Management fee¹,²

QUARTERLY ANALYSIS

Revenues with management fees grew by 28.0% YoY, driven by the increase of 31.3% in assets under management.

The average management fee dropped by 0.06 p.p., as a result of the continuous increase in the share of VGBL plans in the total assets under management, which usually charge a lower management fee, besides the decreased share of traditional plans, which charge a higher fee.


In the 1H16, revenues with management fees grew by 26.5% as compared to the same period of 2015. Under the same analysis, the average management fee dropped by 0.07 p.p. due to the lower share of traditional plans in the total technical reserves, which charge a higher management fee, in addition to the higher concentration of VGBL plans in the portfolio.

¹Management fee annualized considering the total of 252 working days. ²Working days calculated based on ANBIMA data.

Figure 103 – Pension Plans | Technical reserves (R$ billion) Figure 104 – Pension Plans | Technical reserves (%)

By the end of June 2016, technical reserves grew 31.3% in 12 months to R$171.8 billion. Assets under management from PGBL and

VGBL plans rose 32.6% YoY and reached R$162.8 billion.

333 347 345370

418 422 430474

1.28 1.26 1.24 1.22 1.21 1.19 1.17 1.16

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Management fee (R$ million) Management fee (%)

73 80 88 98 104 113 121134

2223

2425

2627

2829

88

88

89

99

103112

120131

138148

157172



70.3 71.9 73.1 74.8 75.5 76.1 76.7 78.0

21.5 20.8 19.9 19.1 18.5 18.1 17.7 16.8

8.1 7.3 7.0 6.2 6.0 5.8 5.6 5.3





Figure 105 – Pension Plans | G&A expenses (R$ million) QUARTERLY ANALYSIS

G&A expenses grew by 18.4% YoY, driven mainly by:

(i) the increase of outsourcing expenses, due to the growth of variable expenses related to the expansion of the assets under management;

(ii) higher personnel expenses, due to the yearly wages adjustments;

(iii) higher expenses with sales incentives, related to endomarketing expenses; and

(iv) the growth in tax expenses, in line with the increase in taxable revenues.


In 1H16, G&A expenses grew by 18.4% YoY, given mainly to: (i) higher expenses with outsourcing, due to increased variable expenses

associated to the expansion of the assets under management; (ii) higher personnel expenses, due to the yearly wages adjustments; (iii)

the increase in expenses with sales incentives related to endomarketing costs; and (iv) higher tax expenses, in line with the increase in

taxable revenues.

Table 71 – Pension Plans | G&A expenses

6882

71 75 7598

79 84

26

2829 31 35

35

36398

57

6 8

7

1110

102

116106

112118

140126

132

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Administrative expenses Tax expenses Other operating income (expenses)

C hg. %


A dministrat ive expenses 74,678 79,291 83,570 11.9 5.4 145,532 162,861 11.9

Personnel 27,089 30,164 30,626 13.1 1.5 54,381 60,790 11.8

Outsourcing 30,997 33,954 35,576 14.8 4.8 60,323 69,530 15.3

Location and operation 10,161 10,098 10,299 1.4 2.0 19,669 20,397 3.7

M arketing 6,075 4,792 6,642 9.3 38.6 10,625 11,435 7.6

Other 357 282 428 19.8 51.6 533 710 33.1

Other o perat ing inco me (expenses) 6,064 10,621 10,074 66.1 (5.1) 12,918 20,695 60.2

Expenses on sales incentive 2,129 4,654 4,672 119.4 0.4 4,259 9,326 119.0

Charging expenses 3,414 3,978 4,535 32.8 14.0 6,476 8,513 31.5

Contingencies 265 1,156 347 30.8 (70.0) 1,437 1,503 4.5

Provision for loan losses 102 189 (97) - - 169 91 (45.8)

Other operating income (expenses) 154 645 617 301.6 (4.3) 578 1,261 118.3

T ax expenses 31,055 35,928 38,679 24.5 7.7 59,596 74,607 25.2

Federal and municipal taxes 7,639 8,934 9,760 27.8 9.2 14,738 18,694 26.8

COFINS 19,205 22,243 23,909 24.5 7.5 36,984 46,153 24.8

PIS 3,115 3,615 3,885 24.7 7.5 6,004 7,500 24.9

Inspection fee 811 1,124 1,124 38.6 (0.0) 1,622 2,248 38.6

Other tax expenses 286 12 (0) - - 248 13 (94.9)

General and administrat ive expenses 111,797 125,840 132,323 18.4 5.2 218,047 258,163 18.4



C O S T T O I N C O M E R A T I O

Figure 106 – Pension Plans | Cost to income ratio (%) QUARTERLY ANALYSIS

Cost to income ratio improved 5.4 p.p. YoY to 47.4% in the 2Q16. This evolution was supported by the growth of 24.7% in revenues, boosted mainly by management fees, along with the strict cost control.


Year to date, the cost to income ratio reached 48.7%, an improvement of 4.0 p.p. as compared to 1H15, as a result of the growth of 26.5% in revenues with management fees, along with the strict cost control.

51.8 54.3 52.6 52.847.4

54.250.2

47.4

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



Figure 107 – Pension Plans| Net investment income (R$ million) Figure 108 – Pension plans | Inflation and TR rates (%)

Source: Banco Central do Brasil

QUARTERLY ANALYSIS

In the 2Q16, the net investment income grew by 4.9% YoY, mostly explained by the increase in the average balance of interest earning

assets.

In the quarter, adjusted interest revenues grew by 13.4% YoY, driven mainly by the expansion in the average balance of interest earning

assets classified as held to maturity. The yield on interest earning assets dropped 0.1 p.p. YoY, driven by the decline observed in the

IPCA inflation index partially offset by the increase in the IGP-M, as both these indexes remunerate a large portion of the company’s

earning assets.

Interest expenses grew by 17.4%, explained by the 0.3 p.p. increase in the average yield along with the expansion in the average

balance of interest bearing liabilities.


In the 1H16, the net investment income dropped by 4.0% as compared to the same period of 2015, explained by the 0.7 p.p. contraction

in the spread between the company’s' earning assets and its interest bearing liabilities. The contraction in the spread is explained by the

fact that the interest bearing liabilities are mostly linked to IGP-M and TR indexes. Both these indexes have increased as compared to

the same period of 2015 and led interest expenses to grow 28.5%. On the other hand, adjusted interest revenues grew at a slower pace,

16.8% YoY, boosted by the increase in the IGP-M, partially offset by the lower IPCA.

Table 72 – Pension Plans | Financial income and expenses

111

130

163

130

112

134145

136

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

0.8 1.7

3.8

2.3

1.4

2.8

2.6 1.7

0.20.3 0.2 0.4

0.6 0.5 0.4 0.5

-0.7

1.92.0 1.9

3.9

3.0 2.9

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

IPCA IGP-M TR

C hg. %


A djusted interest revenues 400,545 497,260 454,117 13.4 (8.7) 814,522 951,377 16.8


investments 11,277 23,660 8,319 (26.2) (64.8) 24,523 31,979 30.4


investments 389,267 473,600 445,798 14.5 (5.9) 789,999 919,398 16.4

A djusted interest expenses (270,721) (352,231) (317,887) 17.4 (9.8) (521,445) (670,118) 28.5

Interest accrual on technical reserves (270,721) (352,231) (317,887) 17.4 (9.8) (521,445) (670,118) 28.5

N et investment inco me 129,824 145,029 136,230 4.9 (6.1) 293,077 281,259 (4.0)



Table 73 – Pension Plans | Quarterly figures - Volume and rate analysis


Table 74 – Pension Plans | Quarterly figures - Earning assets - average balance and interest rates¹

¹Guaranteeing assets and free assets of Traditional plans and guaranteeing assets of the P/VGBL plans in the granting stage.

Table 75 – Pension Plans | Quarterly figures - Interest bearing liabilities - average balance and interest rates¹

¹ Technical reserves of Traditional and P/VGBL plans in the granting stage.


