md&a - bb
TRANSCRIPT
4Q16
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 February 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.
4Q16 Earnings Conference Call
Index
1. Summary 5
2. Earnings Analysis 19
3. Balance Sheet Analysis 25
4. Underwriting and Accumulation 29
5. Distribution 103
6. Definitions 111
February 14th, 2016
Portuguese
Time: 10 am (Brasília time)
7 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)
08:30 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) 4297-0730
Rua Alexandre Dumas, 1671 – Térreo – Ala B Chácara Santo Antônio – São Paulo – SP CEP: 04717-903
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 5
1 . S U M M A R Y
Table 1 – Key figures
Unit 4Q15 1Q16 2Q16 3Q16 4Q16
Earnings Summary
Underwritting and accumulation businesses R$ thousand 629,938 608,261 669,124 638,846 679,268
Distribution businesses R$ thousand 398,996 370,508 420,448 383,974 435,008
Other R$ thousand (15,372) (21,085) (2,858) (34,890) (39,540)
Net income R$ thousand 1,013,562 957,684 1,086,714 987,930 981,524
Adjusted net income R$ thousand 1,013,562 957,684 1,086,714 987,930 1,074,736
Adjusted ROAE¹ % 54.0 49.9 55.2 48.9 52.2
P erfo rmance by segment
Insurance - Life , M o rtgage Life and R ural
Loss ratio % 28.7 34.3 30.9 31.3 31.0
Comission ratio % 28.3 26.3 28.0 27.0 27.5
G&A ratio % 14.9 12.9 9.8 12.0 10.7
Combined ratio % 71.8 73.1 68.5 70.1 69.1
Expanded combined ratio % 63.5 65.8 62.3 64.2 63.0
Adjusted ROAE % 46.3 43.1 46.8 48.4 47.2
Solvency ratio % 113.3 145.0 122.1 124.5 139.9
Insurance - P ro perty and C asualty
Loss ratio % 55.3 64.2 56.6 59.7 63.9
Comission ratio % 22.7 23.1 22.6 23.7 23.3
G&A ratio % 21.5 18.7 17.8 19.1 19.5
Combined ratio % 100.3 105.6 96.8 102.3 106.5
Expanded combined ratio % 90.4 95.9 88.9 95.8 99.4
Adjusted ROAE % 13.8 5.8 13.9 4.7 3.1
Solvency ratio % 143.1 148.6 163.8 175.1 183.4
P ensio n P lans
Technical reserves R$ million 148,247 157,296 171,816 182,724 197,534
M anagement fee % 1.19 1.17 1.16 1.15 1.14
Adjusted ROAE % 36.1 37.3 39.0 43.0 42.9
Solvency ratio % 170.8 160.0 170.9 165.2 201.8
P remium B o nds
Premium bonds reserves R$ million 12,354 11,723 11,208 11,012 10,763
Spread p.p. 5.9 8.3 5.9 6.4 5.7
Adjusted ROAE % 109.7 123.0 84.1 87.9 96.4
Solvency ratio % 165.0 165.2 238.1 130.1 167.2
B ro kerage
Operating margin % 84.1 83.1 80.1 79.7 79.2
Net margin % 60.7 58.7 57.7 57.1 59.4
Quarterly F lo w
¹BB Seguridade's adjusted ROAE of 4Q16, 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$8,190 million, shareholder’s equity as of September, 2016, deducted of dividends to be distributed for the 2H16, according to the Payout of 82% (without interest accrual).
Figure in the end of the period: R$8,289 million, based on shareholder's equity as of December, 2016,
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 6
A D J U S T E D N E T I N C O M E
Figure 1 – Adjusted net income Figure 2 – Adjusted net income | Earnings breakdown¹ (R$ million)
-9
1
-24 -15 -21 -3 -35 -40
604 605 646 630 608 669 639 679
354 389 366 399 371420 384
435
949995 988 1,014
9581,087
9881,075
54.9 55.9 53.9 54.049.9
55.248.9
52.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Distribution business (R$ million)
Underwritting and accumulation businesses (R$ million)
Other (R$ million)
Adjusted ROAE (%)
653 690 720 657 629773 699 743
296304 268 357
329
313289
331
949995 988 1,014
958
1,087988
1,075
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
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
The adjusted net income reached R$1.1 billion in the 4Q16, growth of 6.0% as compared to the adjusted net income for the 4Q15. The
performance in the quarter is explained by the growth of R$86.7 million (+13.2%) in the combined non-interest operating result, which
was partially offset by the drop of R$25.5 million (-7.1%) in the combined net investment income, both net of tax effects.
It is worth noting that the analysis of the last 12 months was impacted by 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, making the bases not
directly comparable.
The return on average equity registered 52.2% in the 4Q16, 1.9 p.p. lower YoY.
YEAR-TO-DATE ANALYSIS
BB Seguridade’s adjusted net income achieved R$4.1 billion in 2016, 4.1% up as compared to the adjusted net income of 2015. The
performance is explained by both the R$124.5 million increase (+4.6%) in the combined non-interest operating result and the expansion
of R$37.6 million (+3.1%) in the combined net investment income, both net of tax effects.
It is worth noting that the result of the year had its comparison base impacted by the risen in taxes in all the BB Seguridade’s affiliates
and controlled companies, what turned the bases not directly comparable. The changes were:
(i) the reinstatement in July 2015 of the PIS/PASEP and COFINS tax on financial revenues earned by the holdings BB Seguridade
Participações, BB Seguros Participações, BB Cor Participações, BB MAPFRE SH1 Participações and MAPFRE BB SH2
Participações, subject to the non-cumulative system;
(ii) the increase in the income tax rate, namely the social contribution (“CSLL"), which affected the results of BB Seguridade’s
affiliate companies controlled by BB MAPFRE SH1 and MAPFRE BB SH2, as well as Brasilprev, Brasilcap and IRB, from September
2015 on;
(iii) the change of BB Corretora’s tax regime to the non-cumulative system in March 2016, which led to a rise in the PIS/PASEP and
COFINS tax rates on gross revenues.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 7
Figure 3 – Adjusted net income | Quarterly evolution breakdown (R$ million)
Figure 4 – Adjusted net income | Year-to-date evolution breakdown (R$ million)
1,014
87(26) 1,075
4Q15 Adjusted netincome
Change in non-interestoperating result¹
Change in netinvestment income¹
4Q16 Adjusted netincome
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.
3,945
124 38 4,107
2015 Adjusted netincome
Change in non-interestoperating result¹
Change in netinvestment income¹
2016 Adjusted netincome
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.
A D J U S T E D I N C O M E S T A T E M E N T
Table 2 – Adjusted income statement
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Equity inco me 1,029,014 997,913 1,076,953 4.7 7.9 3,984,734 4,130,958 3.7
Underwritting and accumulation businesses 629,938 638,846 679,268 7.8 6.3 2,484,650 2,595,499 4.5
Life, M ortgage Life and Rural 300,191 326,729 321,384 7.1 (1.6) 1,223,498 1,247,177 1.9
Property and Casualty 59,292 22,239 14,816 (75.0) (33.4) 208,171 125,186 (39.9)
Pension Plans 156,902 208,223 200,016 27.5 (3.9) 646,003 756,732 17.1
Reinsurance 41,024 13,575 75,259 83.5 454.4 154,660 170,766 10.4
Premium Bonds 72,509 67,483 66,842 (7.8) (0.9) 252,517 292,768 15.9
Dental Insurance 20 597 951 4,655.0 59.3 (200) 2,870 -
Distribution businesses 398,996 383,974 435,008 9.0 13.3 1,508,195 1,609,938 6.7
Other 80 (24,907) (37,323) - 49.9 (8,111) (74,479) 818.2
G&A expenses (19,154) (17,309) (17,659) (7.8) 2.0 (57,404) (68,149) 18.7
Personnel expenses (15,541) (5,083) (7,767) (50.0) 52.8 (43,992) (35,078) (20.3)
Administrative expenses (3,474) (6,419) (9,144) 163.2 42.4 (11,568) (20,494) 77.2
Tax expenses (131) (5,758) (707) 440.9 (87.7) (2,499) (12,941) 417.7
Other operating income (expenses) (8) (49) (41) 416.0 (15.8) 655 364 (44.4)
N et investment inco me 3,702 7,326 15,442 317.2 110.8 17,650 44,255 150.7
Financial income 3,702 41,170 15,442 317.2 (62.5) 80,688 116,308 44.1
Financial expenses - (33,844) - - - (63,038) (72,053) 14.3
A djusted net inco me 1,013,562 987,930 1,074,736 6.0 8.8 3,944,979 4,107,064 4.1
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 8
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. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
A djusted net inco me 1,013,562 987,930 1,074,736 6.0 8.8 3,944,979 4,107,064 4.1
Extrao rdinary events - - (93,212) - - 262,452 (93,212) -
Brasilprev: reversal of provisions - - - - - 220,539 - -
SH1: Increase of the social contribution rate - - - - - 21,970 - -
SH2: Increase of the social contribution rate - - - - - 19,944 - -
SH1: Tax credit - PIS/COFINS - - 13,458 - - - 13,458 -
SH2: Tax credit - PIS/COFINS - - 9,557 - - - 9,557 -
BB Seguros: Impairment - M APFRE BB
SH2- - (176,101) - - - (176,101) -
BB Seguros: Impairment - M APFRE BB
SH2 - Tax effects- - 59,874 - - - 59,874 -
N et inco me 1,013,562 987,930 981,524 (3.2) (0.6) 4,207,432 4,013,852 (4.6)
Quarterly F lo w C hg. % A nnual F lo w
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
collateral 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 Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 9
BB MAPFRE SH1 and MAPFRE BB SH2 – Increase of the social contribution rate: in May 2015, the federal government issued the
Provisional Measure Nr. 675 (“PM 675/15”), raising the rate of the social contribution (“CSLL") from 15% to 20% for financial
institutions, insurance and premium bonds companies, among others. On October 6, 2015, the PM 675/15 was converted into a
definitive Law Nr. 13,169 ("Law 13,169/15"), providing that the new tax rates for social contribution will be effective from September 1,
2015 to December 31, 2018, going back to 15% on January 1, 2019.
Therefore, the insurance companies BB MAPFRE SH1 and MAPFRE BB SH2 recalculated their respective social contribution deferred tax
assets, originally registered at 15%, to the current 20% rate, creating a positive impact for BB Seguridade's net income of R$21.9 million
in equity income arising from BB MAPFRE SH1 and of R$19.9 million in equity income from MAPFRE BB SH2. Such deferred tax assets
arises from: (i) temporary additions (tax credits activated by the companies, coming mainly from the constitution of provisions for loan
losses and other provisions that are expected to be reversed before the end of the effectiveness of the Law 13,169/15); (ii) negative
basis/accumulated fiscal losses; and goodwill (as a result of the corporate reorganization that took place during the process of
structuring the partnership).
SH1 and SH2 - Tax credit - PIS/COFINS: change in the methodology of PIS/PASEP and COFINS tax calculation which comprises the
constitution of tax credits related to temporary differences of taxation on claims to be paid provision (“PSL”), incurred but not reported
claims provision (IBNR) and incurred but not enough reported claims provision (IBNER), resulting in positive net impacts of R$53.1
million in BB MAPFRE SH1 and of R$53.5 million in MAPFRE BB SH2. Considering that the change in the methodology was applied to
provisions recorded in both 2016 and previous years, the amount of tax credits related to provisions recorded in previous years was
considered extraordinary, which generated a positive impact of R$23.0 million in BB Seguridade’s net income.
BB Seguros – Impairment (MAPFRE BB SH2): impairment loss in BB Seguro’s investment in MAPFRE BB SH2 which amounted to R$176.1
million, as determined by the CPC 01 (“Brazilian Accounting Standards Committee Rule”). The impairment loss was due to the
challenging economic scenario, lower premiums written estimates and lower net investment income due to lower expected interest
rates. The gross amount was registered as an impairment loss in BB Seguros’s other operating income/expenses, with a negative impact
on BB Seguridade’s equity income that amounted to R$116.2 million, net of income taxes
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 10
BB MAPFRE SH1 | Life, Mortgage Life and Rural
Figure 5 – SH1 | Premiums written (R$ million) Figure 6 – SH1 | Adjusted net income and ROAE
1,542
1,867
2,094 2,098
1,497
2,097
1,8191,967
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
277 287354
272 266317 331 325
115 95
104
129 113103 105 103
392 382
457400 379
419 436 429
48.0 45.253.7
46.3 43.1 46.8 48.4 47.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
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 arising from the Life, Mortgage Life and Rural business segment amounted to R$428.6 million in the 4Q16, 7.1% higher
YoY. The performance was impacted by the growth of the underwriting result driven by the improvement in G&A ratio, partially offset
by the deterioration in the loss ratio of credit life and term life segments and the contraction of the net investment income.
In the 4Q16, premiums written amounted to R$2.0 billion, 6.2% lower YoY justified by the drop in credit life (-48.3%), partially offset by
the increase in term life (+16.4%), mortgage life (+139.9%) and rural (+4.8%) insurance segments.
YEAR-TO-DATE ANALYSIS
In 2016, the net income arising from the Life, Mortgage Life and Rural business segment reached R$1.7 billion, 1.9% up as compared to 2015. The result of the year was impacted by the increase in the income tax rate namely Social Contribution (“CSLL"), from 15% to 20%, since September 2015 according to the Law 13,169/15.
The earnings before taxes and profit sharing grew by 5.7% driven by the increase in the underwriting result, due mainly to the higher earned premiums, but partially offset by the deterioration in the loss ratio.
Premiums written amounted to R$7.4 billion, in 2016, 2.9% lower YoY, justified by the decrease in credit life (-48.2%), partially offset by
the growth in term life (+15.8%), mortgage life (+29.2%) and rural (+14.0%) insurances. The term life products were especially boosted
by the launch of the new portfolio which begun to be sold in July 2016.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 11
MAPFRE BB SH2 | P&C
Figure 7 – SH2 | Premiums written (R$ million) Figure 8 – SH2 | Adjusted net income and ROAE
2,1212,325 2,422
2,228 2,1742,284
1,971 1,996
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
1.0 12-17 -17
-58
25
-31 -95
98 89 116136
108
101
75
124
99 10099
119
50126
44
30
12.6 12.4 11.8 13.85.8
13.9
4.7 3.1
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Net investment income¹ (R$ million)
Non-interest operating result¹ (R$ million)
Adjusted ROAE (%)
¹Net of income taxes considering the Company’s effective tax rate.
QUARTELY ANALYSIS
The adjusted net income from the P&C business segment amounted to R$29.6 million in the 4Q16, 75.0% down YoY, driven by:
(i) the negative underwriting result in the quarter, explained by the deterioration of the loss ratio in auto and casualty insurances;
and
(ii) the contraction of 39.7% in the net investment income, explained by the higher average yield on the interest bearing liabilities.
In the 4Q16, the premiums written amounted to R$2.0 billion, 10.4% lower YoY, driven by the drop in auto (-17.5%) and casualty (-5.1%)
insurances, partially offset by the expansion of the other segment (+15.4%).
YEAR-TO-DATE ANALYSIS
In 2016, the adjusted net income achieved R$250.4 million, 39.9% down YoY. The performance is explained by the deterioration in both
loss and commission ratios, as well as the contraction of the net investment income.
Premiums written dropped by 7.4% YoY, as a consequence of the reduction of 18.0% in auto insurance sales, partially offset by the
growth in casualty (+2.2%) and other (+30.1%) segments.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 12
Brasilprev | Pension Plans
Figure 9– Brasilprev | Management fee Figure 10 – Brasilprev | Adjusted net income and ROAE
345 370418 422 430
474524 529
1.24 1.22 1.21 1.19 1.17 1.16 1.15 1.14
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Management fee (R$ million) Management fee (%)
121 130 156 133 142 166204 195
99 7966
77 8176
73 72220 210 223 209 223
242278 267
44.637.7 38.0 36.1 37.3 39.0
43.0 42.9
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Net investment income¹ (R$ million)
Non-interest operating result¹ (R$ million)
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$266.7 million in the 4Q16, 27.5% up YoY. The performance was
supported by the growth of 25.3% in the revenues with management fees, driven by the expansion of 33.2% in the assets under
management and the improvement of 2.6 p.p. in the cost-to-income ratio.
In the 4Q16, pension plans contribution rose 55.5% YoY, with the growth concentrated in VGBL sporadic contribution plans. Net inflows
amounted to R$9.7 billion, 68.1% higher YoY, boosted by the strong expansion of the contributions.
YEAR-TO-DATE ANALYSIS
In 2016, the net income of the Pension Plans business segment totaled R$1.0 billion, 17.1% up as compared to the adjusted net income
of 2015. The performance observed in the year is a result of the growth in the non-interest operating result, explained by the expansion
of revenues with management fees along with the improvement of 2.6 p.p. in the cost-to-income ratio.
The volume of pension plans contribution grew by 28.3% YoY, highlighting the performance of VGBL sporadic contribution plans. In the
year, net inflows achieved R$28.5 billion, 24.9% higher YoY, driven by the expansion of the contributions and the 0.5 p.p. drop in the
annualized redemption ratio.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 13
Brasilcap | Premium Bonds
Figure 11 – Brasilcap | Collections (R$ million) Figure 12 – Brasilcap | Net income and ROAE
1,321
1,961
1,379
1,856
1,043
1,5711,360
1,675
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
29 27 28 19 18 25 12 14
75 6941
89117
78 90 86
10597
68
109
135
103 101100
102.688.8
65.4
109.7 123.0
84.1 87.9 96.4
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Net investment income¹ (R$ million)
Non-interest operating results¹ (R$mill ion)
ROAE (%)
¹Net of income taxes considering the Company’s effective tax rate.
QUARTELY ANALYSIS
In the 4Q16, the net income for the Premium Bonds business segment reached R$100.3 million, 7.8% lower YoY. The performance was
impacted by the drop in both the net investment income and the result with premium bonds.
The result with premium bonds dropped by 31.4% YoY, with a contraction of 2.2 p.p. in the premium bonds margin, driven by the drop of 14.2% in the net revenues with premium bonds. The net revenues decrease is explained by the contraction of 9.7% in the premium bonds collection and the growth of 0.8 p.p. in the average reserve quote. On the other hand, the result with lottery expenses and the acquisition costs fell by 23.3% and 12.3%, respectively.
YEAR-TO-DATE ANALYSIS
Premium Bonds business segment reached a net income of R$439.2 million in 2016, 15.9% higher YoY, driven by the higher spread in
the year.
In 2016, the result with premium bonds dropped by 27.9% YoY, due to the deterioration of 1.9 p.p. in the premium bonds margin,
explained by the decrease of 17.7% in the net revenues with premium bonds, driven by the contraction of 13.3% in premium bonds
collection and the growth of 0.9 p.p. in the average reserve quote.