Earning assets

M ark to market financial investments 28 (2,986) (2,958)

Held to maturity financial investments 46,137 10,393 56,530

T o tal¹ 41,791 11,781 53,572


Technical reserves (30,047) (17,119) (47,166)

T o tal (30,047) (17,119) (47,166)

2Q16/ 2Q15


balance

Interest

revenues

A nnualized

rate (%)

A verage

balance

Interest

revenues

A nnualized

rate (%)

Earning assets

M ark to market financial investments 1,330 11 3.6 1,334 8 2.5


T o tal 10,581 401 16.6 11,653 454 16.5

2Q15 2Q16


balance

Interest

expenses

A nnualized

rate (%)

A verage

balance

Interest

expenses

A nnualized

rate (%)


Technical reserves 8,920 (271) 12.0 9,851 (318) 12.3

T o tal 8,920 (271) 12.0 9,851 (318) 12.3

2Q15 2Q16


Table 76 – Pension Plans | Year-to-date figures - Volume and rate analysis


Table 77 – Pension Plans | Year-to-date figures - Earning assets - average balance and interest rates¹

¹Guaranteeing assets and free assets of Traditional plans and guaranteeing assets of the P/VGBL plans in the granting stage.

Table 78 – Pension Plans | Year-to-date figures - Interest bearing liabilities - average balance and interest rates¹

¹ Technical reserves of Traditional and P/VGBL plans in the granting stage.


Earning assets

M ark to market financial investments (2,519) 9,976 7,456


T o tal¹ 79,791 57,064 136,855


Technical reserves (45,713) (102,959) (148,672)

T o tal (45,713) (102,959) (148,672)

1H 16/ 1H 15


balance

Interest

revenues

A nnualized

rate (%)

A verage

balance

Interest

revenues

A nnualized

rate (%)

Earning assets

M ark to market financial investments 1,310 25 3.9 1,214 32 5.4


T o tal 10,480 815 16.7 11,440 951 17.6

1H 15 1H 16


balance

Interest

expenses

A nnualized

rate (%)

A verage

balance

Interest

expenses

A nnualized

rate (%)


Technical reserves 8,779 (521) 11.9 9,713 (670) 13.5

T o tal 8,779 (521) 11.9 9,713 (670) 13.5

1H 15 1H 16


Table 79 – Pension Plans | Financial investments portfolio breakdown (except PGBL and VGBL funds)

Figure 109 – Pension Plans | Financial investments breakdown by index- except PGBL and VGBL funds (%)

Figure 110 – Pension Plans | Assets allocation (%)



Pre-fixed 94,765 79,445 81,870 (13.6) 3.1

Inflation 9,316,557 10,073,762 10,403,664 11.7 3.3

M ark to market securit ies 1,380,497 1,180,225 1,487,661 7.8 26.0

Pre-fixed 415,060 208,597 197,685 (52.4) (5.2)

Floating 674,982 652,729 984,052 45.8 50.8

Inflation 290,455 318,899 305,925 5.3 (4.1)

T o tal 10,791,819 11,333,432 11,973,196 10.9 5.6

B alance C hg. %

87.8 89.9 90.1 89.0 91.8 93.3 91.7 89.4

5.4 3.3 5.5 6.3 6.0 4.5 5.8 8.2

6.8 6.8 4.4 4.7 2.2 2.2 2.5 2.3


Inflation Floating Pre-fixed

77.4 78.6 79.8 82.6 83.1 83.0 86.5 87.9

14.3 13.9 13.8 12.2 12.1 12.8 9.5 9.06.6 6.0 5.2 4.1 3.9 3.4 3.1 2.6

1.6 1.5 1.3 1.1 0.8 0.8 0.8 0.6


Stocks/Other Debentures and commercial papers

CDBs, DPGEs, CRIs, FDICs, LHs and LFs Government bonds



Table 80 – Pension Plans | Balance sheet

S O L V E N C Y

Table 81 – Pension Plans | Solvency


A ssets 134,352,919 160,664,056 175,689,660 30.8 9.4

Cash and cash equivalents 6,882 3,645 3,819 (44.5) 4.8


Receivables from insurance and reinsurance operations 2,500 2,285 1,884 (24.6) (17.6)

Securities and credits receivable 446,098 545,732 597,246 33.9 9.4

Prepaid expenses 1,742 3,055 2,254 29.4 (26.2)

Deferred costs 837,196 970,360 1,108,135 32.4 14.2

Credits from private pension transactions 665 1,214 - - -

Fixed assets 15,057 18,919 18,212 21.0 (3.7)

Intangible 176,953 180,633 180,347 1.9 (0.2)

Liabilit ies 131,877,678 158,306,663 173,089,507 31.3 9.3


Obligations with insurance and reinsurance operations 5,924 11,308 15,822 167.1 39.9

Debts from private pension transactions 1,349 1,110 1,060 (21.4) (4.5)

Third party deposits 227,612 201,030 292,153 28.4 45.3

Technical reserves - insurance 97,839,207 120,573,977 133,978,684 36.9 11.1

Technical reserves - private pension 33,032,629 36,721,962 37,837,321 14.5 3.0



B alance C hg. %


A djusted shareho lder's equity (a) 2,296,547 2,173,705 2,417,553 5.3 11.2

M inimum capital requirement (b) 1,231,432 1,358,431 1,414,191 14.8 4.1

Base capital 15,000 15,000 15,000 - -

Additional capital for underwritting risk 1,089,710 1,198,036 1,238,375 13.6 3.4



Correlation risk reduction (29,614) (31,871) (35,183) 18.8 10.4

C apital adequacy (a) - (b) 1,065,115 815,274 1,003,362 (5.8) 23.1

So lvency rat io (a) / (b) - % 186.5 160.0 170.9 -15.5 p.p. 10.9 p.p.

B alance C hg. %


4 . 4 P R E M I U M B O N D S


Table 82 – Premium Bonds | Income statement

C hg. %


P remium bo nds co llect io n 1,961,346 1,043,471 1,570,613 (19.9) 50.5 3,282,230 2,614,084 (20.4)

Changes in provisions for redemption (1,626,804) (852,592) (1,313,954) (19.2) 54.1 (2,686,488) (2,166,545) (19.4)

N et revenue with premium bo nds 334,542 190,879 256,659 (23.3) 34.5 595,742 447,538 (24.9)

Changes in technical reserves (14,635) (7,707) (12,362) (15.5) 60.4 (24,028) (20,069) (16.5)

Result with lo ttery (73,952) (34,233) (52,099) (29.6) 52.2 (112,817) (86,332) (23.5)

Acquisition costs (157,813) (84,335) (110,986) (29.7) 31.6 (284,326) (195,320) (31.3)

Administrative expenses (23,875) (16,455) (20,948) (12.3) 27.3 (43,740) (37,403) (14.5)

Tax expenses (12,561) (8,352) (10,492) (16.5) 25.6 (23,471) (18,844) (19.7)


R esult with premium bo nds 46,956 34,998 46,925 (0.1) 34.1 97,146 81,924 (15.7)




Equity income 98 102 102 4.5 0.0 193 204 5.6

Operat ing result 161,880 247,912 189,155 16.8 (23.7) 336,634 437,067 29.8


sharing161,880 247,912 189,155 16.8 (23.7) 336,634 437,067 29.8

Taxes (63,985) (111,797) (85,361) 33.4 (23.6) (132,755) (197,158) 48.5

Profit sharing (1,002) (1,042) (1,179) 17.6 13.1 (2,190) (2,221) 1.4

N et inco me 96,893 135,073 102,615 5.9 (24.0) 201,689 237,688 17.8

C hg. %Quarterly F lo w H alf -Yearly F lo w


N E T I N C O M E

Figure 111 – Premium Bonds |Net income and ROAE QUARTERLY ANALYSIS

In the 2Q16, the net income of the premium bonds business reached R$102.6 million, 5.9% up YoY. It is worth noting that, comparing to the 2Q15, the performance was impacted by the increase in the income tax rate, namely social contribution (“CSLL"), from 15% to 20%, since September 2015, pursuant to Law 13,169/15.

The earnings before taxes and profit sharing reached R$189.2 million in the quarter, 16.8% higher YoY. The growth is explained by the improvement of 23.8% in the net investment income, as a result of the higher spread.

¹Net of taxes considering the Company’s effective income tax rate.


In the 1H16, the net income of the premium bonds segment reached R$237.7 million, 17.8% higher YoY. The growth was mainly due to the 48.3% improvement in the net investment income, partially offset by the increase in the income tax rate, as previously discussed. Setting apart the increase in the income tax rate, the earnings before taxes and profit sharing grew by 29.8% YoY.

Table 83 – Premium Bonds | Performance ratios

30 44 29 27 28 19 18 25

4454 75 69

4189

11778

74

98 10597

68

109

135

103

85.1102.3 102.6

88.865.4

109.7 123.0

84.1

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


Non-interest operating results¹ (R$mill ion)

ROAE (%)

C hg.

(p.p.)

% 2Q15 1Q16 2Q16 On 2Q15 On 1Q16 1H 15 1H 16 On 1H 15

Spread 5.1 p.p. 8.3 p.p. 5.9 p.p. 0.8 (2.4) 4.9 p.p. 6.7 p.p. 1.8

Lottery ratio 22.1 17.9 20.3 (1.8) 2.4 18.9 19.3 0.4


G&A ratio 12.3 15.5 13.4 1.0 (2.2) 13.0 14.3 1.3

Premium bonds margin 14.0 18.3 18.3 4.2 (0.1) 16.3 18.3 2.0

Income tax rate 39.5 45.1 45.1 5.6 0.0 39.4 45.1 5.7

ROAE 88.8 123.0 84.1 (4.8) (38.9) 88.3 96.9 8.6



R E S U L T W I T H P R E M I U M B O N D S

Figure 112 – Premium Bonds | Result with premium bonds and margin

QUARTERLY ANALYSIS

The result with premium bonds remained almost flat YoY. The net revenue with premium bonds fell by 23.3%, as a result of the 19.9% decrease in premium bonds collection and a higher average reserve quote. This effect was partially offset by the reduction of 29.7% in the acquisition costs as well as by the 29.6% drop in lottery expenses.


In the 1H16, the result with premium bonds fell by 15.7% YoY, driven by the 24.9% drop in net revenues with premium bonds, due to

the 20.4% decrease in premium bonds collection and the higher average reserve quote. The drop in net revenues with premium bonds

was partially offset by the 31.3% fall in acquisition costs and the 23.5% drop in lottery expenses.


Figure 113 – Premium Bonds | Net investment income and spread

QUARTERLY ANALYSIS

In the 2Q16, the net investment income rose by 23.8% YoY, driven by a 0.8 p.p. increase in the net interest margin, explained by:

(i) the increase of the average yield on pre-fixed bonds held to maturity, due to the maturity of bonds which were bought in an environment of lower Selic rate and now were reinvested at higher yields; and

(ii) the downward shift of the forward yield curve, which positively impacted the returns on pre-fixed bonds marked-to-market.


In the 1H16, the net investment income grew by 48.3% YoY, driven by a 1.8 p.p. increase in the spread. Such improvement was due to the higher Selic rate, the downward shift of the forward yield curve, which positively impacted the returns on pre-fixed bonds marked-to-market, and the maturity of securities which were bought in an environment of lower Selic rate and now were reinvested at higher yields.

51

73

50 47 4734 35

47

21.1 19.9 19.2

14.0

20.5

11.1

18.3 18.3

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Result with premium bonds (R$ million) Premium bonds margin (%)

7387

124 115

67

148

213

142

3.6 3.9

5.4 5.1

3.2

5.9

8.3

5.9

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Net investment income (R$ million) Spread (p.p.)


R E S U L T W I T H P R E M I U M B O N D S A N A L Y S I S

P R E M I U M B O N D S C O L L E C T I O N

Figure 114 – Premium Bonds | Collection (R$ million) QUARTERLY ANALYSIS

In the 2Q16, premium bonds collection came 19.9% lower YoY. This contraction is explained by the decrease in the average collection, since the bonds outstanding grew by 7.5% under the same comparable basis.


In the 1H16, premium bonds collection dropped by 20.4% YoY, due mainly to the decrease in the average collection.

Figure 115 – Premium Bonds | Collections by product (%) Figure 116 – Premium Bonds | Bonds outstanding by product (%)

By the end of June, 2016, the unique payment bonds accounted for 82.5% of the bonds outstanding, 4.1 p.p. higher YoY. This increase is

mostly explained by the sales of the Postalcap bond, which is a low cost unique payment bond that has been sold in the Post Office

branches since May, 2015.

599804 751 689 576 571 635 642

797

1,223

570

1,273

803

1,285

409

929

1,396

2,028

1,321

1,961

1,379

1,856

1,043

1,571

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Monthly payment Unique payment

42.9 39.7

56.8

35.1 41.830.8

60.8

40.9

57.1 60.3

43.2

64.9 58.269.2

39.2

59.1

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Monthly payment Unique payment

20.6 21.0 22.5 21.6 20.2 18.3 18.4 17.5

79.4 79.0 77.5 78.3 78.1 77.0 73.7 70.1

1.7 4.7 7.9 12.4

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Monthly payment Unique payment Unique payment - Postalcap


C H A N G E S I N P R O V I S I O N S F O R R E D E M P T I O N

Figure 117 – Premium Bonds | Changes in provisions for redemption and average reserve quote

QUARTERLY ANALYSIS

In the 2Q16, changes in provisions for redemptions fell by 19.2% YoY as a result of the drop in collections. The average reserve quote grew by 0.8 p.p., as a result of the increased share of the unique payment bonds in the mix of new sales, since this product presents higher reserve quotes when compared to the first installments of monthly payment bonds.


In the 1H16, changes in provision for redemptions fell by 19.4% YoY as a result of the fall in collections. The average reserve quote rose by 1.1 p.p., as a result of the increased share of the unique payment bonds in the mix of new sales, since these products have a higher reserve quotes when compared to the first installments of monthly payment bonds.

Table 84 – Premium Bonds | Changes in premium bonds provision

Table 85 – Premium Bonds | Changes in provisions for redemption¹

¹ Provision’s flow does not pass through income statement

1,156

1,663

1,060

1,627

1,150

1,547

853

1,314

82.8 82.080.2

82.9 83.4 83.3 81.783.7

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Changes in provisions for redemptions (R$ million) Average reserve quote (%)


P remium bo nds pro visio n

Init ial balance 11,079,530 11,670,395 11,058,730 (0.2) (5.2)

Constitution 1,638,664 856,681 1,321,046 (19.4) 54.2

Cancellations (11,535) (3,991) (7,295) (36.8) 82.8

Transfers (1,506,349) (1,677,680) (2,062,334) 36.9 22.9

Interest accrual 201,209 213,325 207,923 3.3 (2.5)

F inal balance 11,401,519 11,058,730 10,518,070 (7.7) (4.9)

B alance C hg. %


P ro visio n fo r redemptio n

Init ial balance 269,008 294,265 312,412 16.1 6.2

Constitution 1,505,460 1,677,237 2,062,578 37.0 23.0

Transfers 10,168 8,853 11,008 8.3 24.3

Payments (1,502,943) (1,668,298) (2,066,213) 37.5 23.9

Interest accrual 1,227 1,248 1,702 38.7 36.4

Premium bonds expiration (813) (893) (1,280) 57.4 43.3

F inal balance 282,107 312,412 320,207 13.5 2.5

B alance C hg. %


R E S U L T W I T H L O T T E R Y

Figure 118 – Premium Bonds | Result with lottery QUARTERLY ANALYSIS

The expenses related to the result with lottery dropped by 29.6% YoY, explained by lower expenses with building lottery provisions, due to the reduction of the volume collected in the quarter.


In the 1H16, the expenses associated with the result with lottery dropped by 23.5% YoY, due to the reduction of the volume collected in the period. On the other hand, the lottery ratio rose by 0.4 p.p., as a result of the increased share of the unique payment bonds in the mix of sales, since the product has higher lottery quotes when compared to the monthly payment bonds.