The effect was partially offset by the drop of 23.7% in the result with lottery expenses as well as the reduction of 19.0% in the
acquisition costs.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 14
IRB | Reinsurance
Figure 13 – IRB | Premiums written¹ (R$ million) Figure 14 – IRB | Adjusted net income¹ (R$ million)
728
1,032902
1,062982
1,2001,041
965
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
43
-6
40 47 66 45
-48
23887
230 162 154 134 157
114
130
130
224202 201 199 202
66
368
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Non-interest operating result¹ Net investment income¹
¹Net of income taxes considering the Company’s effective tax rate.
QUARTELY ANALYSIS
In the 4Q16, the Reinsurance business segment reached a net income of R$368.5 million, 83.5% higher YoY. The performance is justified
by the improvement of 32.3 p.p. in the loss ratio, partially offset by the growth in the G&A and the commission ratios.
YEAR-TO-DATE ANALYSIS
The net income of the Reinsurance business segment achieved R$836.1 million in 2016, 10.4% higher YoY. The performance in the year
is explained by the improvement of 3.6 p.p. in the combined ratio.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 15
D I S T R I B U T I O N B U S I N E S S E S
BB Corretora | Brokerage
Figure 15 – BB Corretora | Brokerage revenues (R$ million) Figure 16 – BB Corretora | Adjusted net income and operating margin
610673
619658 632
728672
732
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
354389 366
399371
420384
435
83.5 81.383.7 84.1 83.1
80.1 79.7 79.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted net income (R$ million) Operating margin (%)
QUARTELY ANALYSIS
BB Corretora’s net income amounted to R$435.0 million in the 4Q16, 9.0% higher YoY, driven by:
(i) the growth of 11.4% in brokerage revenues, partially offset the contraction of 4.9 p.p. in the operating margin, justified mostly
by the higher PIS/PASEP and COFINS tax rates since March 2016; and
(ii) the increase of 45.3% in the net investment income, driven by a higher average balance of financial investments along with the
increase in the average yield on interest earning assets.
YEAR-TO-DATE ANALYSIS
In 2016, BB Corretora reported a net income of R$1.6 billion, 6.7% higher YoY, explained by:
(i) the growth of 8.0% in brokerage revenues, partially offset by the contraction of 2.7 p.p. in the operating margin, justified
mostly by the higher PIS/PASEP and COFINS tax rates since March 2016; and
(ii) the 35.0% increase in the net investment income, driven by an increased average volume as well as a higher average yield on
interest earning assets.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 16
G U I D A N C E 2 0 1 6
In 2016, BB Seguridade’s net income grew by 4.1% as compared to the same period of 2015, within the 2016 revised Guidance, as
presented below:
Table 4 – Estimates for 2016
R atio Values o bserved 2016 Estimates
BB Seguridade - Adjusted net income growth (%) 4.1 4.0 - 8.0
G U I D A N C E 2 0 1 7
The following table presents the Guidance for 2017:
Table 5 – Estimates for 2017
R atio 2017 Estimates
Adjusted net income growth (%) 1.0 - 5.0
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 17
O T H E R I N F O R M A T I O N
Table 6 – Market share and ranking
Unit 4Q15 1Q16 2Q16 3Q16 4Q16
Life
Premiums written R$ thousand 769,935 807,974 805,139 958,693 896,428
M arket-share % 14.6% 15.8% 15.5% 17.3% 16.0%
Ranking 2º 2º 2º 2º 2º
C redit life
Premiums written R$ thousand 656,296 161,816 415,122 175,164 339,463
M arket-share % 33.3% 15.1% 25.8% 15.6% 20.4%
Ranking 1º 3º 1º 3º 1º
M o rtgage life
Premiums written R$ thousand 24,762 52,345 54,027 51,141 59,405
M arket-share % 2.6% 6.4% 6.5% 6.0% 6.7%
Ranking 7º 5º 5º 5º 3º
R ural
Premiums written R$ thousand 608,995 375,143 762,620 586,211 637,928
M arket-share % 82.2% 78.6% 77.4% 67.1% 74.6%
Ranking 1º 1º 1º 1º 1º
A uto
Premiums written R$ thousand 1,222,799 1,032,637 1,100,789 930,650 1,009,018
M arket-share % 14.3% 13.6% 13.6% 11.0% 12.0%
Ranking 2º 2º 2º 4º 2º
C asualt ies
Premiums written R$ thousand 805,361 880,931 916,232 796,224 764,290
M arket-share % 14.0% 15.1% 14.4% 12.7% 10.9%
Ranking 1º 1º 1º 1º 1º
P ensio n P lans
Technical reserves R$ thousand 148,246,754 157,295,939 171,816,005 182,723,662 197,533,558
M arket-share % 28.2% 28.5% 29.4% 29.8% 30.3%
Ranking 2º 1º 1º 1º 1º
Contributions R$ thousand 9,892,606 7,898,302 13,922,495 10,218,318 15,383,564
M arket-share % 33.9% 35.2% 44.5% 39.4% 41.3%
Ranking 1º 1º 1º 1º 1º
P remium B o nds
Reserves R$ thousand 12,354,369 11,723,268 11,207,605 11,011,804 10,762,799
M arket-share % 39.8% 38.6% 37.7% 37.3% 36.6%
Ranking 1º 1º 1º 1º 1º
Collections R$ thousand 1,856,387 1,043,471 1,570,613 1,359,880 1,675,493
M arket-share¹ % 32.5% 21.4% 29.3% 25.8% 26.3%
Ranking¹ 1º 2º 1º 2º 2º
Quarterly F lo w
Source: Susep. ¹ Susep data up to november/2016.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 18
Table 7 - 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 41,921 671,606,547 33.58%
Foreign 1,005 561,237,371 28.06%
Companies 3,358 78,686,349 3.93%
Individuals 37,558 31,682,827 1.58%
T o tal 41,923 2,000,000,000 100.00%
Table 8 - Stocks | Performance
Unit 4Q15 1Q16 2Q16 3Q16 4Q16
Sto ck's perfo rmance
Earnings per share R$ 0.51 0.48 0.54 0.49 0.54
Dividends per share R$ 0.00 0.82 0.00 0.82 0.00
Equity per share R$ 3.79 4.26 3.99 4.49 4.14
Closing price R$ 24.33 29.70 28.11 29.88 28.30
Annualized dividend yield¹ % 5.84 5.39 5.41 5.98 6.21
M arket capitalization R$ million 48,660 59,400 56,220 59,760 56,600
R atio s
P/E (12 month traling) x 12.33 15.02 13.90 14.77 13.78
P/BV x 6.42 6.97 7.04 6.65 6.83
B usiness data
Quantity of trade carried out 980,065 1,161,348 903,793 741,392 730,836
Average daily vo lume traded R$ million 127 155 152 113 104
Average daily vo lume traded - BM &FBOVESPA R$ million 5,659 5,991 6,331 6,171 7,488
Share on BM &FBOVESPA's average volume % 2.25 2.59 2.40 1.83 1.39
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.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 19
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 4Q16, the net investment income of the BB Seguridade holding company grew by 317.2% YoY, explained by the increase of the average balance of cash and cash equivalents.
YEAR-TO-DATE ANALYSIS
In 2016, the net investment income of the holding company rose by 150.7% YoY, driven by the expansion of the average cash balance along with a higher average Selic rate throughout the year.
37.0
39.1
36.2
38.8
37.9
38.6
37.5
39.0
30.7
28.8
33.9
29.2
29.1
28.9
31.9
28.8
17.2
15.8
16.5
15.2
17.1
16.6
20.4
18.0
7.3
6.5
4.5
7.0
9.2
6.3
6.6
6.0
5.2
5.0
4.9
5.8
2.6
5.8
2.2
1.3
2.7
4.7
4.1
4.0
4.2
3.8
1.3
6.8
0.06
0.07
0.06
0.09
0.06
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
Brokerage Life, Mortgage Life and Rural Pension Plans Premium Bonds Property and Casualty Reinsurance Dental Insurance Other
5 5 54
11 11
7
15
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 20
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 4Q16, the G&A expenses of the holding company dropped by 7.8% YoY, due to lower personnel expenses as an outcome of the deployment of the cost sharing methodology with the subsidiaries BB Seguros and BB Corretora.
The decline in personnel expenses was partially offset by higher expenses with specialized technical services, as a result of hiring consulting services.
YEAR-TO-DATE ANALYSIS
In 2016, BB Seguridade’s G&A expenses grew by 18.7% YoY, explained by:
(i) the increase in tax expenses, as a result of IOF collection on withdrawals of short-term financial investments for dividend
payment, besides 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; and
(ii) the growth in administrative expenses, explained by the increase in specialized technical services as a result of hiring
consulting services.
The growth observed in the administrative and tax expenses was partially offset by the decline of 20.3% in personnel expenses, driven
by the deployment of a methodology for costs sharing within the subsidiaries.
Table 9 – Earnings Analysis | General and administrative expenses
12 12
15
1920
13
17 18
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
A dministrat ive expenses (3,474) (6,419) (9,144) 163.2 42.4 (11,568) (20,494) 77.2
Specialized technical services (1,800) (4,691) (7,180) 298.9 53.1 (4,559) (12,682) 178.2
Condominium fee (826) (722) (856) 3.6 18.5 (3,004) (3,367) 12.1
Communication (274) (313) (336) 22.8 7.5 (1,129) (1,316) 16.6
Other administrative expenses (574) (693) (772) 34.5 11.4 (2,876) (3,129) 8.8
P erso nnel expenses (15,541) (5,083) (7,767) (50.0) 52.8 (43,992) (35,078) (20.3)
Compensation (9,831) (2,251) (4,455) (54.7) 97.9 (25,665) (19,144) (25.4)
Welfare benefits (3,949) (1,285) (1,675) (57.6) 30.4 (12,372) (9,445) (23.7)
Other compensation (765) (885) (880) 15.1 (0.5) (2,961) (3,441) 16.2
Benefits (996) (662) (757) (24.0) 14.3 (2,994) (3,048) 1.8
T ax expenses (131) (5,758) (706) 440.1 (87.7) (2,499) (12,941) 417.8
COFINS (114) (1,602) (571) 402.5 (64.4) (1,738) (4,515) 159.8
PIS/Pasep (17) (258) (91) 446.9 (64.8) (280) (727) 159.6
IOF - (3,898) 1 - - (478) (7,640) 1,498.3
Other (0) (0) (45) 11,104.5 17,651.4 (3) (59) 1,866.7
Other o perat ing inco me (expenses) (8) (49) (41) 416.0 (15.8) 655 364 (44.4)
G&A expenses (19,154) (17,309) (17,658) (7.8) 2.0 (57,404) (68,149) 18.7
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 21
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 10 – Earnings Analysis | Non-interest operating results vs net investment income¹
¹Net of taxes considering the Companies effective tax rate.
653 690 720 657 629773 699 743
296304 268 357
329
313289
331
949995 988 1,014
958
1,087988
1,075
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Non-interest operating results Net investment income
68.8 69.4 72.964.8 65.6 71.2 70.8 69.2
31.2 30.6 27.135.2 34.4 28.8 29.2 30.8
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Non-interest operating results Net investment income
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
N o n-interest o perat ing results 656,554 699,340 743,252 13.2 6.3 2,719,913 2,844,385 4 .6
Life, M ortgage Life and Rural 203,811 248,172 243,856 19.6 (1.7) 892,021 929,191 4.2
Property and Casualty (8,631) (15,346) (47,333) 448.4 208.4 (11,009) (79,026) 617.8
Pension Plans 99,482 153,283 146,173 46.9 (4.6) 405,562 530,679 30.9
Premium Bonds 12,870 7,816 9,297 (27.8) 19.0 69,100 45,668 (33.9)
Reinsurance 9,658 (9,712) 48,685 404.1 - 25,291 61,495 143.1
Dental Insurance (95) 266 819 - 208.2 (551) 2,220 -
Holdings and broker 339,459 314,861 341,755 0.7 8.5 1,339,498 1,354,159 1.1
N et investment inco me 357,008 288,591 331,483 (7.1) 14.9 1,225,067 1,262,679 3 .1
Life, M ortgage Life and Rural 96,380 78,557 77,528 (19.6) (1.3) 331,479 317,986 (4.1)
Property and Casualty 67,923 37,585 62,149 (8.5) 65.4 219,179 204,212 (6.8)
Pension Plans 57,420 54,940 53,843 (6.2) (2.0) 240,442 226,053 (6.0)
Premium Bonds 59,639 59,667 57,545 (3.5) (3.6) 183,417 247,100 34.7
Reinsurance 31,366 23,287 26,574 (15.3) 14.1 129,369 109,271 (15.5)
Dental Insurance 115 331 132 14.4 (60.2) 351 650 85.4
Holdings and broker 44,165 34,223 53,712 21.6 56.9 120,831 157,405 30.3
A djusted net inco me 1,013,562 987,930 1,074,735 6.0 8.8 3,944,979 4,107,063 4 .1
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 22
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$743.3 million in the 4Q16, 13.2% up YoY, explained by:
(i) the growth of R$46.7 million in the non-interest operating result arising from the Pension Plans business segment, mostly
explained by the 25.3% increase in the revenues with management fees, driven by the expansion of 33.2% in the assets under
management along with the 2.6 p.p. improvement in the cost to income ratio;
(ii) the increase of R$40.0 million in the non-interest operating result arising from the Life, Mortgage Life and Rural business
segment, due mainly to the higher volume of earned premiums and the 2.7 p.p. improvement in the combined ratio;
(iii) the expansion of R$39.0 million in the non-interest operating result from the Reinsurance segment, driven mainly by the
improvement of 32.3 p.p. in the loss ratio; and
(iv) the R$27.1 million increase in the operating result at BB Corretora, as a result of higher brokerage revenues arising mainly from
the Life, Mortgage Life and Rural business segment as well as the one from the Pension Plans business.
The growth observed in the non-interest operating results at the aforementioned segments was partially offset by the drop of R$38.7
million in the non-interest operating results from the Property and Casualty business segment, driven by the deterioration of 6.2 p.p. in
the combined ratio, and the decrease of R$3.6 million in the non-interest operating result from Premium Bonds business segment, due
to the decline in collections.
YEAR-TO-DATE ANALYSIS
The combined non-interest operating result amounted to R$2.8 billion in 2016, 4.6% up YoY, driven mainly by:
(i) the growth of R$125.1 million in the non-interest operating result arising from the Pension Plans business segment, due to the
25.9% increase in revenues with management fees as well as the 2.6 p.p. improvement in the cost to income ratio;
(ii) the R$37.2 million increase in the non-interest operating result arising from the Life, Mortgage Life and Rural business segment,
due mainly to the higher volume of earned premiums partially offset by the 2.4 p.p. increase in the loss ratio;
(iii) a R$36.2 million higher non-interest operating result at the Reinsurance segment, driven by the improvement of 3.6 p.p. in the
combined ratio; and
(iv) the R$96.6 million expansion in the operating result at BB Corretora, as a result of the 8.0% growth in brokerage revenues,
explained by higher revenues arising from the Life, Mortgage Life and Rural business segment as well as from the Pension Plans
business.
The improved performance in the aforementioned items was partially offset by:
(i) the decrease of R$68.0 million in the non-interest operating result arising from the Property and Casualty business segment,
driven by higher loss and commission ratios; and
(ii) the R$23.4 million decline in the Premium Bonds business segment, mainly as a result of the drop in the premium bonds
collection.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 23
N E T I N V E S T M E N T I N C O M E
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$331.5 million in the
4Q16, 7.1% down YoY. The net investment income was impacted by a lower average Selic rate as well as a lower inflation, which
affected the yield on inflation protected securities classified as held to maturity.
YEAR-TO-DATE ANALYSIS
The combined net investment income of BB Seguridade and its controlled and affiliated companies totaled R$1.3 billion in the year, an
increase of 3.1%, driven by:
(i) the growth of R$63.7 million in the net investment income from the Premium Bonds segment, as a result of the 1.5 p.p.
improvementin the spread;
(ii) the increase of R$36.6 million in the combined net investment income from BB Seguridade, BB Corretora and the holdings BB
Seguros and BB Cor, explained by the higher average Selic rate along with the expansion of the balance of interest earning
assets.
Figure 24 – Earnings Analysis | Breakdown of financial investments by index¹
Figure 25 – Earnings Analysis | Trading portfolio by index¹
Dec/15 Dec /16 Dec /15 Dec /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.
12.1913.14
13.99 14.15 14.15 14.15 14.15 13.86
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
15.57 15.81 15.77 15.66 15.57
13.77
12.20
11.62 11.56 11.57
15.87
16.53 16.75 16.71 16.62
13.63
11.52 11.03 11.19 11.33
DI1F17 DI1F18 DI1F19 DI1F20 DI1F21
Sep/15
Sep/16
Dec/15
Dec/16
Pre-fix ed28.4%
Other4.3%
Mutual funds quotas0.2%
Floating18.7%
Inflation48.5%
Pre-fix ed25.0%
Other5.0%Mutual funds
quotas0.2%
Floating18.6%
Inflation51.2%
Pre-fix ed43.8%
Floating41.0%
Inflation3.6%Mutual funds
quotas0.5%
Other11.1%
Pre-fix ed32.9%
Floating40.8%
Inflation13.9%
Mutual funds quotas0.5%
Other11.9%
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 24
Table 11 – 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.
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
T rading 9,332,194 9,326,910 9,874,733 5.8 5.9
Pre-fixed 4,088,909 3,156,939 3,250,298 (20.5) 3.0
Floating 3,823,109 5,118,588 4,029,099 5.4 (21.3)
Inflation 339,496 353,714 1,373,719 304.6 288.4
M utual funds quotas 44,726 51,442 50,779 13.5 (1.3)
Other 1,035,954 646,227 1,170,838 13.0 81.2
A vailable fo r sale 2,417,831 1,760,356 1,562,758 (35.4) (11.2)
Pre-fixed 136,845 31,275 32,173 (76.5) 2.9
Floating 464,348 620,775 422,891 (8.9) (31.9)
Inflation 1,829,244 868,885 1,088,139 (40.5) 25.2
Other (12,606) 239,421 19,554 - (91.8)
H eld to maturity 12,095,545 12,344,707 12,558,496 3.8 1.7
Pre-fixed 2,541,640 2,637,393 2,720,917 7.1 3.2
Floating 163,948 9,317 5,266 (96.8) (43.5)
Inflation 9,389,957 9,697,996 9,832,313 4.7 1.4
Quarterly F lo w C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 25
3 . B A L A N C E S H E E T A N A L Y S I S
Table 12 – 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 December 2016, the balance of cash and cash equivalents reached R$665.5 million, mainly composed of repos.