Table 86 – Premium Bonds | Result with lottery

Table 87 – Premium Bonds | Changes in provision for lottery to be held

Table 88 – Premium Bonds | Changes in provision for draws to be paid

36

71

39

74

43

74

34

52

15.219.5

14.9

22.119.0

23.9

17.920.3

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Result with lottery (R$ million) Lottery ratio (%)

C hg. %


R esult with lo ttery (73,952) (34,233) (52,099) (29.6) 52.2 (112,817) (86,332) (23.5)

Lottery provision reversal 46,958 80,250 50,073 6.6 (37.6) 108,599 130,323 20.0

Lottery provision constitutions (78,632) (38,132) (62,715) (20.2) 64.5 (125,363) (100,847) (19.6)

Lottery expenses (42,279) (76,351) (39,457) (6.7) (48.3) (96,054) (115,808) 20.6

Quarterly F lo w C hg. % H alf-Yearly F lo w


P ro visio n fo r lo ttery to be held

Init ial balance 243,112 304,310 267,626 10.1 (12.1)

Constitution 79,227 38,355 63,130 (20.3) 64.6

Reversal (46,958) (80,250) (50,073) 6.6 (37.6)

Cancellations (595) (223) (415) (30.3) 86.1

Interest accrual 4,522 5,434 5,372 18.8 (1.1)

F inal balance 279,307 267,626 285,640 2.3 6.7

B alance C hg. %


P ro visio n fo r draws to be paid

Init ial balance 12,549 11,315 11,563 (7.9) 2.2

Constitution 42,279 76,346 39,458 (6.7) (48.3)

Payments (42,826) (76,192) (41,713) (2.6) (45.3)

Interest accrual 60 94 104 72.1 10.6

Premium bonds expiration - - (5) - -

F inal balance 12,062 11,563 9 ,407 (22.0) (18.6)

B alance C hg. %



Figure 119 – Premium Bonds | Acquisition costs QUARTERLY ANALYSIS

In the 2Q16, the acquisition costs dropped by 29.7% YoY due to lower collections. The commission ratio dropped by 4.0 p.p., as a result of the increased share of the unique payment bonds in the mix of new sales, which has a lower commission ratio when compared to the first installments of monthly payment bonds.


In the 1H16, the acquisition costs dropped by 31.3% YoY, due to both the reduction in collections and the increased share of the unique payment bonds in the mix of new sales, which has a lower commission ratio when compared to the first installments of monthly payment bonds.

108

174

127

158

108

145

84111

45.147.7 48.4 47.2 47.3 46.9

44.2 43.2

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16




Figure 120 – Premium Bonds | G&A expenses (R$ million)¹ QUARTERLY ANALYSIS

In the 2Q16, G&A expenses dropped by 16.8% YoY, driven mainly by:

(i) the 12.3% decrease of the administrative expenses, explained by lower expenses with location and operation and with institutional advertisement and publicity, partially offset by the increase in the personnel expenses, due to both the collective bargaining agreement and higher expenses with benefits;

(ii) the 40.1% drop in other expenses, due to lower operating expenses related to provisions for the payment to the shareholder Icatu Cap, for the transfer of rights to sell premium bonds in the former Banco Nossa Caixa branches; and

(iii) the 16.5% reduction of tax expenses, as a result of the contraction in the taxable operating income for PIS/PASEP and COFINS collection.

¹Does not includes BB Capitalização


In the 1H16, G&A expenses dropped by 17.5% YoY, explained by:

(i) the 14.5% drop in administrative expenses, as a result of lower costs with outsourcing and with institutional advertisement and

publicity, partially offset by higher personnel expenses, due to both the collective bargaining and higher benefit expenses;

(ii) the 25.1% decrease in other expenses, due to lower operating expenses related to provisions for the payment to the

shareholder Icatu Cap, for the transfer of rights to sell premium bonds in the former Banco Nossa Caixa branches; and

(iii) the 19.7% reduction of tax expenses, as a result of the contraction in the taxable operating income for PIS/PASEP and COFINS

collection.

2229

20 24 2231

1621

10

15

1113 10

12

810

6

6

5

5

2

3

5

3

38

49

3641

34

46

3034

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Administrative expenses

Tax expenses

Other operating income (expenses)


Table 89 – Premium Bonds | General & Administrative expenses¹

C hg. %


A dministrat ive expenses (23,875) (16,455) (20,948) (12.3) 27.3 (43,740) (37,403) (14.5)

Personnel (9,632) (10,609) (11,238) 16.7 5.9 (19,192) (21,847) 13.8

Location and operation (4,860) (3,812) (3,820) (21.4) 0.2 (9,053) (7,632) (15.7)

Outsourcing (3,547) (729) (3,361) (5.2) 361.0 (6,183) (4,090) (33.9)

Institutional advertisement and publicity (1,824) (75) (116) (93.6) 54.7 (2,998) (191) (93.6)

Leasing (605) - - - - (1,220) - -

Other (3,408) (1,231) (2,413) (29.2) 96.0 (5,095) (3,644) (28.5)

Other o perat ing inco me (expenses) (4,750) (4,799) (2,847) (40.1) (40.7) (10,214) (7,646) (25.1)

Operating expenses (5,293) (5,263) (4,078) (23.0) (22.5) (10,952) (9,341) (14.7)

Printing and mailing (251) (242) (176) (29.9) (27.3) (463) (418) (9.7)

Legal provisions 52 (221) 129 148.1 - (19) (92) 384.2

Other operating income (expenses) (60) (10) 36 - - (65) 26 -

Revenue with premium bonds prescription 802 937 1,242 54.9 32.6 1,285 2,179 69.6

T ax expenses (12,561) (8,352) (10,492) (16.5) 25.6 (23,471) (18,844) (19.7)

COFINS (10,398) (6,663) (8,565) (17.6) 28.5 (19,367) (15,228) (21.4)

PIS (1,690) (1,083) (1,392) (17.6) 28.5 (3,147) (2,475) (21.4)

Inspection fee (405) (488) (488) 20.5 - (811) (976) 20.3

Other tax expenses (68) (117) (47) (30.9) (59.8) (146) (164) 12.3

G&A Expenses (41,186) (29,606) (34,287) (16.8) 15.8 (77,425) (63,893) (17.5)




Figure 121 – Premium Bonds | Net investment income (R$ million)

Figure 122 – Premium Bonds | Annualized average interest rates and spread¹

¹Does not includes BB Capitalização

Table 90 – Premium Bonds | Financial income and expenses

QUARTERLY ANALYSIS

In the 2Q16, the net interest income grew by 19.4% YoY, driven by the increase of 0.8 p.p. in the spread.

Interest revenues grew by 10.5% YoY, due to the 1.0 p.p. increase in the average yield on interest earning assets, as a result of:

(i) the 1.7 p.p. increase in the average return on financial investments held to maturity, boosted by the pre-fixed bonds, due to the

maturity of securities which were bought in an environment of lower Selic rate and now were reinvested at higher yields; and

(ii) the 1.1 p.p. growth in the average yield on marked-to-market financial investments, due to the downward shift of the forward

yield curve.

The interest expenses grew by 4.3% YoY, as a result of the 0.2 p.p. increase in the average yield on interests bearing liabilities, driven

mainly by a higher yield on technical provisions due to the increased TR rate, an index that remunerates a significant portion of the

premium bonds portfolio.


In the 1H16, the net interest income grew by 39.4% YoY, driven mainly by the 1.8 p.p. increase in the spread.

Interest revenues grew by 22.8% YoY, due to the 2.3 p.p. increase in the average return on interest earning assets. Such improvement is

justified by a higher average Selic rate, the downward shift of the forward yield curve, which positively impacted the marked-to-market

pre-fixed bonds, and the maturity of bonds which were previously bought in an environment of lower Selic rate and now were

reinvested at higher yields.

Interest expenses grew by 10.5% YoY, as a result of the 0.5 p.p. increase in the average yield on interests bearing liabilities, driven

mainly by a higher TR rate, an index that remunerates a significant portion of the premium bonds portfolio.

7387

124115

67

148

213

142

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

5.7 5.9 6.2 6.7 6.9 6.9

6.9

6.8

3.6 3.95.4 5.1

3.2

5.9

8.3

5.9

9.3 9.811.6 11.7

10.1

12.815.2

12.7

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Yield on interest rate of bearing l iabilities (%)Spread (p.p.)Yield on interest earnings assets (%)

C hg. %


Interest revenues 352,886 465,406 389,821 10.5 (16.2) 696,168 855,227 22.8


investments278,924 367,998 310,601 11.4 (15.6) 540,579 678,599 25.5

Expenses with mark to market financial

investments(6,600) (9,461) (31,302) 374.3 230.9 (20,408) (40,763) 99.7


investments80,203 105,560 109,926 37.1 4.1 174,823 215,486 23.3

Interest accrual on judicial deposits 359 1,309 596 66.0 (54.5) 1,174 1,905 62.2

Interest expenses (208,991) (222,943) (218,035) 4.3 (2.2) (399,054) (440,978) 10.5

Interest accrual on technical reserves (207,018) (220,101) (215,102) 3.9 (2.3) (395,956) (435,203) 9.9

Other (1,973) (2,842) (2,933) 48.6 3.2 (3,098) (5,775) 86.4

N et interest inco me 143,895 242,463 171,786 19.4 (29.1) 297,114 414,249 39.4



Table 91 – Premium Bonds | Quarterly figures – Volume and rate analysis

¹ Calculated with the same methodology of the parts. Due to the different weights of the elements which compose it, the total does not reflect the sum of the parts. ² Includes: (i) interest expenses related to interest accrual of the payment made to Icatu Cap for the transfer of its rights to market premium bonds products in the branches formerly owned by Banco Nossa Caixa starting in May 2014 and (ii) interest accrual of legal provisions.