I N V E S T M E N T S
Table 13 – Balance Sheet Analysis |Direct investments
Note: (1) Controlled companies, fully consolidated ²BB Cor Participações was closed down at December 27, 2016. Therefore, BB Corretora became a direct controlled Company of BB Seguridade.
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A ssets 9,231,340 8,987,940 9,969,494 8.0 10.9
Cash and cash equivalents 59,784 191,670 665,538 1,013.2 247.2
Investments 7,203,271 8,743,998 7,974,319 10.7 (8.8)
Current tax assets 29,956 48,418 49,018 63.6 1.2
Dividends receivable 1,938,325 - 1,273,950 (34.3) -
Other assets 4 3,854 2,885 72,025.0 (25.1)
Intangible - - 3,784 - -
Liabilit ies 1,650,572 7,254 1,680,429 1.8 23,065.6
Dividends payable 1,634,512 5 1,670,810 2.2 -
Current tax liabilities 134 349 901 572.4 158.2
Other liabilities 15,926 6,900 8,718 (45.3) 26.3
Shareho lders' equity 7,580,768 8,980,686 8,289,065 9.3 (7.7)
B alance C hg. %
T o tal
o wnership (%)
R $ tho usand D ec/ 16 D ec/ 15 Sep/ 16 D ec/ 16
Insurance, P ensio n P lans and
P remium B o nds
BB Seguros Participações Holding (1) 100.0 7,141,522 8,298,328 7,912,353
Insurance B ro kerage
BB Cor Participações² Holding (1) 100.0 61,749 445,670 -
BB Corretora de Seguros e Adm. de Bens Holding (1) 100.0 34,984 418,950 61,966
A cco unting
treatmentA ctivity
Investment balance
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 26
Table 14 – Balance Sheet Analysis |BB Seguros Participações’ investments
Note: (1) Affiliated companies, booked by the equity method
T o tal
o wnership (%)
R $ tho usand D ec/ 16 D ec/ 15 Sep/ 16 D ec/ 16
Insurance
B B M A P F R E SH 1 P art icipaçõ es S.A . H o lding (1) 74.99 3,020,007 2,828,873 3,165,316
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) 50.00 2,230,688 2,348,905 2,198,335
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) 74.99 1,794,476 1,903,549 1,777,217
H ealth
B rasildental Operado ra de P lano s
Odo nto ló gico s S.AH ealth (1) 75.00 1,533 6,828 7,778
P remium B o nds
B rasilcap C apitalização P remium B o nds (1) 66.66 405,229 364,887 411,447
R einsurance
IR B R einsurance (1) 20.43 663,819 642,368 683,710
A ctivity
A cco unting
treatment
Investment balance
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 27
Figure 26 – Balance Sheet Analysis | Ownership structure at 12/31/2016
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 28
S H A R E H O L D E R ’ S E Q U I T Y
Shareholder’s equity amounted to R$8.3 billion in December 2016, 9.3% 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$8.3 billion is equivalent to a book value of R$4.14 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) - - -
Share buyback program - - - (48,249) - - (48,249)
Additional dividends in 2H14 - - (1,103,927) - - - (1,103,927)
Other comprehensive income - - - - - (32,526) (32,526)
Net income for the period - - - - 4,207,432 - 4,207,432
Destination - Capital reserve - - 841,486 - (841,486) - -
- Additional dividends proposed in 1H15 - - - - (1,731,440) - (1,731,440)
- Additional dividends proposed in 2H15 - - - - (1,634,506) - (1,634,506)
B alance o n D ecember 31, 2015 5,646,768 712 2,027,573 (48,961) - (45,324) 7,580,768
Changes in the Period - 446 (262,441) (48,695) - (32,526) (343,216)
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)
Other comprehensive income - - - - - 32,460 32,460
Dividends lapsed - - - - 132 - 132
Net income for the period - - - - 4,013,852 - 4,013,852
Destination - Capital reserve - - 709,790 - (709,790) - -
- Additional dividends proposed in 1H16 - - - - (1,635,518) - (1,635,518)
- Additional dividends proposed in 2H16 - - - - (1,668,676) - (1,668,676)
B alance o n D ecember 31, 2016 5,646,768 1,004 2,737,363 (83,206) - (12,864) 8,289,065
C hanges in the P erio d - 292 709,790 (34,245) - 32,460 708,297
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 29
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 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.
P R O P E R T Y A N D C A S U A L T Y
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.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 30
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$9.2 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.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 31
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%.
D E N T A L I N S U R A N C E
A BB Seguridade offers dental insurance through its affiliate company Brasildental. The Company was established in 2014, by a 20-year
term partnership with Odontoprev. In this partnership BB Seguridade holds a 74.99% economic stake, being 49.99% of the common
shares.
The Brasildental’s dental insurance plans are sold under the BB Dental brand, with exclusivity of the bancassurance channel of Banco do
Brasil, to individuals and companies. The dental insurance has a wide net of specialized clinicas and professionals all over the country.
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.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 32
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. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 2,097,889 1,818,700 1,967,211 (6.2) 8.2 7,601,088 7,379,376 (2.9)
Changes in technical reserves - premiums (465,337) 153,602 (106,007) (77.2) - (1,121,709) 192,867 -
Earned premiuns 1,632,552 1,972,302 1,861,204 14.0 (5.6) 6,479,379 7,572,243 16.9
Revenue of po licies issuance 1,644 2,717 1,994 21.3 (26.6) 14,567 14,132 (3.0)
Claims incurred (557,491) (673,836) (616,990) 10.7 (8.4) (2,276,785) (3,043,023) 33.7
Acquisition costs (427,394) (470,401) (456,002) 6.7 (3.1) (1,643,203) (1,846,089) 12.3
Result with reinsurance 2,006 (99,891) (99,780) - (0.1) 79,841 96,745 21.2
Administrative expenses (126,387) (85,860) (108,913) (13.8) 26.8 (355,733) (376,827) 5.9
Tax expenses (58,935) (59,168) 3,545 - - (216,924) (175,541) (19.1)
Other operating income (expenses) (39,711) (64,687) (72,506) 82.6 12.1 (199,542) (219,943) 10.2
Underwrit ing result 426,282 521,176 512,552 20.2 (1.7) 1,881,600 2,021,697 7.4
N et investment inco me 197,139 161,499 159,181 (19.3) (1.4) 679,029 679,414 0.1
Financial income 239,262 217,602 193,384 (19.2) (11.1) 838,979 891,677 6.3
Financial expenses (42,123) (56,104) (34,204) (18.8) (39.0) (159,950) (212,263) 32.7
Equity income (7,641) (7,798) (7,786) 1.9 (0.2) (30,457) (31,053) 2.0
Operat ing result 615,780 674,877 663,947 7.8 (1.6) 2,530,172 2,670,058 5.5
Gains or losses on non-current assets 4,277 (1) (26) - 2,772.9 84 3,972 4,636.7
Earnings befo re taxes and pro f it
sharing620,057 674,876 663,921 7.1 (1.6) 2,530,256 2,674,030 5.7
Taxes (215,814) (237,117) (232,718) 7.8 (1.9) (881,847) (1,000,386) 13.4
Profit sharing (3,937) (2,060) (2,636) (33.0) 28.0 (16,861) (10,519) (37.6)
A djusted net inco me 400,306 435,698 428,567 7.1 (1.6) 1,631,548 1,663,125 1.9
One-o ff events - - 17,946 - - 29,297 17,946 (38.7)
Increase of the social contribution rate - - - - - 29,297 - -
PIS/COFINS: Deferred tax assets - - 32,630 - - - 32,630 -
PIS/COFINS: Taxes - - (14,684) - - - (14,684) -
N et inco me 400,306 435,698 446,513 11.5 2.5 1,660,845 1,681,071 1.2
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 33
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. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 2,097,889 1,818,700 1,967,211 (6.2) 8.2 7,601,088 7,379,376 (2.9)
Premiums ceded to reinsurance (164,004) (185,367) (169,452) 3.3 (8.6) (594,461) (753,040) 26.7
R etained premiums 1,933,885 1,633,333 1,797,759 (7.0) 10.1 7,006,627 6,626,337 (5.4)
Changes in technical reserves - premiums (423,460) 111,150 (139,188) (67.1) - (931,695) 166,575 -
R etained earned premiuns 1,510,425 1,744,484 1,658,571 9.8 (4.9) 6,074,932 6,792,912 11.8
Revenue of po licies issuance 1,644 2,717 1,994 21.3 (26.6) 14,567 14,132 (3.0)
Claims retained (433,359) (545,910) (514,135) 18.6 (5.8) (1,792,497) (2,166,947) 20.9
Acquisition costs (427,394) (470,401) (456,002) 6.7 (3.1) (1,643,203) (1,846,089) 12.3
Administrative expenses (126,387) (85,860) (108,913) (13.8) 26.8 (355,733) (376,827) 5.9
Tax expenses (58,935) (59,168) 3,545 - - (216,924) (175,541) (19.1)
Other operating income (expenses) (39,711) (64,687) (72,506) 82.6 12.1 (199,542) (219,943) 10.2
Underwrit ing result 426,282 521,176 512,552 20.2 (1.7) 1,881,600 2,021,697 7.4
N et investment inco me 197,139 161,499 159,181 (19.3) (1.4) 679,029 679,414 0.1
Financial income 239,262 217,602 193,384 (19.2) (11.1) 838,979 891,677 6.3
Financial expenses (42,123) (56,104) (34,204) (18.8) (39.0) (159,950) (212,263) 32.7
Equity income (7,641) (7,798) (7,786) 1.9 (0.2) (30,457) (31,053) 2.0
Operat ing result 615,780 674,877 663,947 7.8 (1.6) 2,530,172 2,670,058 5.5
Gains or losses on non-current assets 4,277 (1) (26) - 2,772.9 84 3,972 4,636.7
Earnings befo re taxes and pro f it
sharing620,057 674,876 663,921 7.1 (1.6) 2,530,256 2,674,030 5.7
Taxes (215,814) (237,117) (232,718) 7.8 (1.9) (881,847) (1,000,386) 13.4
Profit sharing (3,937) (2,060) (2,636) (33.0) 28.0 (16,861) (10,519) (37.6)
A djusted net inco me 400,306 435,699 428,567 7.1 (1.6) 1,631,548 1,663,125 1.9
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 34
A D J U S T E D N E T I N C O M E
Figure 27 – Life, Mortgage Life and Rural | Adjusted net income and ROAE
QUARTERLY ANALYSIS
The adjusted net income arising from the Life, Mortgage Life and Rural business segment amounted to R$428.6 million in the 4Q16, 7.1% up YoY. The performance was impacted by the increase in the underwriting result, due to the 2.7 p.p. improvement in the combined ratio, partially offset by the decrease in the net investment income.
The annualized return on average equity reached 47.2%, 0.9 p.p. up YoY.
YEAR-TO-DATE ANALYSIS
In 2016, the adjusted net income arising from the Life, Mortgage Life and Rural business segment grew by 1.9% to R$1.7 billion.
The performance was impacted by the increase in the income tax rate, namely social contribution (“CSLL"), from 15% to 20%, since September 2015, pursuant to Law 13,169/15.
¹Net of taxes considering the Company’s effective tax rate.
Earnings before taxes and profit sharing increased by 5.7%, explained by the growth in underwriting result, driven by the increase in
earned premiums.
The annualized return on average equity reached 44.2%, 2.3 p.p. down as compared to 2015.
Table 18 – Life, Mortgage Life and Rural | Managerial performance ratios
¹Performance ratios calculated based on the managerial income statement, considering the reinsurance effects. ²It considers adjustments which can impact the performance ratios, detailed in the corresponding section, when applicable.
277 287354
272 266317 331 325
115 95
104
129 113103 105 103
392 382
457400 379
419 436 429
48.0 45.253.7
46.3 43.1 46.8 48.4 47.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Net investment income¹ (R$ million)
Non-interest operating result¹ (R$ million)
Adjusted ROAE (%)
C hg. (p.p.)
% 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P erfo rmance rat io s
Loss ratio 28.7 31.3 31.0 2.3 (0.3) 29.5 31.9 2.4
Commission ratio 28.3 27.0 27.5 (0.8) 0.5 27.0 27.2 0.1
G&A ratio 14.9 12.0 10.7 (4.2) (1.3) 12.7 11.4 (1.3)
Combined ratio 71.8 70.1 69.1 (2.7) (1.0) 69.0 70.2 1.2
A djusted perfo rmance rat io s ²
Loss ratio 28.7 31.3 31.0 2.3 (0.3) 29.5 31.5 2.0
Commission ratio 28.3 27.0 27.5 (0.8) 0.5 27.0 27.2 0.1
G&A ratio 15.8 12.0 10.2 (5.7) (1.8) 13.6 12.6 (0.9)
Combined ratio 72.7 70.1 68.5 (4.2) (1.6) 69.9 71.1 1.2
Other rat io s
Expanded combined ratio 63.5 64.2 63.0 (0.4) (1.1) 62.1 63.9 1.8
Income tax rate 34.8 35.1 35.1 0.2 (0.1) 34.9 37.4 2.6
Adjusted ROAE 46.3 48.4 47.2 0.9 (1.2) 46.5 44.2 (2.3)
Quarterly F lo w C hg. (p.p.) A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 35
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 4Q16, the underwriting result grew by 20.2% YoY, as a result of the 2.7 p.p. improvement in the combined ratio along with the 9.8% increase in earned premiums. The improvement in the combined ratio can be explained by the lower G&A ratio, partially offset by the deterioration in the loss ratio in credit life and in term life.
YEAR-TO-DATE ANALYSIS
In 2016, the underwriting result came 7.4% higher, explained by the increase in the volume of earned premiums, partially offset by the deterioration in the loss ratio.
N E T I N V E S T M E N T I N C O M E
Figure 29 – Life, Mortgage Life and Rural | Net investment income (R$ million)
QUARTERLY ANALYSIS
In the 4Q16, the net investment income dropped by 19.3% YoY, impacted by the decrease in the average Selic rate in addition to the lower yield on inflation protected securities classified as held to maturity.
YEAR-TO-DATE ANALYSIS
In 2016, net investment income grew by 0.1% as a result of the expansion in the average balance of financial investments, partially offset by a lower average yield.
445 457
554
426460
528 521 513
69.7 69.8 65.171.8 73.1 68.5 70.1 69.1
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Underwriting result (R$ mill ion) Combined ratio (%)
178
147 157
197 190168 161 159
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 36
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 4Q16, premiums written amounted to R$2.0 billion, 6.2% down YoY, justified by the decline in credit life premiums written, partially offset by the increase in life, mortgage life and in rural.
YEAR-TO-DATE ANALYSIS
In 2016, premiums written dropped by 2.9%, driven by credit life, partially offset by the increase in term life and in rural.
Figure 31 – Life, Mortgage Life and Rural | Premiums written in the bancassurance channel (R$ 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 (%)
1,4811,833 1,758 1,934
1,3841,811 1,633 1,798
6133 336 164
113
285185
1691,542
1,8672,094 2,098
1,497
2,0971,819
1,967
96.1 98.2
84.092.2 92.4 86.4 89.8 91.4
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Retained premiums (R$ million) Premiums ceded (R$ million)
Retention rate (%)
1,257
1,655
1,896 1,929
1,194
1,879
1,6121,760
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
285
212198
168
303
218 207 207
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Life 769,935 958,693 896,428 16.4 (6.5) 2,995,558 3,468,234 15.8
Credit Life 656,296 175,164 339,463 (48.3) 93.8 2,105,315 1,091,564 (48.2)
M ortgage Life 24,762 51,141 59,405 139.9 16.2 167,861 216,918 29.2
Rural 608,995 586,211 637,928 4.8 8.8 2,071,138 2,361,903 14.0
DPVAT 37,527 46,832 33,218 (11.5) (29.1) 260,083 238,441 (8.3)
Other 374 659 770 106.1 16.8 1,132 2,317 104.6
T o tal 2,097,889 1,818,700 1,967,211 (6.2) 8.2 7,601,088 7,379,376 (2.9)
Quarterly F lo w C hg. % A nnual F lo w
47.339.5 36.3 36.7
54.038.4
52.745.6
6.5
3.6 2.6 1.8
6.6
2.8
2.6
1.7
28.035.7
16.731.3
10.8
19.8
9.617.3
3.0 2.6
2.3
1.2 3.5
2.62.8 3.0
15.1 18.6
42.129.0 25.1
36.4 32.2 32.4
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Life DPVAT Credit Life Mortgage Life Rural Other
48.940.1 43.1 39.7
58.244.3
58.649.6
6.8
3.7 3.11.9
7.2
3.3
2.9
1.8
29.136.4
19.9 33.9
11.6
22.810.7
18.8
2.92.5
2.5
1.2 3.42.5 3.2 3.0
12.3 17.431.3
23.3 19.527.1 24.6 26.6
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Life DPVAT Credit Life Mortgage Life Rural Other
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 37
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 4Q16, retained earned premiums increased 9.8% YoY, driven mainly by life, rural and mortgage life insurance, partially offset by the decline in credit life.
YEAR-TO-DATE ANALYSIS
In 2016, retained earned premiums grew by 11.8%, driven by the increase observed in life, rural and, to a lesser extent, in mortgage life.
Table 21 – Life, Mortgage Life and Rural | Breakdown of retained earned premiums
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Provision for unearned premiums (428,944) 124,160 (96,467) (77.5) - (999,733) 252,512 -
Provision for benefits to be granted
(except VGBL and VRGP)16 - - - - (276) - -
Provision for administrative expenses -
DPVAT1,335 (71) 468 (65.0) - (139) (1,372) 886.7
Provision for technical surplus 6,006 256 (4,637) - - 6,336 (204) -
Complementary provisions of
contributions (87,115) (24,587) (17,179) (80.3) (30.1) (87,115) (95,539) 9.7
Other provisions (except VGBL and
VRGP)43,365 53,843 11,808 (72.8) (78.1) (40,781) 37,470 -
C hange in technical reserves -
premiums(465,337) 153,602 (106,007) (77.2) - (1,121,709) 192,867 -
Quarterly F lo w C hg. % A nnual F lo w
1,465 1,510 1,589 1,5101,711 1,679 1,744
1,659
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Life 714,595 829,001 834,562 16.8 0.7 2,830,764 3,296,041 16.4
Credit Life 381,773 359,028 347,950 (8.9) (3.1) 1,527,321 1,472,306 (3.6)
M ortgage Life 24,176 53,591 52,730 118.1 (1.6) 167,202 199,054 19.0
Rural 352,134 455,423 388,906 10.4 (14.6) 1,290,094 1,587,263 23.0
DPVAT 38,862 46,761 33,686 (13.3) (28.0) 259,944 237,069 (8.8)
Other (1,116) 680 736 - 8.3 (393) 1,179 -
T o tal 1,510,425 1,744,484 1,658,571 9.8 (4.9) 6,074,933 6,792,912 11.8
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 38
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 4Q16, the loss ratio was 2.3 p.p. up YoY, mostly given to a higher frequency of claims in term life and in credit life insurance.
YEAR-TO-DATE ANALYSIS
In 2016, the loss ratio worsened by 2.4 p.p., largely explained by the increase in claims in credit life insurance, driven by a higher frequency of claims along with the late accounting of additional expenses for claims in the beginning of the year, amounting to R$27.8 million, due to reported claims which were not fully processed because of registration mismatches.
Setting this effect apart, the loss ratio would have been 31.5%, 2.0 p.p. higher as compared to 2015.
¹Segregates the effects of the reversal of provisions for claims incurred but not enough reported (IBNER), the accounting of reported claims related to previous periods in the non-contributory product in the credit life product and the reversal of provisions for technical surplus.
Table 22 – Life, Mortgage Life and Rural | Breakdown of retained claims
481 471407 433
587519 546 514
34.331.0
32.831.2
25.628.7
32.7
30.9 31.3
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Retained claims (R$ mil lion) Loss ratio (%)
Adjusted loss ratio¹ (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16
On
4Q15
On
3Q16 2015 2016 On 2015
C laims incurred (557,491) (673,836) (616,990) 10.7 (8.4) (2,276,785) (3,043,023) 33.7
Expenses with claims (594,684) (696,605) (637,419) 7.2 (8.5) (2,363,881) (3,189,735) 34.9
Changes in provisions for claims IBNR (5,246) (19,529) 2,801 - - (57,966) (121,376) 109.4
Changes in provisions for claims IBNER 5,693 (4,533) (24,100) - 431.7 4,717 104,539 2,116.2
Recovery of claims - Coinsurance 43,288 54,296 49,324 13.9 (9.2) 162,214 196,476 21.1
Recovery of claims - Reinsurance 124,132 127,926 102,855 (17.1) (19.6) 484,288 876,077 80.9
Salvage 482 619 388 (19.6) (37.4) 1,790 1,590 (11.1)
Reimbursements 78 5 0 (99.9) (98.7) 198 674 240.9
Assistance services (6,661) (7,658) (7,458) 12.0 (2.6) (26,783) (29,855) 11.5
Other (440) (430) (526) 19.5 22.3 2,926 (5,337) -
R etained claims (433,359) (545,910) (514,135) 18.6 (5.8) (1,792,497) (2,166,947) 20.9
A djustments - - - - - - 27,822 -
Claims in credit life related to previous
periods - - - - - - 27,822 -
A djusted retained claims (433,359) (545,910) (514,135) 18.6 (5.8) (1,792,497) (2,139,124) 19.3
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 39
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 4Q16, the commission ratio reached 27.5%, 0.8 p.p. down YoY as a result of the increased share of rural insurance in total retained premiums, which have a lower commission ratio.
YEAR-TO-DATE ANALYSIS
In 2016, the commission ratio rose 0.1 p.p. to 27.2%.
Table 23 – Life, Mortgage Life and Rural | Acquisition costs
388 399429 427 450 470 470 456
26.5 26.4 27.0 28.3 26.3 28.0 27.0 27.5
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Acquisition costs (R$ million) Commission ratio (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Commission charged on premiums
written(526,859) (418,605) (398,721) (24.3) (4.7) (1,822,918) (1,602,796) (12.1)
Agency commission (2,204) (3,148) (7,580) 243.9 140.8 (12,871) (12,603) (2.1)
Commissions recovered - Coinsurance 5,667 5,670 5,890 3.9 3.9 20,930 22,771 8.8
Change in deferred acquisition costs 131,451 (23,615) 32,537 (75.2) - 299,972 (69,339) -
Other acquisition costs (35,449) (30,703) (88,128) 148.6 187.0 (128,316) (184,122) 43.5
A cquisit io n co sts (427,394) (470,401) (456,002) 6.7 (3.1) (1,643,203) (1,846,089) 12.3
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 40
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 4Q16, the G&A ratio fell by 4.2 p.p. YoY, explained by:
(i) lower administrative expenses, largely justified by lower donations and contributions; and
(ii) lower tax expenses, as a result of the change in the accounting methodology for calculating these expenses, which consists of building deferred tax assets related to temporary differences of PIS and COFINS on provisions for claims to be settled (PSL), provisions for claims incurred but not reported (IBNR) and provisions for claims incurred but not enough reported (IBNER). The positive impact related to provisions recorded in 2016 was of R$64.0 million, concentrated in the 4Q16.
¹Segregates the effects of 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.
YEAR-TO-DATE ANALYSIS
In 2016, the G&A ratio improved by 1.3 p.p. justified by the decline in tax expenses, as the outcome of building deferred tax assets
referring to temporary differences of PIS and COFINS, as previously mentioned.
It’s worth noting that in both 2016 and 2015, there were reversals of provisions for loan losses recorded in the impairment line, being
R$19.8 million for 2016 and R$51.0 million for 2015.
Setting appart the effect of the deferred tax assets and the reversals of provisions, the G&A ratio in 2016 would have remained stable
YoY.
75 69 86126
93 89 86 10930
6665
4064
1965
735151
5559 63
57
59
-4
155186
206225 220
165
210178
10.612.3 13.0
14.9
9.8
10.711.7
13.2 13.4
15.8
12.911.5 12.0
10.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Tax expenses (R$ million)
Other operating income (expenses) (R$ million)
G&A ratio (%)
Adjusted G&A ratio¹ (%)
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 41
Table 24 – Life, Mortgage Life and Rural | General & Administrative expenses
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
A dministrat ive expenses (126,387) (85,860) (108,913) (13.8) 26.8 (355,733) (376,827) 5.9
Personnel (32,677) (38,396) (38,940) 19.2 1.4 (139,678) (148,587) 6.4
Outsourcing (22,900) (22,832) (25,436) 11.1 11.4 (83,348) (95,572) 14.7
Location and operation (24,066) (15,970) (15,351) (36.2) (3.9) (56,458) (75,309) 33.4
Institutional advertisement and publicity (9,031) (4,334) (6,854) (24.1) 58.1 (18,931) (15,633) (17.4)
Releases (66) (66) (22) (67.6) (67.2) (609) (622) 2.2
Other administrative expenses (33,949) (1,535) (19,324) (43.1) 1,158.6 (44,657) (30,104) (32.6)
DPVAT administrative expenses (3,699) (2,726) (2,986) (19.3) 9.5 (12,051) (11,000) (8.7)
Other o perat ing inco me (expenses) (39,711) (64,687) (72,506) 82.6 12.1 (199,542) (219,943) 10.2
FESR contributions (30,599) (29,441) (48,425) 58.3 64.5 (122,858) (157,797) 28.4
Charging expenses (3,298) (5,257) (4,341) 31.6 (17.4) (19,016) (24,020) 26.3
Civil contingencies (3,327) (5,952) (4,353) 30.9 (26.9) (18,390) (19,329) 5.1
Events expenses (1,660) (1,819) (389) (76.6) (78.6) (8,083) (4,461) (44.8)
Endomarketing (3,184) (3,559) (3,550) 11.5 (0.3) (12,747) (14,210) 11.5
Social contributions (141) (133) - - - (565) (271) (52.0)
Impairment 13,602 (3,418) 938 (93.1) - 47,293 38,471 (18.7)
Other operating income (expenses) (11,105) (15,109) (12,386) 11.5 (18.0) (65,177) (38,328) (41.2)
T ax expenses (58,935) (59,168) 3,545 - - (216,925) (175,541) (19.1)
COFINS (49,083) (48,259) 5,401 - - (180,688) (143,296) (20.7)
PIS (8,339) (7,844) 626 - - (29,862) (23,138) (22.5)
Inspection fee (1,567) (1,455) (1,455) (7.2) 0.0 (4,730) (5,821) 23.1
Other tax expenses 54 (1,609) (1,026) - (36.2) (1,645) (3,286) 99.7
G&A (225,033) (209,715) (177,874) (21.0) (15.2) (772,200) (772,312) 0.0
A djustments (14,300) - 9,114 - - (51,039) (19,786) (61.2)
Reversal o f provision for loan losses (14,300) - 9,114 - - (51,039) (19,786) (61.2)
A djusted G&A expenses (239,333) (209,715) (168,760) (29.5) (19.5) (823,239) (792,098) (3.8)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 42
Life Insurance
Table 25 – Life Insurance | Key figures
QUARTERLY ANALYSIS
Life insurance premiums reached R$896.4 million in the 4Q16, 16.4% up YoY. The bancassurance channel posted an increase of 13.1%,
boosted by the new life insurance portfolio, whose sales began in July/2016, while the independent broker channel grew by 32.8% in
the same comparable basis.
YEAR-TO-DATE ANALYSIS
In 2016, life insurance premiums grew by 15.8% to R$3.5 billion, with increased premiums written in both the bancassurance channel
(+15.9%) and the independent broker channel (+15.5%).
Figure 39 – Life Insurance | Premiums written (R$ 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. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 769,935 958,693 896,428 16.4 (6.5) 2,995,558 3,468,234 15.8
Premiums ceded to reinsurance (1,557) (1,886) (4,084) 162.3 116.5 (10,660) (9,879) (7.3)
R etained premiums 768,378 956,807 892,344 16.1 (6.7) 2,984,898 3,458,355 15.9
Changes in technical reserves - premiums (53,783) (127,806) (57,782) 7.4 (54.8) (154,134) (162,313) 5.3
Earned premiums 714,595 829,001 834,562 16.8 0.7 2,830,764 3,296,041 16.4
Retained claims (213,143) (311,281) (284,139) 33.3 (8.7) (923,708) (1,087,798) 17.8
Acquisition costs (237,200) (260,978) (263,758) 11.2 1.1 (915,634) (1,037,725) 13.3
Underwrit ing margin 264,252 256,741 286,665 8.5 11.7 991,422 1,170,518 18.1
Quarterly F lo w C hg. % A nnual F lo w
729 737 760 770808 805
959896
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
74.880.5 81.2 83.0
74.880.4 83.4 80.7
25.2 19.5 18.8 17.025.2 19.6 16.6 19.3
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Bancassurance Other channels
546593 617 639
604648
799
723
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
184
144 143131
204
158 160173
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 43
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 reached 34.3% in the 4Q16, 2.7 p.p. down YoY. The contraction is explained by the 4.2 p.p.
deterioration in the loss ratio, concentrated in the bancassurance channel due to a higher frequency of claims in the period, partially
offset by the 1.6 p.p. improvement in the commission ratio.
YEAR-TO-DATE ANALYSIS
In 2016, the underwriting margin for life insurance reached 35.5%, an improvement of 0.5 p.p., explained by the drop in the commission
ratio in both the bancassurance and the independent broker channels.
Figure 45 – Life Insurance | Loss ratio (%) Figure 46 – Life Insurance | Commission ratio (%)
227 229
271 264
333
294
257287
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
34.1
32.636.2 37.0
40.036.8
31.0
34.3
35.2 36.141.0 42.8 43.5
39.234.8
34.8
30.5
18.8 18.3
12.7
25.227.5
15.9
32.6
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Total Bancassurance Other channels
33.5 35.332.0 29.8 29.7 30.7
37.534.0
28.4 29.424.6
21.5 23.8 25.231.0 30.2
49.8
59.3 60.364.6
54.4 51.8
62.8
48.1
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Total Bancassurance Other channels
32.4 32.0 31.833.2
30.3
32.5 31.5 31.6
36.334.6 34.5
35.7
32.7
35.634.1 35.0
19.7
21.9 21.522.7
20.4 20.721.3
19.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Total Bancassurance Other channels
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 44
Credit Life Insurance
Table 26 – Credit Life Insurance | Key figures
QUARTERLY ANALYSIS
Credit life insurance premiums written amounted to R$339.5 million in 4Q16, 48.3% down YoY. The underwriting margin decreased by
15.3 p.p., impacted by the 14.7 p.p. increase in the loss ratio, largely explained by a higher frequency of claims, along with the 0.6 p.p.
increase in the commission ratio.
YEAR-TO-DATE ANALYSIS
In 2016, credit life premiums written amounted to R$1.1 billion, 48.2% lower as compared to 2015. The underwriting margin reached
38.9%, 12.7 p.p. down in the same comparable basis. The contraction in the underwriting margin is largely explained by the 11.4 p.p.
increase in the loss ratio, due to a higher frequency of claims. It is worth noting that the 1Q16 was negatively impacted by the
accounting of R$27.8 million in claims of the non-contributory product that had incurred in previous periods but have not been reported
due to mismatches in client data. By setting apart this effect, the worsening in the loss ratio as compared to 2015 would have been of
9.5 p.p., resulting in a 10.8 p.p. drop in the underwriting margin.
Figure 47 – Credit Life Insurance | Premiums written (R$ 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. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 656,296 175,164 339,463 (48.3) 93.8 2,105,315 1,091,564 (48.2)
Premiums ceded to reinsurance (330) (743) (678) 105.3 (8.8) (674) (3,504) 419.7
R etained premiums 655,966 174,420 338,785 (48.4) 94.2 2,104,641 1,088,060 (48.3)
Changes in technical reserves - premiums (274,193) 184,608 9,165 - (95.0) (577,320) 384,245 -
Earned premiuns 381,773 359,028 347,950 (8.9) (3.1) 1,527,321 1,472,306 (3.6)
Retained claims (82,464) (118,322) (126,480) 53.4 6.9 (295,395) (452,733) 53.3
Acquisition costs (113,024) (111,155) (104,983) (7.1) (5.6) (443,125) (446,640) 0.8
Underwrit ing margin 186,285 129,551 116,487 (37.5) (10.1) 788,801 572,933 (27.4)
Quarterly F lo w C hg. % A nnual F lo w
432
667
350
656
162
415
175
339
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
198183
221
186
143
184
130 116
55.547.2
55.248.8
37.5
47.9
36.1 33.5
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Underwriting margin (R$ million) Underwriting margin (%)
32.4 33.0
14.4
25.0
16.1
21.6
25.1
21.9
32.9
36.3
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Loss ratio Adjusted loss ratio¹
30.1
27.828.7
29.6 30.1 30.231.0
30.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 45
Rural Insurance
Table 27 – Rural Insurance | Key figures
QUARTERLY ANALYSIS
In the 4Q16, premiums written in the rural segment amounted to R$637.9 million, 4.8% up YoY. The performance was boosted by the
increase observed in credit life for farmers (+12.2%) and in rural lien (+7.9%). Premiums written in crop insurance decreased by 4.9% as
a result of the early release of working capital loans for the crop season 2016/2017, which started in February 2016.
YEAR-TO-DATE ANALYSIS
In 2016, premiums written in the rural segment grew by 14.0% to R$2.4 billion. Crop insurance premiums written recorded the highest
increase in the period, 30.8%, followed by rural lien, with a 5.3% growth, and by credit life for farmers, with an increase of 3.8%.
Figure 51 – Rural Insurance | Premiums written (R$ 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. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 608,995 586,211 637,928 4.8 8.8 2,071,138 2,361,903 14.0
Premiums ceded to reinsurance (159,085) (183,702) (159,636) 0.3 (13.1) (569,863) (720,672) 26.5
R etained premiums 449,910 402,510 478,291 6.3 18.8 1,501,275 1,641,231 9.3
Changes in technical reserves - premiums (97,776) 52,913 (89,385) (8.6) - (211,181) (53,968) (74.4)
Earned premiuns 352,134 455,423 388,906 10.4 (14.6) 1,290,094 1,587,263 23.0
Retained claims (97,445) (70,975) (72,889) (25.2) 2.7 (320,470) (396,815) 23.8
Acquisition costs (73,449) (91,271) (79,790) 8.6 (12.6) (261,802) (333,473) 27.4
Underwrit ing margin 181,240 293,177 236,227 30.3 (19.4) 707,822 856,975 21.1
Quarterly F lo w C hg. % A nnual F lo w
43 20
490
222 157
387257 211113
144
186
193112
185
164208
77178
194
193
105
187
159 217
1
6
11
2
1
4
63
233
348
881
609
375
763
586638
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Crop Rural lien Credit life for farmers Other
18.35.7
55.6
36.4 41.950.8
43.933.0
48.3
41.4
21.1
31.729.8
24.328.0
32.6
33.0
51.2
22.131.7 28.0 24.5 27.0 33.9
0.4 1.7 1.2 0.3 0.2 0.5 1.1 0.4
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Crop Rural lien Credit life for farmers Other
126
182219
181154
173
293
236
42.3
60.5 64.4
51.544.0 44.2
64.460.7
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Underwriting margin (R$ million) Underwriting margin (%)-25.7
41.0
70.7
29.1
-7.0
-25.7
68.7
50.1
66.0 69.3 68.0
60.0 57.3
71.1 71.264.7
54.359.6 61.8
56.9 55.7 58.755.3
64.0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Crop Rural lien Credit life for farmers
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 46
QUARTERLY ANALYSIS
In the quarter, the underwriting margin reached 60.7%, improving 9.2 p.p. YoY. The increase in the underwriting margin is mainly given
to the 9.0 p.p. drop in the loss ratio, which had been negatively impacted in the 4Q15 by the occurrence of frost and a higher rate of
rainfall in the South.
YEAR-TO-DATE ANALYSIS
In 2016, the underwriting margin of the rural segment dropped by 0.9 p.p. mostly given to the 0.7 p.p. increase in the crop insurance
commission ratio, along with the growth of 0.2 p.p. in the loss ratio.
Figure 55 – Rural Insurance | Loss ratio (%) Figure 56 – Rural Insurance | Commission ratio (%)
22.7
18.7
20.1
28.0
30.816.9
16.8 23.4
16.711.6
9.113.7
15.412.0
15.3
7.0
103.9
41.4
10.0
50.7
83.8
100.7
13.7
31.6
37.9
19.7
15.0
27.7
34.5 33.7
15.618.7
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Rural lien Credit life for farmers Crop Total
21.8
17.619.3 20.2
23.225.0
17.6 18.3
11.312.0 11.9 12.0 11.9 12.0 12.0 12.0
29.0 28.8 29.1 29.4 28.9 29.3 29.4 29.0
19.8
19.720.6 20.9
21.6 22.1
20.0 20.5
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Crop Rural lien Credit life for farmers Total
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 47
Mortgage Life Insurance
Table 28 – Mortgage Life Insurance | Key figures
QUARTERLY ANALYSIS
In the 4Q16, mortgage life premiums written amounted to R$59.4 million, 139.9% up YoY. It is worth noting that the 4Q15 had been
negatively impacted by the reversal of premiums from risks underwritten but not issued (RVNE), in the total amount of R$18.0 million.