Table 92 – Premium Bonds | Quarterly figures - Earning assets average balance and interest rates

Table 93 – Premium Bonds | Quarterly figures - Interest bearing liabilities average balance and interest rates

¹ Includes: (i) interest expenses related to interest accrual of the payment made to Icatu Cap for the transfer of its rights to market premium bonds products in the branches formerly owned by Banco Nossa Caixa starting in May 2014 and (ii) interest accrual of legal provisions.


Earning assets



Judicial deposits 129 108 237

T o tal¹ (3,384) 40,319 36,935


Technical reserves - premium bonds 7,652 (15,736) (8,084)

Other (667) (293) (960)

T o tal 3,373 (12,417) (9,044)

2Q16/ 2Q15

R $ tho usandA verage

balance

Interest

revenues

A nnualized

rate (%)

A verage

balance

Interest

revenues

A nnualized

rate (%)

Earnings assets

M ark to market financial investments 9,299,573 272,324 12.7 8,508,222 279,299 13.8

Held to maturity financial investments 2,980,328 80,203 11.6 3,472,019 109,926 13.3

Judicial deposits 681,417 359 0.2 869,532 596 0.3

T o tal 12,961,319 352,886 11.7 12,849,772 389,821 12.7

2Q15 2Q16


balance

Interest

expenses

A nnualized

rate (%)

A verage

balance

Interest

expenses

A nnualized

rate (%)


Technical reserves - premium bonds 11,873,320 (207,018) 7.0 11,465,437 (215,102) 7.3

Other¹ 732,899 (1,973) 1.1 948,752 (2,933) 1.2

T o tal 12,606,219 (208,991) 6.7 12,414,189 (218,035) 6.8

2Q15 2Q16


Table 94 – Premium Bonds | Year-to-date figures - Volume and rate analysis

¹ Calculated with the same methodology of the parts. Due to the different weights of the elements which compose it, the total does not reflect the sum of the parts. ² Includes: (i) interest expenses related to interest accrual of the payment made to Icatu Cap for the transfer of its rights to market premium bonds products in the branches formerly owned by Banco Nossa Caixa starting in May 2014 and (ii) interest accrual of legal provisions.

Table 95 – Premium Bonds | Year-to-date figures - Earning assets average balance and interest rates

Table 96 – Premium Bonds | Year-to-date figures - Interest bearing liabilities average balance and interest rates

¹ Includes: (i) interest expenses related to interest accrual of the payment made to Icatu Cap for the transfer of its rights to market premium bonds products in the branches formerly owned by Banco Nossa Caixa starting in May 2014 and (ii) interest accrual of legal provisions.


Earning assets



Judicial deposits 400 331 731

T o tal¹ 196,574 (37,515) 159,059


Technical reserves - premium bonds 4,636 (43,883) (39,247)

Other (1,282) (1,394) (2,677)

T o tal (2,670) (39,254) (41,924)

1H 16/ 1H 15


balance

Interest

revenues

A nnualized

rate (%)

A verage

balance

Interest

revenues

A nnualized

rate (%)

Earnings assets

M ark to market financial investments 9,241,272 520,171 12.0 8,606,097 637,836 15.6

Held to maturity financial investments 3,155,987 174,823 11.8 3,750,644 215,486 12.0

Judicial deposits 648,870 1,174 0.4 821,126 1,905 0.5

T o tal 13,046,129 696,168 11.3 13,177,866 855,227 13.6

1H 15 1H 16


balance

Interest

expenses

A nnualized

rate (%)

A verage

balance

Interest

expenses

A nnualized

rate (%)


Technical reserves - premium bonds 11,906,484 (395,956) 6.7 11,780,987 (435,203) 7.4

Other¹ 708,801 (3,098) 0.9 911,141 (5,775) 1.3

T o tal 12,615,285 (399,054) 6.4 12,692,128 (440,978) 6.9

1H 15 1H 16


Table 97 – Premium Bonds | Mark to market and derivatives effect¹

¹ Does not include BB Capitalização

Table 98 – Premium Bonds | Financial investments portfolio breakdown

Figure 123 – Premium Bonds | Asset allocation¹ (%) Figure 124 – Premium Bonds | Breakdown of mark to market financial investments by index¹ (%)

¹ Does not include BB Capitalização. ¹ Does not include BB Capitalização.

C hg. %


M ark to market (1,775) 135,198 10,258 - (92.4) (9,351) 145,455 -

Derivatives 8,557 (72,080) (7,829) - (89.1) 17,269 (79,910) -

N et result 6,782 63,117 2,429 (64.2) (96.2) 7,919 65,546 727.7

Quarterly F lo w C hg. % H alf-Yearly F lo w


M ark to market securit ies 9,665,443 8,944,095 8,072,350 (16.5) (9.7)

Pre-fixed 5,895,654 5,433,391 4,646,388 (21.2) (14.5)

Floating 3,461,438 3,231,039 3,138,376 (9.3) (2.9)

Inflation 223,843 208,309 216,025 (3.5) 3.7

Equity funds 83,916 70,360 70,360 (16.2) 0.0

Other 592 996 1,201 102.8 20.5


Pre-fixed 1,863,024 2,160,970 2,655,192 42.5 22.9

Inflation 1,004,976 1,049,192 1,078,683 7.3 2.8

T o tal 12,533,443 12,154,256 11,806,225 (5.8) (2.9)

B alance C hg. %

15.0 15.1 15.7 14.5 15.1 15.7 17.2 14.7

6.3 5.8 5.5 4.7 4.7 4.4 4.5 4.2

67.9 71.3 75.0 75.0 75.4 75.5 73.173.1

10.1 7.1 3.2 5.2 4.3 3.9 4.6 7.4

0.7 0.6 0.7 0.7 0.6 0.5 0.6 0.6


Time deposits and other Debentures and commercial papers

Government bonds Repo + cash

Equity funds

4.0 3.4 2.9 2.3 2.2 2.2 2.3 2.7

42.852.9

59.4 61.0 65.6 62.9 60.7 57.6

52.142.9

36.7 35.8 31.4 34.1 36.1 38.9

1.1 0.9 0.9 0.9 0.8 0.7 0.8 0.9


Inflation Pre-fixed Floating Equity funds



Table 99 – Premium Bonds | Balance sheet

S O L V E N C Y

Table 100 – Premium Bonds | Solvency¹

¹ Information based on the accounting principles adopted by SUSEP. Does not include BB Capitalização.


A ssets 13,408,516 13,175,112 12,879,875 (3.9) (2.2)

Cash and cash equivalents 311 399 111 (64.4) (72.2)

Financial assets 12,533,443 12,154,256 11,806,225 (5.8) (2.9)

Securities and credits receivable 848,628 1,005,516 1,060,407 25.0 5.5

Prepaid expenses 13,132 1,935 1,798 (86.3) (7.1)

Investments 1,239 1,223 1,217 (1.7) (0.4)

Fixed assets 4,388 2,845 2,725 (37.9) (4.2)

Intangible 4,754 4,315 3,829 (19.5) (11.3)

Other assets 2,621 4,623 3,563 35.9 (22.9)

Liabilit ies 12,923,831 12,738,104 12,340,252 (4.5) (3.1)


Premium bonds operations debits 27,773 18,017 24,091 (13.3) 33.7

Technical reserves - premium bonds 12,060,959 11,723,268 11,207,605 (7.1) (4.4)


Shareho lders' equity 484,685 437,008 539,623 11.3 23.5

C hg. %B alance


A djusted shareho lders' equity (a) 466,794 430,754 533,991 14.4 24.0




Additional capital for operating risk 19,332 19,308 18,586 (3.9) (3.7)




B alance C hg. %


4 . 5 R E I N S U R A N C E


Table 101 – Reinsurance | Income statement

Table 102 – Reinsurance | Managerial performance ratios

C hg. (p.p.)

% 2Q15 1Q16 2Q16 On 2Q15 On 1Q16 1H 15 1H 16 On 1H 15

P erfo rmance rat io s

Loss ratio 50.3 91.0 37.5 (12.8) (53.5) 53.9 63.9 10.0


Underwriting margin 13.5 17.4 14.3 0.8 (3.0) 17.0 15.8 (1.2)

G&A ratio 11.1 8.7 8.0 (3.1) (0.7) 11.7 8.3 (3.4)

Combined ratio 97.6 91.3 93.7 (3.9) 2.4 94.7 92.5 (2.2)

Expanded combined ratio 73.7 77.1 76.8 3.1 (0.4) 75.3 76.9 1.7

Net margin 24.8 19.4 19.1 (5.7) (0.3) 20.9 19.2 (1.6)

ROAE 30.7 26.0 27.2 (3.5) 1.1 23.5 25.6 2.1


C hg. %


P remiums writ ten 1,032,037 982,276 1,199,847 16.3 22.1 1,760,454 2,182,123 24.0

Changes in technical reserves - premiums (129,907) 45,258 (143,521) 10.5 - (65,212) (98,263) 50.7

Earned premiuns 902,130 1,027,534 1,056,326 17.1 2.8 1,695,242 2,083,860 22.9

Claims incurred (454,085) (935,296) (396,157) (12.8) (57.6) (914,055) (1,331,453) 45.7


Other operating income (expenses) (26,872) (6,200) 17,834 - - (31,728) 11,634 -

Administratives expenses (58,199) (47,589) (64,002) 10.0 34.5 (119,646) (111,591) (6.7)

Tax expenses (15,313) (35,276) (38,503) 151.4 9.1 (46,756) (73,779) 57.8

Result with reinsurance (296,040) 118,784 (483,977) 63.5 - (442,763) (365,193) (17.5)

N et investment inco me 293,318 188,654 233,121 (20.5) 23.6 437,100 421,775 (3.5)

Financial income 527,260 339,371 474,921 (9.9) 39.9 918,747 814,292 (11.4)

Financial expenses (233,942) (150,717) (241,800) 3.4 60.4 (481,647) (392,517) (18.5)

Equity income (22,385) 11,933 8,397 - (29.6) (7,990) 20,330 -

Operat ing result 292,350 289,943 308,081 5.4 6.3 519,441 598,023 15.1

Gains or losses on non-current assets 15 - 12 (19.1) - 16 12 (26.0)


sharing292,365 289,943 308,093 5.4 6.3 519,457 598,035 15.1

Taxes (63,133) (84,606) (100,346) 58.9 18.6 (152,395) (184,953) 21.4

Profit sharing (5,283) (5,975) (5,974) 13.1 (0.0) (12,919) (11,949) (7.5)

N et inco me 223,949 199,362 201,773 (9.9) 1.2 354,144 401,135 13.3




Table 103 – Reinsurance | Balance sheet

S O L V E N C Y

Table 104 – Reinsurance | Solvency


A ssets 13,733,453 14,109,595 13,718,751 (0.1) (2.8)

Cash and cash equivalents 7,758 13,884 169,388 2,083.4 1,120.0

Financial assets 5,745,732 6,106,734 5,912,203 2.9 (3.2)

Receivables from insurance and reinsurance operations 2,434,599 2,154,282 2,242,878 (7.9) 4.1

Reinsurance and retrocession - technical reserves 3,851,935 4,173,304 3,684,828 (4.3) (11.7)

Securities and credits receivable 1,421,657 1,390,435 1,433,402 0.8 3.1

Prepaid expenses 3,370 428 154 (95.4) (64.0)

Defered costs - - - - -

Investments 119,264 129,621 140,225 17.6 8.2

Fixed assets 35,760 34,525 34,519 (3.5) (0.0)

Intangible 113,378 106,382 101,154 (10.8) (4.9)

Liabilit ies 10,688,923 11,210,958 10,673,155 (0.1) (4.8)


Obligations with insurance and reinsurance operations 1,135,517 1,097,237 1,014,083 (10.7) (7.6)

Technical reserves - reinsurance 8,451,353 8,985,554 8,510,319 0.7 (5.3)

Third party deposits 13,882 2,186 6,946 (50.0) 217.7

Other liabilities 495,637 483,857 422,052 (14.8) (12.8)


B alance C hg. %




Additional capital for underwritting risk 605,408 496,265 511,987 (15.4) 3.2


Additional capital for operating risk 34,673 36,841 34,892 0.6 (5.3)


C apital adequacy (a) - (b) 1,781,021 1,856,321 1,880,400 5.6 1.3


B alance C hg. %


4 . 6 D E N T A L I N S U R A N C E


Table 105 – Dental Insurance | Income statement


Table 106 – Dental Insurance | Balance sheet

C hg. %


Operat ing revenues 3,786 4,934 4,882 28.9 (1.1) 3,810 9,816 157.6

Health assistance plans revenues 3,786 4,934 4,882 28.9 (1.1) 3,810 9,816 157.6

Administratives expenses (2,880) (3,438) (3,333) 15.7 (3.1) (3,957) (6,771) 71.1

Tax expenses (405) (306) (370) (8.6) 20.9 (408) (676) 65.7

Operat ing result 501 1,190 1,179 135.3 (0.9) (555) 2,369 -

N et investment inco me 53 112 275 418.9 145.6 108 386 257.4

Financial revenues 82 169 343 318.7 103.1 140 512 265.9

Financial expenses (29) (57) (69) 138.9 21.6 (32) (126) 294.7


sharing554 1,302 1,453 162.3 11.6 (447) 2,755 -

Taxes - (486) (506) - 4.0 742 (992) -

N et inco me 554 816 947 71.0 16.1 295 1,763 497.6



A ssets 8,497 13,474 17,037 100.5 26.4

Cash and cash equivalents 406 101 328 (19.3) 224.4

Financial assets 5,873 10,159 11,515 96.1 13.3

Receivables from insurance and reinsurance operations 397 614 2,275 473.1 270.5

Tax assets 1,146 1,803 1,819 58.7 0.9

Other assets 675 797 1,100 63.0 38.1

Liabilit ies 5,891 6,114 8,730 48.2 42.8

Technical reserves 3,897 2,975 5,117 31.3 72.0

Tax liabilities 219 228 311 42.2 36.6


Shareho lders' equity 2,606 7,360 8,307 218.8 12.9

B alance C hg. %


5 . D I S T R I B U T I O N

B A N C A S S U R A N C E

The main role of an insurance broker (either an individual or an entity) is to intermediate the insurance business between insurance

companies and their clients. The insurance intermediation in Brazil is not required by law, but the brokerage payment is mandatory for

all insurance contracts, regardless the involvement of a broker. According to the law 6,317 as of 1975, in case no broker is involved, the

amount supposed to be paid as brokerage shall be directed to the Fund for Developing the Insurance Culture, managed by the

Foundation National Insurance School– FUNENSEG.

BB Seguridade distributes its products through its own broker, BB Corretora, in the Banco do Brasil channel.The brokerage business in

the bancassurance channel is not a complex business model, as it does not have underwriting risk and it has low capital needs. These

factors are added to the vast footprint and the strong franchise of Banco do Brasil.


5 . 1 B B C O R R E T O R A


Table 107 – Brokerage | Income statement

C hg. %


B ro kerage revenues 672,566 631,567 728,118 8.3 15.3 1,282,263 1,359,685 6.0

Administrative expenses (73,304) (47,564) (52,217) (28.8) 9.8 (127,909) (99,781) (22.0)

Personnel expenses (400) (53) (1,706) 326.5 3,136.7 (1,871) (1,759) (6.0)

Other operating income (expenses) (2,414) (3,198) (4,210) 74.4 31.6 (1,821) (7,408) 306.8

Tax expenses (49,756) (56,108) (86,677) 74.2 54.5 (94,703) (142,785) 50.8


N et investment inco me 39,675 35,262 50,133 26.4 42.2 65,156 85,395 31.1

Financial income 39,685 49,872 50,571 27.4 1.4 77,036 100,443 30.4

Financial expenses (10) (14,610) (438) 4,281.3 (97.0) (11,880) (15,048) 26.7

Earnings befo re taxes 586,367 559,905 633,441 8.0 13.1 1,121,114 1,193,346 6.4

Taxes (197,334) (189,397) (212,993) 7.9 12.5 (377,985) (402,390) 6.5

N et inco me 389,033 370,508 420,448 8.1 13.5 743,130 790,955 6.4

C hg. % Quarterly F lo w H alf -Yearly F lo w



Figure 125 – BB Corretora | Adjusted net income QUARTERLY ANALYSIS

BB Corretora reported a net income of R$420.4 million in the 2Q16, 8.1% higher YoY, explained by:

(i) the 8.3% growth in brokerage revenues, partially offset by the increase in the G&A expenses, mainly due to the higher PIS/PASEP and COFINS tax rates beginning in March 2016; and

(ii) the 26.4% growth in the net investment income, due to the increase in both the balance and the average yield on financial investments.