The underwriting margin reached 81.9% in the quarter, 28.1 p.p. higher YoY.
Setting apart the effect of the reversal of premiums RVNE in 2015, the underwriting margin would have increased by 8.4 p.p., justified
by the improvement in the loss ratio.
YEAR-TO-DATE ANALYSIS
In 2016, premiums written increased by 29.2% to R$216.9 million. The underwriting margin reached 74.5%, an increase of 2.0 p.p.,
justified by the improvement of 3.3 p.p. in the loss ratio, partially offset by the increase of 1.3 p.p. in the commission ratio.
Figure 57 – Mortgage Life Insurance | Premiums written (R$ million)
Figure 58 – Mortgage Life Insurance | Underwriting margin
Figure 59 – Mortgage Life Insurance | Loss ratio (%) Figure 60 – Mortgage Life Insurance | Commission ratio (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 24,762 51,141 59,405 139.9 16.2 167,861 216,918 29.2
Premiums ceded to reinsurance (1,573) 938 (5,027) 219.5 - (11,763) (17,851) 51.8
R etained premiums 23,189 52,079 54,378 134.5 4.4 156,099 199,067 27.5
Changes in technical reserves - premiums 987 1,511 (1,648) - - 11,103 (13) -
Earned premiuns 24,176 53,591 52,730 118.1 (1.6) 167,202 199,054 19.0
Retained claims (8,027) (5,378) (2,467) (69.3) (54.1) (27,337) (26,021) (4.8)
Acquisition costs (3,144) (6,184) (7,066) 124.8 14.3 (18,496) (24,647) 33.3
Underwrit ing margin 13,005 42,028 43,197 232.2 2.8 121,369 148,386 22.3
Quarterly F lo w C hg. % A nnual F lo w
47 48 48
25
52 5451
59
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
36 37 35
13
31 32
42 43
74.8 73.9 78.8
53.866.0
70.378.4 81.9
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Underwriting margin (R$ million) Underwriting margin (%)
14.6 15.3
10.2
33.2
22.8
16.3
10.0
4.7
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
10.5 10.7 11.0
13.0
11.2
13.4
11.5
13.4
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 48
DPVAT
Table 29 – DPVAT | Key figures
Other
Table 30 – Other | Key figures
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 37,527 46,832 33,218 (11.5) (29.1) 260,083 238,441 (8.3)
R etained premiums 37,527 46,832 33,218 (11.5) (29.1) 260,083 238,441 (8.3)
Changes in technical reserves - premiums 1,335 (71) 468 (65.0) - (139) (1,372) 886.7
Earned premiuns 38,862 46,761 33,686 (13.3) (28.0) 259,944 237,069 (8.8)
Retained claims (32,072) (39,885) (28,118) (12.3) (29.5) (225,495) (203,390) (9.8)
Acquisition costs (517) (656) (275) (46.8) (58.1) (3,674) (3,149) (14.3)
Underwrit ing margin 6,274 6,221 5,293 (15.6) (14.9) 30,774 30,531 (0.8)
Quarterly F lo w C hg. % A nnual F lo w
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 374 659 770 106.1 16.8 1,132 2,319 104.8
Premiums ceded to reinsurance (1,459) 26 (27) (98.2) - (1,501) (1,135) (24.4)
R etained premiums (1,086) 685 743 - 8.4 (369) 1,184 -
Changes in technical reserves - premiums (30) (5) (7) (77.7) 29.9 (24) (5) (81.0)
Earned premiums (1,116) 680 736 - 8.3 (393) 1,179 -
Retained claims (208) (69) (42) (79.7) (38.8) (92) (189) 104.6
Acquisition costs (60) (156) (130) 118.1 (16.6) (470) (456) (3.0)
Underwrit ing margin (1,384) 455 564 - 23.9 (956) 534 -
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 49
N E T I N V E S T M E N T I N C O M E
Figure 61 – Life, Mortgage Life and Rural | Net investment income (R$ million)
QUARTERLY ANALYSIS
In the 4Q16, the net investment income dropped by 18.6% YoY.
Adjusted interest revenues fell by 19.1%, as a result of the 3.1 p.p. lower average yield on financial investments, partially offset by the expansion of 4.9% in the average balance of interest earning assets. The drop in the average yield is largely explained by a lower average Selic rate, which impacted the return on floating securities, along with lower inflation indexes, which impacted the yield on inflation protected securities classified as held to maturity.
Adjusted interest expenses dropped by 21.7%, justified by the 2.7 p.p. decrease in the average yield, partially offset by the 30.1%
expansion in the average balance of interest bearing liabilities.
YEAR-TO-DATE ANALYSIS
In 2016, the net investment income remained stable as compared to 2015.
Adjusted interest revenues grew by 4.8%, boosted by the expansion in the average balance of financial investments, partially offset by
the contraction in the average yield, largely explained by lower inflation indexes which impacted the return on inflation protected
securities booked as held to maturity.
Adjusted interest expenses rose by 27.2% as a result of the expansion in the average balance of interest bearing liabilities and, to a
lesser extent, to the increase in the average yield on pending claims.
Table 31 – Life, Mortgage Life and Rural | Financial income and expenses¹
¹Managerial view
178
147 157
197 190168 161 159
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
A djusted interest revenues 238,508 217,215 192,969 (19.1) (11.2) 838,187 878,802 4.8
Revenues with mark to market financial
investments 168,798 190,823 154,565 (8.4) (19.0) 578,987 686,955 18.6
Revenues with held to maturity financial
investments 57,826 3,721 28,373 (50.9) 662.6 207,658 130,699 (37.1)
Judicial deposits 11,144 13,191 9,112 (18.2) (30.9) 44,736 49,441 10.5
Receivables from insurance and
reinsurance operations 740 9,481 919 24.2 (90.3) 6,806 11,706 72.0
A djusted interest expenses (39,790) (53,129) (31,145) (21.7) (41.4) (149,454) (190,088) 27.2
Pending claims (15,971) (26,975) (11,520) (27.9) (57.3) (63,643) (93,673) 47.2
Judicial provisions (12,650) (11,201) (3,202) (74.7) (71.4) (45,880) (36,845) (19.7)
Obligations with insurance and reinsurance
operations (11,168) (14,953) (16,422) 47.0 9.8 (39,931) (59,571) 49.2
N et interest inco me 198,719 164,087 161,825 (18.6) (1.4) 688,733 688,714 (0.0)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 50
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 20,120 (34,353) (14,233)
Held to maturity financial investments (4,740) (24,713) (29,453)
Judicial deposits 929 (2,961) (2,032)
Receivables from insurance and reinsurance operations (720) 899 179
T o tal¹ 9,005 (54,544) (45,539)
Interest bearing liabilit ies
Pending claims (2,323) 6,775 4,451
Judicial provisions (83) 9,530 9,447
Obligations with insurance and reinsurance operations (10,748) 5,495 (5,253)
T o tal¹ (7,199) 15,844 8,645
4Q16/ 4Q15
R $ millio nA verage
balance
Interest
revenues
A nnualize
d rate (%)
A verage
balance
Interest
revenues
A nnualize
d rate (%)
Earning assets
M ark to M arket financial investments 4,404 169 16.2 5,063 155 13.0
Held to maturity financial investments 1,734 58 14.0 1,486 28 8.0
Judicial deposits 767 11 5.9 854 9 4.4
Receivables from insurance and reinsurance operations 328 1 0.9 184 1 2.0
T o tal 7,233 239 13.9 7,587 193 10.7
4Q15 4Q16
R $ millio nA verage
balance
Interest
expenses
A nnualize
d rate (%)
A verage
balance
Interest
expenses
A nnualize
d rate (%)
Interest bearing liabilit ies
Pending claims 1,415 (16) 4.4 1,772 (12) 2.6
Judicial provisions 637 (13) 7.7 654 (3) 2.0
Obligations with insurance and reinsurance operations 152 (11) 26.3 441 (16) 14.3
T o tal 2,204 (40) 7.0 2,867 (31) 4.3
4Q15 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 51
Table 35 – Life, Mortgage Life and Rural | Year-to-date 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 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
R $ tho usand A verage vo lume A verage rate N et change
Earning assets
M ark to M arket financial investments 124,447 (16,479) 107,968
Held to maturity financial investments (15,675) (61,284) (76,959)
Judicial deposits 4,765 (60) 4,706
Receivables from insurance and reinsurance operations (3,525) 8,424 4,900
T o tal¹ 83,423 (42,808) 40,615
Interest bearing liabilit ies
Pending claims (8,549) (21,481) (30,030)
Judicial provisions (1,194) 10,229 9,035
Obligations with insurance and reinsurance operations (45,110) 25,470 (19,640)
T o tal¹ (27,130) (13,504) (40,634)
2016/ 2015
R $ millio nA verage
balance
Interest
revenues
A nnualize
d rate (%)
A verage
balance
Interest
revenues
A nnualize
d rate (%)
Earning assets
M ark to M arket financial investments 4,233 579 13.8 5,170 687 13.3
Held to maturity financial investments 1,828 208 11.5 1,632 131 8.0
Judicial deposits 746 45 6.0 825 49 6.0
Receivables from insurance and reinsurance operations 317 7 2.2 243 12 4.8
T o tal 7,123 838 11.9 7,870 879 11.2
2015 2016
R $ millio nA verage
balance
Interest
expenses
A nnualize
d rate (%)
A verage
balance
Interest
expenses
A nnualize
d rate (%)
Interest bearing liabilit ies
Pending claims 1,488 (64) 4.3 1,637 (94) 5.7
Judicial provisions 616 (46) 7.5 637 (37) 5.8
Obligations with insurance and reinsurance operations 61 (40) 65.7 251 (60) 23.8
T o tal 2,165 (149) 7.0 2,525 (190) 7.6
2015 2016
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 52
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 (%)
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
T rading 2,524,542 2,738,995 4,127,580 63.5 50.7
Pre-fixed 172,451 255,330 264,072 53.1 3.4
Floating 1,347,973 2,051,702 2,779,819 106.2 35.5
Inflation 774 0 0 (100.0) 2.3
Other 1,003,344 431,962 1,083,689 8.0 150.9
A vailable fo r sale 2,203,347 1,775,383 1,484,536 (32.6) (16.4)
Pre-fixed 49,236 25,106 25,827 (47.5) 2.9
Floating 412,020 499,153 364,754 (11.5) (26.9)
Inflation 1,798,946 960,625 1,093,955 (39.2) 13.9
Other (56,855) 290,499 - - -
H eld to maturity securit ies 1,764,219 1,471,471 1,499,845 (15.0) 1.9
Pre-fixed 437,726 400,753 411,512 (6.0) 2.7
Floating 131,700 - - - -
Inflation 1,194,793 1,070,718 1,088,333 (8.9) 1.6
T o tal 6,492,108 5,985,849 7,111,961 9.5 18.8
B alance C hg. %
12.5 11.5 11.2 10.2 10.5 12.5 11.4 9.9
36.430.7
34.829.1 33.6 39.9
42.6 44.2
44.546.2
49.046.1
50.9 29.533.9 30.7
6.6 11.7 5.014.6
5.018.1 12.1 15.2
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Pre-fixed Floating Inflation Other
7.3 5.6 5.5 4.7 4.3 8.0 6.2 5.2
49.340.6
46.1
37.2 44.752.6 56.5
56.0
33.8
37.141.3
38.1
43.7 14.121.3 19.5
9.616.6
7.120.0
7.2
25.316.0 19.3
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Pre-fixed Floating Inflation Other
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 53
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
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A ssets 15,390,229 14,866,230 15,238,819 (1.0) 2.5
Cash 122,338 98,257 24,700 (79.8) (74.9)
Financial assets 6,492,108 5,985,849 7,111,961 9.5 18.8
Receivables from insurance and reinsurance operations 3,419,282 3,727,316 2,920,107 (14.6) (21.7)
Reinsurance and retrocession - technical reserves 606,072 535,837 526,362 (13.2) (1.8)
Securities and credits receivable 1,603,658 1,433,015 1,516,725 (5.4) 5.8
Other 5,402 654 760 (85.9) 16.2
Prepaid expenses 3,750 13,122 16,498 339.9 25.7
Deferred costs 1,674,565 1,572,688 1,605,226 (4.1) 2.1
Investments 657,935 657,760 657,763 (0.0) 0.0
Fixed assets 61,148 82,332 88,898 45.4 8.0
Intangible 743,973 759,400 769,819 3.5 1.4
Liabilit ies 11,726,209 11,457,087 11,381,027 (2.9) (0.7)
Accounts payable 989,513 884,453 990,481 0.1 12.0
Obligations with insurance and reinsurance operations 1,761,367 1,661,335 1,352,791 (23.2) (18.6)
Technical reserves - insurance 8,212,096 8,099,039 8,316,751 1.3 2.7
Third party deposits 120,500 134,808 90,313 (25.1) (33.0)
Other liabilities 642,734 677,452 630,691 (1.9) (6.9)
Shareho lders' equity 3,664,020 3,409,143 3,857,792 5.3 13.2
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Receivable premiums 2,898,681 2,808,231 2,641,759 (8.9) (5.9)
Operations with insurance companies 50,720 78,834 37,456 (26.2) (52.5)
Premiums 9,676 46,734 6,203 (35.9) (86.7)
Claims paid 37,136 27,637 26,715 (28.1) (3.3)
Other receivables 3,909 4,463 4,538 16.1 1.7
Operations with reinsurance companies 498,715 792,138 199,946 (59.9) (74.8)
Claims paid 416,999 791,818 199,497 (52.2) (74.8)
Other receivables 81,715 320 449 (99.5) 40.5
Other operating receivables 41,874 81,287 73,183 74.8 (10.0)
Impairment (70,708) (33,175) (32,238) (54.4) (2.8)
R eceivables fro m insurance and reinsurance
o perat io ns3,419,282 3,727,315 2,920,107 (14.6) (21.7)
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 54
Table 41 – Life, Mortgage Life and Rural | Reinsurance and retrocession – technical reserves
Table 42 – Life, Mortgage Life and Rural | Securities and credit receivable
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Deferred premiums - PPNG 344,519 377,242 349,896 1.6 (7.2)
Deferred premiums - RVNE 7,988 9,188 9,896 23.9 7.7
Other deferred premiums (145) - - - -
IBNR claims 22,365 42,515 41,020 83.4 (3.5)
Pending claims 180,133 81,909 108,601 (39.7) 32.6
Provision for related expenses 2,684 3,633 2,140 (20.2) (41.1)
Other provision 48,528 21,350 14,808 (69.5) (30.6)
R einsurance and retro cessio n - technical reserves 606,072 535,837 526,362 (13.2) (1.8)
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Securities and credits receivable 268,112 110,433 114,679 (57.2) 3.8
Other tax and social security receivables 131,843 80,222 177,030 34.3 120.7
Receivable tax and social security - tax loss 188,956 179,461 174,560 (7.6) (2.7)
Receivable tax and social security - temporary adjustements 199,946 186,637 163,859 (18.0) (12.2)
Tax and judicial deposits 794,203 852,264 864,476 8.8 1.4
Other receivables 20,637 24,038 22,160 7.4 (7.8)
Impairment (40) (40) (40) 0.0 -
Securit ies and credits receivable 1,603,658 1,433,016 1,516,725 (5.4) 5.8
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 55
Table 43 – Life, Mortgage Life and Rural | Accounts payable
Table 44 – Life, Mortgage Life and Rural | Obligations with insurance and reinsurance operations
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Payable liabilities 129,902 136,790 122,055 (6.0) (10.8)
Deferred taxes 278,943 271,234 269,967 (3.2) (0.5)
Social securities and taxes payable 16,689 15,899 21,615 29.5 35.9
Labor charges 10,784 14,881 10,090 (6.4) (32.2)
Taxes and contributions 515,121 426,767 533,793 3.6 25.1
Other accounts payable 38,075 18,882 32,962 (13.4) 74.6
A cco unts payable 989,513 884,453 990,481 0.1 12.0
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Premiums to return 91,956 18,812 4,503 (95.1) (76.1)
Operations with insurance companies 24,424 37,952 17,567 (28.1) (53.7)
Operations with reinsurance companies 795,118 658,144 365,158 (54.1) (44.5)
Insurance and reinsurance brokers 745,555 721,956 (696) - -
Other operating obligations 104,313 224,469 966,259 826.3 330.5
Obligat io ns with insurance and reinsurance o perat io ns 1,761,367 1,661,335 1,352,791 (23.2) (18.6)
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 56
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).
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
M apfre Vida
A djusted shareho lders' equity (a) 269,135 255,938 275,280 2.3 7.6
M inimum capital required (b) 173,523 171,930 184,274 6.2 7.2
Additional capital for underwritting risk 155,309 161,773 169,146 8.9 4.6
Additional capital for credit risk 28,750 15,277 21,877 (23.9) 43.2
Additional capital for operating risk 2,022 2,003 2,156 6.6 7.6
Additional capital for market risk - - 3,801 - -
Benefit o f correlation between risks (12,558) (7,123) (12,706) 1.2 78.4
C apital adequacy (a) - (b) 95,612 84,008 91,006 (4.8) 8.3
So lvency rat io (a) / (b) - % 155.1 148.9 149.4 -5.7 p.p. 0.5 p.p.
A liança do B rasil
A djusted shareho lders' equity (a) 1,390,720 1,435,193 1,598,015 14.9 11.3
M inimum capital required (b) 1,291,516 1,186,931 1,154,860 (10.6) (2.7)
Additional capital for underwritting risk 1,177,520 1,087,339 1,018,112 (13.5) (6.4)
Additional capital for credit risk 170,246 134,871 148,500 (12.8) 10.1
Additional capital for operating risk 20,294 26,265 27,894 37.4 6.2
Additional capital for market risk - - 89,554 - -
Benefit o f correlation between risks (76,544) (61,543) (129,200) 68.8 109.9
C apital adequacy (a) - (b) 99,204 248,262 443,155 346.7 78.5
So lvency rat io (a) / (b) - % 107.7 120.9 138.4 30.7 p.p. 17.5 p.p.
T o tal B B M apfre SH 1
A djusted shareho lders' equity (a) 1,659,855 1,691,131 1,873,295 12.9 10.8
M inimum capital required (b) 1,464,973 1,358,861 1,339,134 (8.6) (1.5)
Additional capital for underwritting risk 1,332,829 1,249,112 1,187,258 (10.9) (5.0)
Additional capital for credit risk 198,996 150,148 170,377 (14.4) 13.5
Additional capital for operating risk 22,316 28,268 30,050 34.7 6.3
Additional capital for market risk - - 93,355 - -
Benefit o f correlation between risks (89,167) (68,666) (141,906) 59.1 106.7
C apital adequacy (a) - (b) 194,881 332,270 534,161 174.1 60.8
So lvency rat io (a) / (b) - % 113.3 124.5 139.9 26.6 p.p. 15.4 p.p.