BB Corretora’s net margin recorded a slight deterioration of 0.1 p.p. YoY.


In the 1H16, BB Corretora’s net income recorded R$791.0 million, 6.4% up YoY, explained by:

(i) the 6.0% growth in brokerage revenues, partially offset by the increase in the G&A expenses, mainly due to the rise in

PIS/PASEP and COFINS tax rates since March 2016; and

(ii) the 31.1% growth in the net investment income, due to the increase in the average balance of interest earning assets along

with a higher average yield on financial investments.

BB Corretora’s net margin reached 58.2%, 0.2 p.p. higher YoY.

Table 108 – BB Corretora | Managerial performance ratios

B R O K E R A G E R E V E N U E S

Figure 126 – BB Corretora | Brokerage revenues (R$ million) QUARTERLY ANALYSIS

Brokerage revenues amounted to R$728.1 million in the 2Q16, 8.3% up YoY, explained by:

(i) the 16.8% increase in brokerage revenues arising from BB MAPFRE SH1, driven mostly by the increased sales of life and rural insurance, in addition to the accrual of unearned commissions; and

(ii) the 22.9% growth in brokerage revenues coming from Brasilprev, due to higher pension plans contributions, partially offset by an increased share of sporadic contribution plans in the mix of new sales, which has lower commission rates when compared to the first installments of periodic contribution plans.

The growth in commissions from these two businesses was partially offset by:

(i) the 29.0% fall in brokerage revenues arising from Brasilcap, due to lower premium bonds collection, along with an increased

share of unique payment bonds in the mix of new sales, which has lower commission rates when compared to the first

installments of monthly payment bonds; and

(ii) the 5.9% drop in brokerage revenues arising from MAPFRE BB SH2, as a consequence of the decrease in auto insurance sales.

319372 354

389 366399

371420

81.8 81.7 83.5 81.383.7 84.1 83.1

80.1

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Adjusted net income (R$ million) Operating margin (%)

C hg.

(p.p.)

% 2Q15 1Q16 2Q16 On 2Q15 On 1Q16 1H 15 1H 16 On 1H 15

G&A expenses 18.7 16.9 19.9 1.2 3.0 17.6 18.5 0.9

Tax expenses 7.4 8.9 11.9 4.5 3.0 7.4 10.5 3.1

Operating margin 81.3 83.1 80.1 (1.2) (3.0) 82.4 81.5 (0.9)

Income tax rate 33.7 33.8 33.6 (0.0) (0.2) 33.7 33.7 0.0

Net margin 57.8 58.7 57.7 (0.1) (0.9) 58.0 58.2 0.2


563

648610

673619

658 632

728

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16



In the 1H16, brokerage revenues grew by 6.0% YoY, explained by:

(i) the 16.0% increase in brokerage revenues arising from BB MAPFRE SH1, driven mostly by increased sales of life and rural

insurance, in addition to the accrual of unearned commissions; and

(ii) the 14.0% growth in brokerage revenues arising from Brasilprev, in line with the increase in pension plan contributions.

The growth in these two businesses was partially offset by:

(i) the 31.2% contraction in the brokerage revenues arising from Brasilcap, due to lower premium bonds collection along with an

increased share of unique payment bonds in the mix of new sales; and

(ii) the 4.9% drop in the brokerage revenues arising from MAPFRE BB SH2, as a consequence of the decrease in the auto insurance

sales.

Table 109 – BB Corretora | Brokerage revenues breakdown

Figure 127 – BB Corretora | Brokerage revenues breakdown (%)

Figure 128 – BB Corretora | Unearned commissions breakdown (%)

G E N E R A L A N D A D M I N I S T R A T I V E E X P E N S E S

Figure 129 – BB Corretora | G&A expenses QUARTERLY ANALYSIS

In the 2Q16, G&A expenses grew by 15.0% YoY, driven by the 74.2% increase in tax expenses, as a consequence of the publication of the Brazilian Internal Revenue Service Rule Nr. 1,628, dated as of March 17th, 2016, which changed the PIS/PASEP and COFINS tax regime for the insurance brokers.

Due to this change, the insurance brokers, previously framed in the cumulative system, turned to the non-cumulative regime and, as a consequence, the PIS/PASEP and COFINS tax rate on brokerage gross revenues increased from 4.65% to 9.25%. It is worth noting that the taxation on financial revenues remained unchanged at 4.65%.

Under the same analysis, the growth observed in tax expenses was partially offset by the contraction of 28.8% in administrative

expenses, due to lower administrative costs of products and operational support and IT expenses.

C hg. %


SH1 352,517 383,475 411,699 16.8 7.4 685,603 795,174 16.0

SH2 82,088 78,889 77,267 (5.9) (2.1) 164,181 156,156 (4.9)

Brasilprev 133,706 112,066 164,280 22.9 46.6 242,416 276,346 14.0

Brasilcap 102,745 55,899 72,976 (29.0) 30.6 187,338 128,875 (31.2)

Other 1,510 1,238 1,896 25.5 53.1 2,725 3,134 15.0

T o tal 672,566 631,567 728,118 8.3 15.3 1,282,263 1,359,685 6.0


56.3 50.9 54.6 52.459.9 54.8

60.7 56.5

14.812.9

13.5 12.2

13.012.2

12.510.6

15.417.0

17.8 19.915.3

17.417.7

22.6

13.118.6 13.9 15.3 11.4 15.1

8.9 10.0

0.3 0.6 0.2 0.2 0.3 0.5 0.2 0.3

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

SH1 SH2 Brasilprev Brasilcap Other

78.0 82.0 82.9 84.9 82.8 83.6 83.3 83.3

7.35.8 5.5 5.2

5.3 4.9 4.9 5.08.7 7.6 7.9 7.4 7.7 7.2 7.5 7.33.4 3.1 2.9 2.2 2.0 2.0 2.2 1.8

2.6 1.4 0.8 0.4 2.2 2.2 2.1 2.6


Life P&C Auto Custom Rural

102119

100126

101 104 107

145

18.2 18.316.5

18.716.3 15.9 16.9

19.9

10.8 10.8 9.111.3

8.9 8.4 8.0 8.0

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

G&A Expenses (R$ million) G&A ratio (%) G&A ratio ex-taxes (%)



In the 1H16, G&A expenses rose by 11.2% YoY, explained mainly by the 50.8% growth in tax expenses, as a consequence of the

increased PIS/PASEP and COFINS rates. Such growth observed in tax expenses was partially offset by the contraction of 22.0% in

administrative expenses, due to lower administrative costs of products and operational support.

Table 110 – BB Corretora | General & Administrative expenses

Table 111 – BB Corretora | Banco do Brasil distribution network

Source: Banco Central do Brasil


Figure 130 – BB Corretora | Net investment income (R$ million) QUARTERLY ANALYSIS

In the 2Q16, the net investment income grew by 26.4% YoY, due to the increased average balance of interest earning assets along with the higher average yield on financial investments.

The financial income grew by 27.4% YoY, driven by:

(i) the 1.3 p.p. increase in the average yield on interest earning assets, driven mainly by the higher average Selic rate; and

(ii) the 10.8% increase in the average balance of financial investments.


In the 1H16, the net investment income grew by 31.1% YoY, as a result of the increased average balance of interest earning assets and

the higher average yield on financial investments.