C hg. %B alance
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 57
4 . 2 P R O P E R T Y A N D C A S U A L T Y
E A R N I N G S A N A L Y S I S
Table 46 – Property and Casualty | Income statement
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 2,227,592 1,970,883 1,996,111 (10.4) 1.3 9,094,358 8,424,453 (7.4)
Changes in technical reserves - premiums (35,465) 224,508 117,011 - (47.9) (305,741) 466,891 -
Earned premiuns 2,192,127 2,195,391 2,113,122 (3.6) (3.7) 8,788,617 8,891,344 1.2
Revenue of po licies issuance 2,696 3,899 2,862 6.1 (26.6) 18,793 19,283 2.6
Claims incurred (1,590,097) (1,330,405) (1,023,979) (35.6) (23.0) (5,529,890) (4,938,157) (10.7)
Acquisition costs (416,873) (430,016) (405,077) (2.8) (5.8) (1,644,875) (1,711,801) 4.1
Result with reinsurance 243,844 (134,397) (461,306) - 243.2 (23,382) (1,075,595) 4,500.1
Administrative expenses (242,453) (236,848) (236,848) (2.3) (0.0) (914,571) (938,839) 2.7
Tax expenses (60,017) (35,865) (57) (99.9) (99.8) (196,320) (125,304) (36.2)
Other operating income (expenses) (135,040) (72,993) (102,039) (24.4) 39.8 (452,992) (318,340) (29.7)
Underwrit ing result (5,813) (41,234) (113,322) 1,849.3 174.8 45,380 (197,409) -
N et investment inco me 206,252 122,918 124,298 (39.7) 1.1 684,043 610,694 (10.7)
Financial income 176,139 174,872 200,543 13.9 14.7 1,102,119 664,782 (39.7)
Financial expenses 30,113 (51,954) (76,245) - 46.8 (418,076) (54,088) (87.1)
Equity income (1,612) (840) (834) (48.3) (0.7) (6,227) (3,395) (45.5)
Operat ing result 198,827 80,844 10,142 (94.9) (87.5) 723,196 409,890 (43.3)
Gains or losses on non-current assets 70 6,211 88 24.9 (98.6) 214 6,972 3,152.4
Earnings befo re taxes and pro f it
sharing198,897 87,055 10,230 (94.9) (88.2) 723,410 416,862 (42.4)
Taxes (67,896) (33,817) 28,304 - - (259,749) (139,670) (46.2)
Profit sharing (12,416) (8,760) (8,899) (28.3) 1.6 (47,318) (26,820) (43.3)
A djusted net Inco me 118,585 44,478 29,635 (75.0) (33.4) 416,343 250,372 (39.9)
One-o ff events - - 19,114 - - 39,887 19,114 (52.1)
Increase of the social contribution rate - - - - - 39,887 - -
PIS/COFINS: tax credit - - 34,753 - - - 34,753 -
PIS/COFINS: taxes - - (15,639) - - - (15,639) -
N et inco me 118,585 44,478 48,749 (58.9) 9.6 456,230 269,486 (40.9)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 58
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
¹In 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. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 2,227,592 1,970,883 1,996,111 (10.4) 1.3 9,094,358 8,424,453 (7.4)
Premiums ceded reinsurance (337,115) (302,861) (251,442) (25.4) (17.0) (1,413,918) (1,416,694) 0.2
R etained premiums 1,890,477 1,668,022 1,744,669 (7.7) 4.6 7,680,440 7,007,759 (8.8)
Changes in technical reserves - premiums 353 146,680 (7,710) - - (118,028) 376,544 -
R etained earned premiuns 1,890,831 1,814,702 1,736,959 (8.1) (4.3) 7,562,412 7,384,303 (2.4)
Revenue of po licies issuance 2,696 3,899 2,862 6.1 (26.6) 18,793 19,283 2.6
Claims retained (1,044,957) (1,084,113) (1,109,122) 6.1 2.3 (4,327,069) (4,506,711) 4.2
Acquisition costs (447,573) (430,016) (405,077) (9.5) (5.8) (1,750,528) (1,711,801) (2.2)
Administrative expenses (242,453) (236,848) (236,848) (2.3) (0.0) (914,571) (938,839) 2.7
Tax expenses (60,017) (35,865) (57) (99.9) (99.8) (196,320) (125,304) (36.2)
Other operating income (expenses) (104,340) (72,993) (102,039) (2.2) 39.8 (347,337) (318,340) (8.3)
Underwrit ing result (5,813) (41,234) (113,322) 1,849.3 174.8 45,380 (197,409) -
N et investment inco me 206,252 122,918 124,298 (39.7) 1.1 684,043 610,694 (10.7)
Financial income 176,139 174,872 200,543 13.9 14.7 1,102,119 664,782 (39.7)
Financial expenses 30,113 (51,954) (76,245) - 46.8 (418,076) (54,088) (87.1)
Equity income (1,612) (840) (834) (48.3) (0.7) (6,227) (3,395) (45.5)
Operat ing result 198,827 80,844 10,142 (94.9) (87.5) 723,196 409,890 (43.3)
Gains or losses on non-current assets 70 6,211 88 24.9 (98.6) 214 6,972 3,152.4
Earnings befo re taxes and pro f it
sharing198,897 87,055 10,230 (94.9) (88.2) 723,410 416,862 (42.4)
Taxes (67,896) (33,817) 28,304 - - (259,749) (139,670) (46.2)
Profit sharing (12,416) (8,760) (8,899) (28.3) 1.6 (47,318) (26,820) (43.3)
A djusted net inco me 118,585 44,478 29,635 (75.0) (33.4) 416,343 250,372 (39.9)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 59
A D J U S T E D N E T I N C O M E
Figure 64 – Property and Casualty | Adjusted net income and ROAE
QUARTERLY ANALYSIS
The adjusted net income from the Property and Casualty business segment reached R$29.6 million in the 4Q16, 75.0% down YoY as a result of:
(i) the negative underwriting result in the quarter, impacted by the 6.2 p.p. deterioration in the combined ratio; and
(ii) the 39.7% decline in the net investment income, explained by higher financial expenses.
The annualized return on average equity reached 3.1% in the 4Q16, 10.7 p.p. lower YoY.
YEAR-TO-DATE ANALYSIS
In 2016, the adjusted net income dropped by 39.9% to R$250.4 million, explained by the higher loss ratio along with the decline in the net investment income.
The annualized return on average equity reached 7.0%, 5.8 p.p. lower as compared to 2015.
¹Net of taxes considering the Company’s effective tax rate.
Note: In the 4Q16, the taxes line of the income stament came positive. In the chart, the positive balance matching these taxes was deducted from the non-interest operating result.
Table 48 – Property and Casualty | Managerial performance ratios
¹ Performance ratios calculated based on the managerial income statement, considering the reinsurance effects.
² It considers adjustments which can impact the performance ratios, detailed in the corresponding section, when applicable.
1.0 12-17 -17
-58
25
-31 -95
98 89 116136
108
101
75
124
99 10099
119
50126
44
30
12.6 12.4 11.8 13.85.8
13.9
4.7 3.1
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Net investment income¹ (R$ million)
Non-interest operating result¹ (R$ million)
Adjusted ROAE (%)
C hg.
(p.p.)
% 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P erfo rmance rat io s¹
Loss ratio 55.3 59.7 63.9 8.6 4.1 57.2 61.0 3.8
Commission ratio 23.7 23.7 23.3 (0.3) (0.4) 23.1 23.2 0.0
G&A ratio 21.5 19.1 19.5 (2.0) 0.5 19.3 18.7 (0.6)
Combined ratio 100.3 102.3 106.5 6.2 4.3 99.4 102.7 3.3
A djusted perfo rmance rat io s ¹ ²
Loss ratio 58.0 59.7 63.9 5.8 4.1 57.9 62.4 4.5
Commission ratio 23.7 23.7 23.3 (0.3) (0.4) 23.1 23.4 0.2
G&A ratio 21.5 19.1 19.5 (2.0) 0.5 19.3 18.9 (0.4)
Combined ratio 103.1 102.3 106.5 3.5 4.3 100.1 104.4 4.3
Other rat io s¹
Expanded combined ratio 90.4 95.8 99.4 9.0 3.6 91.2 94.8 3.7
Income tax rate 34.1 38.8 - - - 35.9 33.5 (2.4)
Adjusted ROAE 13.8 4.7 3.1 (10.7) (1.6) 12.8 7.0 (5.8)
Quarterly F lo w C hg. (p.p.) A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 60
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
In the 4Q16, the underwriting result came negative in R$113.3 million, as compared to R$5.8 million loss in 4Q15. The weaker performance is explained by the increase in the loss ratio, especially in auto and casualties, partially offset by the improvement in the G&A ratio.
YEAR-TO-DATE ANALYSIS
In 2016, the underwriting result came negative in R$197.4 million, against a positive result of R$45.4 million in 2015, impacted by the increase in the loss ratio. ¹Adjustments segregate the effects from the strengthening and reversions of IBNR and IBNER provisions.
N E T I N V E S T M E N T I N C O M E
Figure 66 – Property and Casualty | Net investment income (R$ million)
QUARTERLY ANALYSIS
In the 4Q16, the net investment income dropped by 39.7% YoY, due to the increase in financial expenses, which were positively impacted in the 4Q15 by the changes in the foreign exchange rate.
YEAR-TO-DATE ANALYSIS
In 2016, net investment income dropped by 10.7%, justified by a lower inflation, with a negative impact in the return on inflation protected securities classified as held to maturity.
11
45
-5 -6
-105
62
-41
-113
99.497.7
100.3
100.3
105.6
96.8
102.3
106.5103.1
104.6
104.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Underwriting result (R$ mill ion) Combined ratio (%)
Adjusted combined ratio¹ (%)
158
136
183
206192
172
123 124
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 61
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 4Q16, premiums written amounted to R$2.0 billion, 10.4% down YoY. The performance is explained by the weak performance in auto and casualty segments, partially offset by the increase in the segment other.
The retention ratio increased by 2.5 p.p. YoY as a result of the lower share of large risk insurances in the sales mix of the quarter, which present a higher volume of premiums ceded to reinsurance.
YEAR-TO-DATE ANALYSIS
In 2016, premiums written dropped by 7.4% as a result of the 18.0% decline in auto insurance sales, partially offset by the increase in casualty and in other.
Figure 68 – Property and Casualty | Premiums written in the bancassurance channel (R$ 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 (%)
1,824 2,026 1,940 1,8901,756 1,839 1,668 1,745
296299 481 337 418 444
303 251
2,1212,325 2,422
2,228 2,174 2,284
1,971 1,996
86.0 87.180.1
84.980.8 80.5 84.6 87.4
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Retained premiums (R$ million) Premiums ceded (R$ mill ion)
Retention rate (%)
633688 701
630
511559
509 524
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
1,488
1,6371,720
1,5981,663
1,724
1,462 1,472
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Auto 1,222,799 930,650 1,009,018 (17.5) 8.4 4,969,186 4,073,094 (18.0)
Casualties 805,361 796,224 764,290 (5.1) (4.0) 3,286,462 3,357,676 2.2
DPVAT 47,726 67,206 47,675 (0.1) (29.1) 325,472 325,825 0.1
Other 151,706 176,803 175,129 15.4 (0.9) 513,239 667,858 30.1
T o tal 2,227,592 1,970,883 1,996,111 (10.4) 1.3 9,094,358 8,424,452 (7.4)
Quarterly F lo w C hg. % A nnual F lo w
53.957.6 52.2 54.9
47.548.2 47.2 50.5
35.133.6
39.5 36.240.5
40.140.4 38.3
5.2 5.1 5.5 6.86.2 7.9 9.0 8.8
5.8 3.7 2.9 2.1 5.8 3.7 3.4 2.4
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Auto Casualties Other DPVAT
62.6 66.2 65.1 64.9 58.8 59.8 55.8 57.8
24.723.8 24.5 24.6
26.425.7
29.6 29.4
6.0 5.8 6.8 8.07.6 9.8 10.6 10.0
6.7 4.2 3.6 2.5 7.2 4.6 4.0 2.7
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Auto Casualties Other DPVAT
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 62
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 4Q16, retained earned premiums decreased by 8.1% YoY, impacted by the lower volume of premiums in auto, partially offset by the increase in casualty and in the other segment.
YEAR-TO-DATE ANALYSIS
In 2016, retained earned premiums dropped by 2.4%, reflecting the decline in auto insurance premiums, partially offset by the increase in casualty and in the other segment.
It is worth noting that earned premiums were positively impacted in the 2Q16 by a reversal of provisions for unearned premiums, which amounted to 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.
Table 51 – Property and Casualty | Breakdown of retained earned premiums
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Provision for unearned premiums (34,720) 224,736 119,965 - (46.6) (307,965) 482,821 -
Provision for administrative expenses -
DPVAT180 (56) 369 104.7 - (239) (896) 275.1
Provision for technical surplus (926) (172) (3,322) 259.0 1,826.2 2,462 (15,033) -
C hange in technical reserves -
premiums(35,465) 224,508 117,011 - (47.9) (305,741) 466,891 -
Quarterly F lo w C hg. % A nnual F lo w
1,901 1,910 1,860 1,891 1,894 1,9391,815 1,737
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Auto 1,238,225 1,074,659 1,029,436 (16.9) (4.2) 4,871,417 4,403,788 (9.6)
Casualties 468,503 507,518 496,491 6.0 (2.2) 1,858,059 2,022,513 8.9
DPVAT 47,906 67,151 48,045 0.3 (28.5) 325,233 324,930 (0.1)
Other 136,197 165,375 162,986 19.7 (1.4) 507,704 633,072 24.7
T o tal 1,890,831 1,814,702 1,736,959 (8.1) (4.3) 7,562,412 7,384,303 (2.4)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 63
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 4Q16, the loss ratio increased by 8.6 p.p. YoY, explained by higher claims in auto as well as in casualty segments.
YEAR-TO-DATE ANALYSIS
In 2016, the loss ratio increased by 3.8 p.p., justified by the deterioration in the loss ratio in both auto and casualty segments, partially offset by the improvement in the other segment.
¹Adjustments segregate the effects from the strengthening and reversions of IBNR and IBNER provisions.
Table 52 – Property and Casualty | Breakdown of retained claims
1,131 1,087 1,064 1,0451,215
1,098 1,084 1,109
55.3
64.2
56.6
59.556.9 57.2 58.0
63.2
62.8
59.7
63.9
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Retained claims (R$ million) Loss ratio (%)
Adjusted loss ratio¹ (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
C laims incurred (1,590,097) (1,330,405) (1,023,979) (35.6) (23.0) (5,529,891) (4,938,157) (10.7)
Expenses with claims (1,769,019) (1,439,011) (1,039,700) (41.2) (27.7) (5,832,626) (5,126,468) (12.1)
Changes in provisions for claims IBNR 29,846 20,698 8,582 (71.2) (58.5) (11,501) (66,906) 481.7
Changes in provisions for claims IBNER 42,086 (40,669) (22,669) - (44.3) (1,165) (67,949) 5,734.2
Changes of expenses related to IBNR (307) 339 6,595 - 1,847.8 (420) 7,027 -
Recovery of claims - Coinsurance 66,206 3,587 8,444 (87.2) 135.4 94,197 6,888 (92.7)
Recovery of claims - Reinsurance 545,140 246,292 (85,143) - - 1,202,823 431,445 (64.1)
Salvage 75,754 91,912 66,141 (12.7) (28.0) 318,410 328,471 3.2
Reimbursements 32,873 39,871 31,290 (4.8) (21.5) 113,552 143,747 26.6
Change in estimates of salvaged and
reimbursement(261) 39,629 (4,057) 1,452.3 - 33,952 94,369 178.0
Assistance services (67,275) (46,760) (78,604) 16.8 68.1 (244,290) (257,334) 5.3
R etained claims (1,044,957) (1,084,113) (1,109,122) 6.1 2.3 (4,327,069) (4,506,711) 4.2
A djustments (52,143) - - - - (52,143) (64,988) 24.6
Strengthening of IBNR and IBNER
provisions- - - - - - 18,518 -
Reversal of IBNR and IBNER provisions (52,143) - - - - (52,143) (83,506) 60.1
A djusted retained claims (1,097,100) (1,084,113) (1,109,122) 1.1 2.3 (4,379,212) (4,571,699) 4.4
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 64
A C Q U I S I T I O N C O S T S
Figure 74 – Property and Casualty | Acquisition costs QUARTERLY ANALYSIS
In the 4Q16, the commission ratio dropped by 0.4 p.p. YoY, driven by the other segment, partially offset by the increase in both auto and casualty segments.
YEAR-TO-DATE ANALYSIS
In 2016, the commission ratio increased by 0.1 p.p.. Such increase was driven by a higher commission ratio arising from the independent broker channel.
Table 53 – Property and Casualty | Acquisition costs
419 441 443 448 438 439 430405
22.023.1 23.8 23.7 23.1 22.6
23.7 23.3
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Acquisition costs (R$ million) Commission ratio (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Comission charged on premiums written (324,868) (312,189) (283,374) (12.8) (9.2) (1,318,876) (1,235,781) (6.3)
Agency commission (42,327) (47,354) (77,970) 84.2 64.7 (148,849) (203,255) 36.6
Commissions recovered - Coinsurance 2,075 3,010 751 (63.8) (75.1) 3,982 5,650 41.9
Change in deferred acquisition costs 7,653 (18,739) 9,121 19.2 - 10,536 (57,332) -
Other acquisition costs (90,106) (54,744) (53,605) (40.5) (2.1) (297,321) (221,084) (25.6)
A cquisit io n co sts (447,572) (430,016) (405,077) (9.5) (5.8) (1,750,528) (1,711,801) (2.2)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 65
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 75 – Property and Casualty | G&A expenses QUARTERLY ANALYSIS
In the 4Q16, the G&A ratio improved by 2.0 p.p. YoY. The performance is largely explained by lower tax expenses, as a result of the change in the accounting methodology for calculating these expenses, which consists of building deferred tax assets related to temporary differences of PIS and COFINS taxes on provisions for claims to be settled (PSL), provisions for claims incurred but not reported (IBNR) and provisions for claims incurred but not enough reported (IBNER). The positive impact related to provisions recorded in 2016 was of R$62.5 million, concentrated in the 4Q16.
YEAR-TO-DATE ANALYSIS
In 2016, the G&A ratio dropped by 0.6 p.p. to 18.7%. The improvement is largely explained by lower tax expenses, impacted by the deferred tax assets related to temporary differences of PIS and COFINS, as mentioned before.
It is worth noting that there was a reversal of provision for unearned premiums (PPNG), in the total amount of R$58.3 million in the 2Q16, which impacted the earned premiums.
Setting apart this effect, the improvement of the adjusted G&A ratio in 2016 would have been of 0.4 p.p. to 18.9%.
¹Adjustments segregate the effects of the reversal of provision for unearned premiums (PPNG), which impacted the volume of earned premiums.
Table 54 – Property and Casualty | General & Administrative expenses
224 222 226 242 242 223 237 237
66 74 103 104 68 75 73 102
52 4440
6043 46 36
0
343 340369
407
354 344 346 339
19.821.5
18.7
17.8
19.518.0 17.8 18.3 19.1
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Tax expenses (R$ million)
Other operating income (expenses) (R$ million)
Administrative expenses (R$ million)
G&A ratio (%)
Adjusted G&A ratio¹ (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
A dministrat ive expenses (242,453) (236,848) (236,848) (2.3) (0.0) (914,571) (938,839) 2.7
Personnel (122,850) (122,567) (120,787) (1.7) (1.5) (484,726) (485,767) 0.2
Outsourcing (42,318) (44,590) (45,590) 7.7 2.2 (177,826) (186,722) 5.0
Location and operation (61,943) (60,161) (57,403) (7.3) (4.6) (222,234) (234,333) 5.4
Institutional advertisement and publicity (5,650) (4,441) (7,092) 25.5 59.7 (16,785) (16,745) (0.2)
Releases (86) (80) (40) (52.8) (49.6) (967) (814) (15.8)
Other administrative expenses (9,606) (5,008) (5,936) (38.2) 18.5 (12,033) (14,458) 20.2
Other o perat ing inco me
(expenses)(104,340) (72,993) (102,039) (2.2) 39.8 (347,337) (318,340) (8.3)
FESR contributions 928 (5) (4) - (26.0) 1,290 (6) -
Charging expenses (10,060) (9,266) (7,972) (20.8) (14.0) (33,781) (39,851) 18.0
Civil contingencies (2,582) 4,354 (7,197) 178.7 - (15,485) 91 -
Events expenses (2,652) (2,184) (2,199) (17.1) 0.7 (13,244) (8,639) (34.8)
Endomarketing (14,433) (2,317) (2,317) (83.9) (0.0) (22,697) (9,277) (59.1)
Social contributions (565) - - - - (2,612) (325) (87.6)
Impairment (20,259) (15,126) (31,279) 54.4 106.8 (61,005) (67,620) 10.8
Other operating income (expenses) (54,717) (48,449) (51,073) (6.7) 5.4 (199,802) (192,714) (3.5)
T ax expenses (60,017) (35,865) (57) (99.9) (99.8) (196,320) (125,303) (36.2)
COFINS (47,491) (25,395) 6,797 - - (153,813) (86,276) (43.9)
PIS (8,454) (4,264) 24 - - (26,033) (15,183) (41.7)
Inspection fee (2,779) (2,779) (2,779) (0.0) (0.0) (9,116) (11,116) 21.9
Other tax expenses (1,293) (3,427) (4,099) 217.0 19.6 (7,358) (12,727) 73.0
G&A (406,810) (345,706) (338,945) (16.7) (2.0) (1,458,228) (1,382,482) (5.2)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 66
Auto Insurance
Table 55 – Auto Insurance | Key figures
QUARTERLY ANALYSIS
In the 4Q16, auto insurance premiums written amounted to R$1.0 billion, 17.5% down YoY, with a 13.4% decline in the insured fleet.
The performance was largely impacted by the reduction in the sales of brand new cars.
YEAR-TO-DATE ANALYSIS
In 2016, premiums written dropped by 18.0%, impacted by the reduction in the sales of brand new cars along with the fact that the
2015 sales mix had a higher concentration of the multi-annual modality in the bancassurance channel, which anticipated part of the
2016 premiums.
Figure 76 – Auto Insurance | Premiums written (R$ 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. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 1,222,799 930,650 1,009,018 (17.5) 8.4 4,969,186 4,073,094 (18.0)
Premiums ceded to reinsurance 4,186 (0) 7 (99.8) - 2,766 (780) -
R etained premiums 1,226,985 930,649 1,009,024 (17.8) 8.4 4,971,952 4,072,314 (18.1)
Changes in technical reserves - premiums 11,240 144,009 20,411 81.6 (85.8) (100,535) 331,474 -
Earned premiuns 1,238,225 1,074,659 1,029,436 (16.9) (4.2) 4,871,417 4,403,788 (9.6)
Retained claims (757,931) (756,434) (724,803) (4.4) (4.2) (3,089,290) (3,065,232) (0.8)
Acquisition costs (216,099) (187,899) (189,687) (12.2) 1.0 (827,712) (773,501) (6.5)
Underwrit ing margin 264,195 130,325 114,945 (56.5) (11.8) 954,416 565,056 (40.8)
Quarterly F lo w C hg. % A nnual F lo w
1,143
1,3401,263 1,223
1,0331,101
9311,009
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
2,879 2,889 2,850 2,806 2,759 2,6592,491 2,430
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
473513 527
460
376403
366 359
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
670
827
736763
657697
565
650
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 67
Figure 80 – Auto Insurance | Underwriting margin (R$ million) Figure 81 – Auto Insurance | Underwriting margin by distribution channel (%)
QUARTERLY ANALYSIS
In the 4Q16, the underwriting margin in the auto segment dropped by 10.1 p.p. YoY. The performance is explained by the increase in
the loss ratio, as a result of the higher frequency of robbery and theft, in addition to the increase in the commission ratio.
YEAR-TO-DATE ANALYSIS
In 2016, the underwriting margin reached 12.8%, 6.8 p.p. down as compared to 2015, impacted by the increase in both loss and
commission ratios. The loss ratio rose by 6.2 p.p., largely explained by the higher frequency of robbery and theft, while the commission
ratio increased 0.6 p.p., mainly driven by the independent broker channel.
Figure 82 – Auto Insurance | Loss ratio (%) Figure 83 – Auto Insurance | Commission ratio (%)
222
259
209
264
126
193
130115
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
18.621.0
17.421.3
10.9
16.9
12.1 11.2
23.926.3 25.7
31.6
19.4
22.6
15.717.3
15.117.7
12.015.0
5.9
13.6
9.97.7
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Total Bancassurance Other channels
65.2
62.2
65.1
61.2
71.5
66.3
70.4 70.4
65.0
60.562.0
56.8
68.4
65.2
72.2
70.3
65.4
63.3
67.1
63.9
73.2
66.9
69.3
70.5
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Total Bancassurance Other channels
16.2 16.817.5 17.5 17.6
16.817.5
18.4
11.1
13.212.3
11.6 12.2 12.2 12.0 12.3
19.519.0
20.8 21.120.8
19.520.8
21.9
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Total Bancassurance Other channels
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 68
Casualty Insurance
Table 56 – Casualty Insurance | Key figures
QUARTERLY ANALYSIS
In the 4Q16, casualty insurance premiums written amounted to R$764.3 million, 5.1% down YoY, impacted by both the bancassurance
and the independent broker channels. The performance was mainly driven by lower premiums written in the large risks segment.
YEAR-TO-DATE ANALYSIS
In 2016, casualty insurance premiums written amounted to R$3.4 billion, 2.2% higher as compared to 2015, concentrated in the
independent broker channel, which grew by 5.7%, while premiums in the bancassurance channel decreased 11.5% in the same
comparable basis.
Figure 84 – Casualty Insurance | Premiums written (R$ 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. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 805,361 796,224 764,290 (5.1) (4.0) 3,286,462 3,357,676 2.2
Premiums ceded to reinsurance (340,895) (302,268) (250,803) (26.4) (17.0) (1,414,745) (1,413,839) (0.1)
R etained premiums 464,467 493,957 513,487 10.6 4.0 1,871,716 1,943,837 3.9
Changes in technical reserves - premiums 4,037 13,561 (16,996) - - (13,658) 78,676 -
Earned premiuns 468,503 507,518 496,491 6.0 (2.2) 1,858,059 2,022,513 8.9
Retained claims (216,029) (240,133) (307,131) 42.2 27.9 (820,999) (1,031,925) 25.7
Acquisition costs (147,868) (181,008) (162,852) 10.1 (10.0) (638,203) (717,401) 12.4
Underwrit ing margin 104,607 86,377 26,507 (74.7) (69.3) 398,857 273,186 (31.5)
Quarterly F lo w C hg. % A nnual F lo w
745780
956
805881
916
796764
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
78.7 77.7 81.9 79.084.7 83.1 82.1 78.4
21.3 22.3 18.1 21.015.3 16.9 17.9 21.6
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Other channels Bancassurance
159174 173 169
135
155143
165
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
586 606
783
636
746 762
654599
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 69
Figure 88 – Casualty Insurance | Underwriting margin QUARTERLY ANALYSIS
In the 4Q16, the underwriting margin in the casualty segment dropped by 17.0 p.p. YoY, justified by the 15.8 p.p. increase in the loss ratio, concentrated in the independent broker channel, along with a higher commission ratio.
YEAR-TO-DATE ANALYSIS
In 2016, the underwriting margin in the casualty segment reached 13.5%, 8.0 p.p. down YoY. The performance was impacted by the increased loss and commission ratios. Additionally, the underwriting margin was impacted by the following events occurred in the 2Q16:
(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$58.3 million in provisions for unearned premiums related to the warranty risk insurance hired for consortium
groups, due to the change in the risk-term of this insurance, from yearly to monthly.
Figure 89 – Casualty Insurance | Loss ratio (%) Figure 90 – Casualty Insurance | Commission ratio (%)
10287
105 105
43
118
86
27
22.318.7
22.6 22.3
9.0
21.617.0
5.3
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Underwriting margin (R$ million) Underwriting margin (%)
45.3 45.040.4
46.152.8
43.147.3
61.9
33.6 34.0 32.5
43.449.9
2.026.7
37.6
51.0 50.344.0
47.253.9
63.456.7
70.1
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Total Bancassurance Other channels
32.4
36.3 37.1
31.6
38.2
35.4
35.732.8
39.9 40.1 40.0 39.9
44.5
34.1
36.1
40.7
28.8
34.535.7
28.1
35.8
36.0
35.5
30.1
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Total Bancassurance Other channels
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 70
DPVAT
Table 57 – DPVAT | Key figures
Other
Table 58 – Other | Key figures
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 47,726 67,206 47,675 (0.1) (29.1) 325,472 325,825 0.1
R etained premiums 47,726 67,206 47,675 (0.1) (29.1) 325,472 325,825 0.1
Changes in technical reserves - premiums 180 (56) 371 105.8 - (240) (894) 272.7
Earned premiuns 47,906 67,151 48,045 0.3 (28.5) 325,232 324,930 (0.1)
Retained claims (39,315) (31,056) (66,300) 68.6 113.5 (282,254) (278,817) (1.2)
Acquisition costs (657) (941) (668) 1.6 (29.1) (4,595) (4,562) (0.7)
Underwrit ing margin 7,934 35,154 (18,923) - - 38,384 41,550 8.2
Quarterly F lo w C hg. % A nnual F lo w
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 151,706 176,803 175,129 15.4 (0.9) 513,238 667,858 30.1
Premiums ceded to reinsurance (407) (592) (646) 58.8 9.0 (1,940) (2,072) 6.8
R etained premiums 151,299 176,210 174,483 15.3 (1.0) 511,299 665,785 30.2
Changes in technical reserves - premiums (15,104) (10,835) (11,497) (23.9) 6.1 (3,595) (32,710) 809.9
Earned premiuns 136,197 165,375 162,986 19.7 (1.4) 507,704 633,072 24.7
Retained claims (31,682) (56,491) (10,887) (65.6) (80.7) (134,526) (130,737) (2.8)
Acquisition costs (82,950) (60,167) (51,870) (37.5) (13.8) (280,022) (216,338) (22.7)
Underwrit ing margin 21,565 48,717 100,229 364.8 105.7 93,156 285,998 207.0
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 71
N E T I N V E S T M E N T I N C O M E
Figure 91 – Property and Casualty | Net investment income (R$ million)
QUARTERLY ANALYSIS
In the 4Q16, the net investment income dropped by 39.7% YoY, due to the increase in financial expenses, which were positively impacted in the 4Q15 by the changes in the foreign exchange rate.
YEAR-TO-DATE ANALYSIS
In 2016, the net investment income dropped by 10.7%, explained by the decline in the average yield on earning assets. The lower average yield was largely explained by the lower inflation indexes, with negative impact in the yield on inflation protected securities, classified as held to maturity. This effect was partially offset by the higher average Selic rate in the full year 2016.
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 (%)
158
136
183
206192
172
123 124
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
T rading 1,336,116 2,211,533 1,988,784 48.8 (10.1)
Pre-fixed 46,975 4,556 4,725 (89.9) 3.7
Floating 722,381 1,563,956 1,269,639 75.8 (18.8)
Inflation 462 290 296 (35.8) 2.3
Other 566,298 642,732 714,124 26.1 11.1
A vailable fo r sale 1,475,829 797,265 835,890 (43.4) 4.8
Pre-fixed 199,847 24,896 25,611 (87.2) 2.9
Floating 310,749 492,920 298,724 (3.9) (39.4)
Inflation 905,175 236,297 472,447 (47.8) 99.9
Other 60,058 43,152 39,107 (34.9) (9.4)
H eld to maturity securit ies 1,574,107 1,522,618 1,548,548 (1.6) 1.7
Pre-fixed 644,685 651,835 670,266 4.0 2.8
Floating 130,373 18,634 10,532 (91.9) (43.5)
Inflation 799,049 852,149 867,750 8.6 1.8
T o tal 4,386,052 4 ,531,417 4 ,373,221 (0.3) (3.5)
B alance C hg. %
29.1 28.028.7
26.5 34.450.7 45.8
36.1
22.8 23.3 19.3 20.318.0
15.8 15.0
16.0
33.8 34.5 37.8 38.9 32.619.7 24.0
30.7
14.3 14.2 14.2 14.3 15.0 13.8 15.1 17.2
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Floating Pre-fixed Inflation Others
40.9 40.0 40.036.7
48.3
73.0 68.4
55.5
11.5 12.3 7.3 8.8
6.4
3.21.0
1.1
24.6 25.0 30.6 32.2 22.3
2.37.9
16.7
23.0 22.7 22.1 22.3 23.1 21.5 22.8 26.7
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Floating Pre-fixed Inflation Others
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 72
B A L A N C E S H E E T A N A L Y S I S
Table 60 – Property and Casualty | Balance sheet
Table 61 – Property and Casualty | Receivables from insurance and reinsurance operations
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A ssets 15,165,951 14,161,111 13,483,666 (11.1) (4.8)
Cash 169,502 119,492 154,149 (9.1) 29.0
Financial assets 4,386,052 4,531,417 4,373,221 (0.3) (3.5)
Receivables from insurance and reinsurance operations 4,375,597 3,755,418 3,358,106 (23.3) (10.6)
Reinsurance and retrocession - technical reserves 2,487,775 2,163,084 1,774,578 (28.7) (18.0)
Securities and credits receivable 1,733,503 1,663,231 1,903,835 9.8 14.5
Other 348,892 344,479 328,091 (6.0) (4.8)
Prepaid expenses 12,902 28,094 12,453 (3.5) (55.7)
Deferred costs 790,076 719,650 731,069 (7.5) 1.6
Investments 264,741 257,508 257,553 (2.7) 0.0
Fixed assets 108,059 73,150 69,596 (35.6) (4.9)
Intangible 488,852 505,588 521,015 6.6 3.1
Liabilit ies 11,733,896 10,382,652 9,718,690 (17.2) (6.4)
Accounts payable 1,006,949 589,576 772,730 (23.3) 31.1
Obligations with insurance and reinsurance operations 1,613,964 1,223,282 935,933 (42.0) (23.5)
Technical reserves - insurance 8,220,696 7,767,768 7,291,486 (11.3) (6.1)
Third party deposits 237,066 133,012 61,977 (73.9) (53.4)
Other liabilities 655,221 669,014 656,564 0.2 (1.9)
Shareho lders' equity 3,432,054 3,778,459 3,764,976 9.7 (0.4)
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Receivable premiums 3,334,714 2,954,670 2,802,007 (16.0) (5.2)
Operations with insurance companies 131,628 129,217 123,706 (6.0) (4.3)
Premiums 81,939 65,904 59,445 (27.5) (9.8)
Claims paid 32,583 43,575 48,941 50.2 12.3
Other receivables 17,106 19,738 15,321 (10.4) (22.4)
Operations with reinsurance companies 910,265 695,833 506,057 (44.4) (27.3)
Claims paid 752,235 556,929 370,181 (50.8) (33.5)
Other receivables 158,030 138,904 135,876 (14.0) (2.2)
Other operating receivables 173,882 175,559 157,680 (9.3) (10.2)
Impairment (174,891) (199,860) (231,344) 32.3 15.8
R eceivables fro m insurance and reinsurance
o perat io ns4,375,597 3,755,418 3,358,106 (23.3) (10.6)
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 73
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
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Deferred premiums - PPNG 754,379 687,436 580,425 (23.1) (15.6)
Deferred premiums - RVNE 136,501 148,770 149,063 9.2 0.2
IBNR claims 99,623 99,614 99,573 (0.1) (0.0)
Pending claims 1,473,424 1,202,394 931,427 (36.8) (22.5)
Provision for related expenses 23,848 24,869 14,090 (40.9) (43.3)
R einsurance and retro cessio n - technical reserves 2,487,775 2,163,084 1,774,578 (28.7) (18.0)
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Securities and credits receivable 262,561 212,817 230,069 (12.4) 8.1
Other tax and social security receivables 84,844 60,334 225,949 166.3 274.5
Receivable tax and social security - tax loss 339,346 325,921 368,573 8.6 13.1
Receivable tax and social security - temporary adjustements 289,841 254,122 263,932 (8.9) 3.9
Tax and judicial deposits 717,495 763,785 779,409 8.6 2.0
Other receivables 47,486 65,504 54,952 15.7 (16.1)
Impairment (8,072) (19,253) (19,048) 136.0 (1.1)
Securit ies and credits receivable 1,733,503 1,663,231 1,903,835 9.8 14.5
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Payable liabilities 471,736 215,221 301,661 (36.1) 40.2
Deferred taxes 52,274 51,351 52,964 1.3 3.1
Social securities and taxes payable 231,394 180,049 176,495 (23.7) (2.0)
Labor charges 35,141 51,719 34,193 (2.7) (33.9)
Taxes and contributions 93,817 39,814 119,767 27.7 200.8
Other accounts payable 122,587 51,422 87,649 (28.5) 70.5
A cco unts payable 1,006,949 589,576 772,730 (23.3) 31.1
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
Premiums to return 39,809 11,893 2,382 (94.0) (80.0)
Operations with insurance companies 146,834 166,922 71,089 (51.6) (57.4)
Operations with reinsurance companies 968,086 689,478 518,081 (46.5) (24.9)
Insurance and reinsurance brokers 310,829 337,549 (439) - -
Other operating obligations 148,405 17,438 344,819 132.3 1,877.4
Obligat io ns with insurance and reinsurance o perat io ns 1,613,964 1,223,282 935,933 (42.0) (23.5)
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 74
S O L V E N C Y
Table 66 – Property and Casualty | Solvency¹
¹ Information based on the accounting principles adopted by SUSEP.