C hg. %


A dministrat ive expenses (73,304) (47,564) (52,217) (28.8) 9.8 (127,909) (99,781) (22.0)

Administrative cost of products (24,832) (16,298) (15,573) (37.3) (4.4) (53,736) (31,871) (40.7)

Operational support (38,499) (20,957) (28,432) (26.1) 35.7 (55,040) (49,389) (10.3)

Information technology (9,822) (10,130) (8,184) (16.7) (19.2) (18,774) (18,314) (2.4)

Other (152) (179) (29) (81.1) (84.0) (360) (208) (42.3)

T ax expenses (49,756) (56,108) (86,677) 74.2 54.5 (94,703) (142,785) 50.8

PIS/PASEP (4,630) (6,560) (12,343) 166.6 88.2 (8,835) (18,902) 113.9

COFINS (28,490) (34,928) (57,359) 101.3 64.2 (54,372) (92,287) 69.7

ISS (16,635) (14,621) (16,974) 2.0 16.1 (31,495) (31,594) 0.3

IOF (1) (0) (1) 33.6 572.3 (1) (2) 53.4

P erso nnel expenses (400) (53) (1,706) 326.5 3,136.7 (1,871) (1,759) (6.0)

Other o perat ing inco me (expenses) (2,413) (3,198) (4,210) 74.5 31.6 (1,820) (7,408) 307.0

G&A Expenses (125,872) (106,923) (144,810) 15.0 35.4 (226,303) (251,733) 11.2


N umber o f

branches

M arket share

(%)

N umber o f

branches

M arket share

(%)

N umber o f

branches

M arket share

(%)

B anco do B rasil distribut io n

netwo rk5,544 24.0 5,428 23.8 5,428 23.9

Northeast 1,190 32.4 1,134 31.2 1,136 31.4

North 330 28.7 320 27.9 320 27.7

M idwest 497 26.9 482 26.4 483 26.5

South 1,087 24.9 1,065 24.8 1,057 24.9

Southeast 2,440 20.2 2,427 20.4 2,432 20.5

Jun/ 16Jun/ 15 M ar/ 16

23

34

25

40

34

49

35

50

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16


The financial Income grew by 30.4% YoY, driven by:

(i) the 1.3 p.p. increase in the yield on interest earning assets, driven by the higher average Selic rate; and

(ii) the 13.2% increase in the average balance of financial investments.

Financial expenses rose by 26.7%, explained by the expansion in the average balance of dividends payable and the higher yield on

interest bearing liabilities, due to the higher Selic rate.

Table 112 – BB Corretora | Quarterly figures – Earning assets average balance and interest rates

Table 113 – BB Corretora | Quarterly figures – Interest bearing liabilities average balance and interest rates

Table 8 – BB Corretora | Year-to-date figures – Earning assets average balance and interest rates

Table 9 – BB Corretora | | Year-to-date figures – Interest bearing liabilities average balance and interest rates


balanceR evenues

A nnualized

rate (%)

A verage

balanceR evenues

A nnualized

rate (%)

Earning assets

Cash and financial instruments 1,287,828 36,482 12.2 1,441,940 47,093 13.7

Other assets 147,721 3,038 8.8 163,865 3,477 8.8

Current tax assets 74,002 165 0.9 67,430 - -

T o tal 1,509,551 39,685 11.3 1,673,236 50,570 12.6

2Q15 2Q16


balanceExpenses

A nnualized

rate (%)

A verage

balanceExpenses

A nnualized

rate (%)


Dividends payable 371,566 - - 395,478 - -

Other liabilities 410 (10) 9.7 398 (8) 7.7

T o tal 371,975 (10) 0 .0 395,876 (8) 0 .4

2Q15 2Q16


balanceR evenues

A nnualized

rate (%)

A verage

balanceR evenues

A nnualized

rate (%)

Earning assets

Cash and financial instruments 1,477,362 71,043 10.2 1,680,585 93,628 11.6

Other assets 146,327 5,810 8.4 162,174 6,815 8.7

Current tax assets 63,807 183 0.6 67,430 - -

T o tal 1,687,497 77,036 9 .7 1,910,189 100,443 11.0

1H 15 1H 16


balanceExpenses

A nnualized

rate (%)

A verage

balanceExpenses

A nnualized

rate (%)


Dividends payable 716,909 (11,860) 3.4 778,011 (14,602) 3.8

Other liabilities 405 (20) 10.0 394 (15) 7.8

T o tal 717,314 (11,880) 3 .4 778,405 (14,618) 3 .9

1H 15 1H 16



Table 10 – Brokerage | Balance sheet


A ssets 2,621,456 2,263,097 2,936,295 12.0 29.7

Cash and cash equivalents 1,334,449 523,092 1,473,171 10.4 181.6

Securities 186,316 654,375 233,267 25.2 (64.4)

Current tax assets 107,987 163,862 261,562 142.2 59.6

Commission receivable 842,549 760,498 801,277 (4.9) 5.4

Other assets 150,155 161,270 167,018 11.2 3.6

Liabilit ies 2,586,455 1,857,614 2,901,319 12.2 56.2

Dividends payable 743,131 - 790,956 6.4 -

Provision 9,165 11,050 11,653 27.1 5.5

Current tax liabilities 214,991 215,283 434,940 102.3 102.0

Unearned commissions 1,594,929 1,612,894 1,643,086 3.0 1.9

Other liabilities 24,239 18,387 20,684 (14.7) 12.5

Shareho lders' equity 35,001 405,483 34,976 (0.1) (91.4)

C hg. % B alance


6 . D E F I N I T I O N S

C O M M O N R A T I O S

Quarterly adjusted ROAE annualized = (adjusted net income / average equity) x 4;

Average volume = net change - average rate

Average rate = (current period interest / current period balance) x (previous period balance) - (previous period interest)

Net change = current period interest - previous period interest

Assets annualized rate = interest revenues / average earning assets balance

Liabilities annualized rate = interest expenses / average interest bearing liabilities

I N S U R A N C E

Loss Ratio = claims incurred / earned premiums;

Commission Ratio = acquisition costs / earned premiums;

Technical Margin = (earned premiums + policies issuance revenue + claims incurred + acquisition costs + result with reinsurance) /

earned premiums;

G&A Ratio = (administrative expenses + tax expenses + other operating income (expenses)) / earned premiums;

Combined Ratio = (policies issuance revenue + claims incurred + acquisition costs + result with reinsurance + administrative expenses +

tax expenses + other operating income (expenses)) / earned premiums;

Expanded combined ratio = (policies issuance revenue + claims incurred + acquisition costs + result with reinsurance + administrative

expenses + tax expenses + other operating income (expenses)) / (earned premiums + net investment income).

M A N A G E R I A L

Earned Premiums = premiums written – premiums written in raw reinsurance – changes in technical reserves – changes in expenses

with reinsurance provisions;

Retained claims = claims incurred – indemnity claims (recovery) – claims expenses (recovery) – changes in claims provision IBNR –

salvages assets – changes in claim provision IBNER PSL – change of expenses related of IBNR;

Commission = acquisition costs – commission return;

G&A expenses = administrative expenses + tax expenses + other operating income (expenses);


P E N S I O N P L A N S

Commission Ratio = acquisition cost / income and premiums contributions

Cost to income = (changes in other technical reserves + expenses with benefits, redemptions and claims + acquisition costs +

administrative expenses + tax expenses + other operating income (expenses)) / (net revenues with contributions and VGBL premiums +

revenues with management fee + earned premiums)

P R E M I U M B O N D S

Lottery Ratio = lottery results / net revenue with premium bonds;

Commission Ratio = acquisition costs / net revenue with premium bonds;

G&A Ratio = (administrative expenses + tax expenses + other operating income (expenses)) / net revenue with premium bonds;

Reserve quote = change in provision for redemption / premium bonds collection

Premium Bond Margin = result with premium bonds / net revenue with premium bonds;

Net Margin = adjusted net income / net revenue with premium bonds.

Spread = average yield on interest earning assets – average yield on interest bearing liabilities

R E I N S U R A N C E

Claim Ratio = claims incurred / earned premiums;

Commission Ratio = acquisition costs / earned premiums;

Technical Margin = (claims incurred + acquisition costs + result with reinsurance) / earned premiums;

G&A Ratio = (administrative expenses + tax expenses + other operating income (expenses)) / earned premiums;

Combined Ratio = (claims incurred + acquisition costs + result with reinsurance + administrative expenses + tax expenses + other

operating income (expenses)) / earned premiums;

Expanded combined ratio = (claims incurred + acquisition costs + result with reinsurance + administrative expenses + tax expenses +

other operating income (expenses)) / (earned premiums + net investment income).

B R O K E R A G E

Adjusted Operational Margin = operational results / brokerage revenues;

Adjusted Net Margin = adjusted net income / brokerage revenues.

md&a - bb · Índice de comissionamento % 23.1 23.8 22.7 23.1 22.6 Índice de despesas gerais e...

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