' '
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
B rasilveí culo s
A djusted shareho lders' equity (a) 540,949 503,338 453,101 (16.2) (10.0)
M inimum capital required (b) 480,808 409,628 393,105 (18.2) (4.0)
Additional capital for underwritting risk 431,746 369,711 349,179 (19.1) (5.6)
Additional capital for market risk - - 6,564 - -
Additional capital for credit risk 64,943 50,697 55,289 (14.9) 9.1
Additional capital for operating risk 13,196 12,136 11,451 (13.2) (5.6)
Benefit o f correlation between risks (29,077) (22,916) (29,378) 1.0 28.2
C apital adequacy (a) - (b) 60,141 93,710 59,996 (0.2) (36.0)
So lvency rat io (a) / (b) - % 112.5 122.9 115.3 2.8 p.p. -7.6 p.p.
A liança do B rasil Seguro s
A djusted shareho lders' equity (a) 208,805 217,460 229,036 9.7 5.3
M inimum capital required (b) 124,527 108,268 108,862 (12.6) 0.5
Additional capital for underwritting risk 105,680 93,462 92,301 (12.7) (1.2)
Additional capital for market risk - - 1,191 - -
Additional capital for credit risk 24,536 17,404 19,728 (19.6) 13.4
Additional capital for operating risk 4,680 4,998 4,950 5.8 (1.0)
Benefit o f correlation between risks (10,369) (7,596) (9,308) (10.2) 22.5
C apital adequacy (a) - (b) 84,278 109,192 120,174 42.6 10.1
So lvency rat io (a) / (b) - % 167.7 200.9 210.4 42.7 p.p. 9.5 p.p.
M A P F R E Seguro s Gerais
A djusted shareho lders' equity (a) 1,594,676 1,951,086 2,063,672 29.4 5.8
M inimum capital required (b) 1,033,277 1,007,776 995,579 (3.6) (1.2)
Additional capital for underwritting risk 881,773 863,440 842,859 (4.4) (2.4)
Additional capital for market risk - - 32,610 - -
Additional capital for credit risk 194,480 181,799 179,591 (7.7) (1.2)
Additional capital for operating risk 39,882 40,537 40,713 2.1 0.4
Benefit o f correlation between risks (82,858) (78,000) (100,194) 20.9 28.5
C apital adequacy (a) - (b) 561,399 943,310 1,068,093 90.3 13.2
So lvency rat io (a) / (b) - % 154.3 193.6 207.3 53.0 p.p. 13.7 p.p.
T o tal M A P F R E B B SH 2
A djusted shareho lders' equity (a) 2,344,430 2,671,884 2,745,809 17.1 2.8
M inimum capital required (b) 1,638,612 1,525,672 1,497,546 (8.6) (1.8)
Additional capital for underwritting risk 1,419,199 1,326,613 1,284,339 (9.5) (3.2)
Additional capital for market risk - - 40,365 - -
Additional capital for credit risk 283,959 249,900 254,608 (10.3) 1.9
Additional capital for operating risk 57,758 57,671 57,114 (1.1) (1.0)
Benefit o f correlation between risks (122,304) (108,512) (138,880) 13.6 28.0
C apital adequacy (a) - (b) 705,818 1,146,212 1,248,263 76.9 8.9
So lvency rat io (a) / (b) - % 143.1 175.1 183.4 40.3 p.p. 8.2 p.p.
C hg. %B alance
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 75
4 . 3 P E N S I O N P L A N S
E A R N I N G S A N A L Y S I S
Table 67 – Pension Plans | Income statement
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
T o tal revenue fro m pensio n and
insurance9,892,606 10,218,318 15,383,564 55.5 50.5 36,963,628 47,422,678 28.3
Provision for benefits to be granted (9,843,581) (10,170,159) (15,323,887) 55.7 50.7 (36,785,382) (47,216,260) 28.4
N et revenue fro m pensio n and
insurance49,025 48,159 59,677 21.7 23.9 178,246 206,418 15.8
M anagement fee 421,916 524,060 528,807 25.3 0.9 1,555,048 1,957,380 25.9
Changes in other technical reserves (23,803) 10,051 (22,878) (3.9) - (58,134) (54,600) (6.1)
Expenses with benefits, redemptions and
claims(12,044) (43,533) (15,143) 25.7 (65.2) (65,336) (93,636) 43.3
Acquisition costs (105,746) (128,545) (135,950) 28.6 5.8 (399,020) (467,471) 17.2
Earned premiums 48,571 49,732 50,239 3.4 1.0 197,334 200,748 1.7
Contributions to cover risks 50,028 49,453 50,281 0.5 1.7 199,242 198,270 (0.5)
Changes in technical reserves -premiums (1,457) 278 (42) (97.1) - (1,907) 2,478 -
Gro ss inco me 377,919 459,924 464,752 23.0 1.0 1,408,139 1,748,839 24.2
Administrative expenses (97,662) (84,757) (105,565) 8.1 24.6 (318,547) (353,183) 10.9
Tax expenses (34,909) (42,544) (42,744) 22.4 0.5 (129,258) (159,894) 23.7
Other operating income (expenses) (7,387) (5,558) (7,572) 2.5 36.2 (28,272) (33,825) 19.6
R esult with pensio n plans and
insurance237,961 327,066 308,871 29.8 (5.6) 932,061 1,201,937 29.0
N et investment inco me 133,503 115,576 111,733 (16.3) (3.3) 538,511 508,568 (5.6)
Financial income 4,535,436 5,707,781 5,300,575 16.9 (7.1) 14,384,304 21,650,083 50.5
Financial expenses (4,401,933) (5,592,205) (5,188,842) 17.9 (7.2) (13,845,793) (21,141,515) 52.7
Operat ing result 371,464 442,641 420,604 13.2 (5.0) 1,470,573 1,710,505 16.3
Gains or losses on non-current assets (8) - (794) 9,273.8 - 21 (709) -
Earnings befo re taxes and pro f it
sharing371,456 442,641 419,810 13.0 (5.2) 1,470,593 1,709,796 16.3
Taxes (158,410) (162,052) (150,036) (5.3) (7.4) (596,362) (688,312) 15.4
Profit sharing (3,831) (2,940) (3,069) (19.9) 4.4 (12,859) (12,441) (3 .2)
A djusted net inco me 209,215 277,649 266,705 27.5 (3.9) 861,373 1,009,043 17.1
One-o ff events - - - - - 294,091 - -
Reversal o f technical provisions - - - - - 514,056 - -
Tax expenses on one-off events - - - - - (23,904) - -
Income taxes on one-off events - - - - - (196,061) - -
N et inco me 209,215 277,649 266,705 27.5 (3.9) 1,155,464 1,009,043 (12.7)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 76
A D J U S T E D N E T I N C O M E
Figure 94 – Pension Plans | Adjusted net income and ROAE QUARTERLY ANALYSIS
The net income of the Pension Plans business reached R$266.7 million in the 4Q16, 27.5% up YoY, supported by the improvement in the non-interest operating result.
The annualized return on average equity reached 42.9% in the quarter, 6.8 p.p. higher as compared to the 4Q15.
YEAR-TO-DATE ANALYSIS
In 2016, the adjusted net income rose by 17.1% to R$1.0 billion, boosted by the increase in the non-interest operating result, driven by higher revenues with management fees as well as by the 2.6 p.p. lower cost to income ratio.
The annualized return on average equity improved by 2.7 p.p. to 41.8%.
¹ Net of taxes considering the effective tax rate
Table 68 – Pension Plans | Performance ratios
121 130 156 133 142 166204 195
99 7966
77 8176
73 72220 210 223 209 223
242278 267
44.637.7 38.0 36.1 37.3 39.0
43.0 42.9
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Net investment income¹ (R$ million)
Non-interest operating result¹ (R$ million)
Adjusted ROAE (%)
C hg. (p.p.)
% 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Commission ratio 1.1 1.3 0.9 (0.2) (0.4) 1.1 1.0 (0.1)
Load fee 0.5 0.5 0.4 (0.1) (0.1) 0.5 0.4 (0.1)
M anagement fee 1.19 1.15 1.14 (0.05) (0.01) 1.21 1.15 (0.06)
Redemption ratio 9.5 7.8 9.7 0.2 1.9 9.3 8.8 (0.5)
Cost to income ratio 54.2 47.4 51.6 (2.6) 4.2 51.7 49.2 (2.6)
Income tax rate 42.6 36.6 35.7 (6.9) (0.9) 40.6 40.3 (0.3)
Adjusted ROAE 36.1 43.0 42.9 6.8 (0.0) 39.2 41.8 2.7
Quarterly F lo w C hg. (p.p.) A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 77
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
In the 4Q16, the result with pension plans and insurance grew by 29.8% YoY, driven by the increase of 25.3% in revenues with management fees, as a result of the 33.2% expansion in the assets under management, as well as by the 2.6 p.p. improvement in the cost to income ratio.
YEAR-TO-DATE ANALYSIS
In 2016, the result with pension plans and insurance increased by 29.0%, boosted by the growth of 25.9% in revenues with management fees, due to the expansion in assets under management, as well as by the 2.6 p.p. lower cost to income ratio.
N E T I N V E S T M E N T I N C O M E
Figure 96 – Pension Plans | Net investment income (R$ million) QUARTERLY ANALYSIS
In the 4Q16, the net investment income dropped by 16.3% YoY, explained by the 1.8 p.p. contraction in the spread between the Company’s proprietary assets and its interest bearing liabilities.
YEAR-TO-DATE ANALYSIS
In 2016, the net investment income dropped by 5.6% as a result of the contraction of 0.4 p.p. in the spread between the proprietary assets and the interest bearing liabilities.
206 219
270238
262
304327
309
52.6 52.847.4
54.250.2
47.4 47.451.6
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Result with pension plans and insurance (R$ million) Cost to income ratio (%)
163
130
112
134145
136
116 112
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 78
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
In the 4Q16, pension plans contributions grew by 55.5% YoY. The increase was concentrated in VGBL plans with sporadic contribution.
YEAR-TO-DATE ANALYSIS
In 2016, contributions grew by 28.3%, driven by VGBL plans with sporadic contribution.
Figure 98 – Pension Plans | Contributions breakdown (%) Figure 99 – Pension Plans | Pension plans outstanding (%)
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
Net inflows achieved R$9.7 billion in the 4Q16, an increase of 68.1% YoY, boosted by the strong growth in pension plans contributions.
The annualized redemption ratio increase slightly to 9.7%.
YEAR-TO-DATE ANALYSIS
In 2016, net inflows increased 24.9% to R$28.5 billion, explained by the decline of 0.5 p.p. in the redemption ratio along with the 28.3%
expansion in pension plans contributions.
8,474
10,750
7,847
9,893
7,898
13,922
10,218
15,384
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
92.7 94.0 91.9 89.5 92.3 95.4 93.8 93.2
5.9 4.9 6.6 9.3 6.2 3.8 5.1 6.1
1.4 1.1 1.5 1.2 1.4 0.8 1.1 0.8
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
VGBL PGBL Traditional
81.1 79.8 79.1 78.3 78.4 76.9 76.0 74.4
18.9 20.2 20.9 21.7 21.6 23.1 24.0 25.6
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Periodic contribution Sporadic contribution
5,441
7,317
4,307
5,770
3,739
9,566
5,523
9,699
9.0 9.3 9.2 9.5 9.28.4
7.8
9.7
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Net inflows (R$ million) Annualized redemption ratio (%)
3,781 3,903 4,001 4,0974,244
4,376 4,4724,602
1,815 1,853 1,872 1,889 1,908 1,939 1,957 1,983
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Active plans CPFs
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 79
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
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
B enefits to be granted
Init ial balance 135,113,719 168,474,686 179,278,465 32.7 6.4
Constitution 5,819,953 5,391,035 22,229,989 282.0 312.4
Reversal (69,082) (117,649) (12,653,792) 18,217.1 10,655.6
Restatement 4,299,077 5,530,392 5,156,333 19.9 (6.8)
F inal balance 145,163,667 179,278,465 194,010,995 33.6 8.2
B enefits granted
Init ial balance 1,861,728 2,177,485 2,286,001 22.8 5.0
Constitution 215,159 269,462 273,134 26.9 1.4
Reversal (192,214) (235,650) (260,817) 35.7 10.7
Restatement 96,635 74,703 48,194 (50.1) (35.5)
F inal balance 1,981,309 2,286,001 2,346,512 18.4 2.6
Other pro visio ns
Init ial balance 1,086,442 1,163,834 1,159,197 6.7 (0.4)
Constitution 54,670 108,009 109,763 100.8 1.6
Reversal (61,573) (126,926) (106,254) 72.6 (16.3)
Restatement 22,239 14,281 13,345 (40.0) (6.5)
F inal balance 1,101,778 1,159,197 1,176,051 6.7 1.5
T o tal P ro visio ns 148,246,754 182,723,661 197,533,558 33.2 8.1
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
P |VGB L R eserves
Init ial balance 129,829,787 162,775,252 173,589,397 33.7 6.6
Constitution 5,992,008 5,656,788 22,513,544 275.7 298.0
Reversal (153,455) (245,572) (12,810,830) 8,248.2 5,116.7
Restatement 4,013,528 5,402,929 5,024,331 25.2 (7.0)
F inal balance 139,681,869 173,589,397 188,316,442 34.8 8.5
T radit io nal R eserves
Init ial balance 8,232,103 9,040,754 9,134,266 11.0 1.0
Constitution 97,774 111,881 99,342 1.6 (11.2)
Reversal (169,413) (234,815) (210,032) 24.0 (10.6)
Restatement 404,422 216,446 193,541 (52.1) (10.6)
F inal balance 8,564,886 9,134,266 9,217,116 7.6 0.9
T o tal P ro visio ns 148,246,754 182,723,661 197,533,558 33.2 8.1
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 80
M A N A G E M E N T F E E
Figure 102 – Pension Plans | Management fee¹,²
QUARTERLY ANALYSIS
In the 4Q16, revenues with management fees grew by 25.3% YoY, driven by the increase of 33.2% in assets under management.
The average management fee dropped by 0.05 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 have a higher management fee.
YEAR-TO-DATE ANALYSIS
In 2016, revenues with management fees grew by 25.9%. The
average management fee reached 1.15%, 0.06 p.p. down as
compared to the 1.21% registered in 2015, explained by the
increased share of VGBL plans in assets under management, which
usually charge a lower management fee, besides the decreased
share of traditional plans, which have a higher management fee.
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 December 2016, technical reserves reached R$197.5 billion, 33.2% higher in 12 months. Assets under management from
PGBL and VGBL plans reached R$188.3 billion, 34.8% up YoY.
345 370418 422 430
474524 529
1.24 1.22 1.21 1.19 1.17 1.16 1.15 1.14
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Management fee (R$ million) Management fee (%)
88 98 104 113 121 134 144 157
2425 26
2728
2930
31
88 8
99
99
9
120131 138
148157
172183
198
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
VGBL PGBL Traditional
73.1 74.8 75.5 76.1 76.7 78.0 78.7 79.6
19.9 19.1 18.5 18.1 17.7 16.8 16.3 15.7
7.0 6.2 6.0 5.8 5.6 5.3 5.0 4.7
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
VGBL PGBL Traditional
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 81
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 105 – Pension Plans | G&A expenses (R$ million) QUARTERLY ANALYSIS
In the 4Q16, G&A expenses grew by 11.4% YoY, driven mainly by:
(i) the increase of outsourcing expenses, due to the growth of variable expenses related to the expansion in assets under management;
(ii) higher personnel expenses, mainly due to the yearly wages adjustment; and
(iii) the growth in tax expenses, in line with the increase in taxable revenues.
In the 4Q16, the cost to income ratio improved by 2.6 p.p. YoY to 51.6%. The performance was largely explained by the increase of 25.3% in revenues with management fees along with the strict cost control.
YEAR-TO-DATE ANALYSIS
In 2016, G&A expenses grew by 14.9% mostly given to: (i) higher expenses with outsourcing, due to increased variable expenses associated with the growth in assets under management; (ii) higher personnel expenses, due to the yearly wages adjustment; and (iii) higher tax expenses, in line with the increase in taxable income.
In 2016, the cost to income ratio reached 49.2%, an improvement of 2.6 p.p. reflecting the 25.9% increase in revenues with management fees along with a strict cost control.
Figure 106 – Pension Plans | Cost to income ratio (%)
Table 71 – Pension Plans | G&A expenses
71 75 7598
79 84 85106
29 31 35
35
36 39 43
43
7 6 8
711
10 6
8
106 112 118
140126 132 133
156
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Administrative expenses Tax expenses Other operating income (expenses)
52.6 52.847.4
54.250.2
47.4 47.451.6
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
A dministrat ive expenses 97,662 84,757 105,565 8.1 24.6 318,547 353,183 10.9
Personnel 28,135 32,061 33,122 17.7 3.3 109,740 125,972 14.8
Outsourcing 35,997 38,752 41,898 16.4 8.1 129,816 150,181 15.7
Location and operation 10,058 10,594 13,046 29.7 23.1 39,720 44,037 10.9
M arketing 17,740 3,464 12,165 (31.4) 251.2 32,701 27,064 (17.2)
Other 5,731 (114) 5,334 (6.9) - 6,568 5,929 (9.7)
Other o perat ing inco me (expenses) 7,387 5,558 7,573 2.5 36.3 28,272 33,826 19.6
Expenses on sales incentive 1,806 95 948 (47.5) 896.9 8,542 10,370 21.4
Charging expenses 3,646 4,287 4,082 12.0 (4.8) 13,635 16,882 23.8
Contingencies 994 278 2,023 103.6 629.0 4,092 3,803 (7.1)
Provision for loan losses 40 (23) (29) - 22.5 185 40 (78.6)
Other operating income (expenses) 901 921 548 (39.1) (40.5) 1,817 2,732 50.3
T ax expenses 34,909 42,544 42,744 22.4 0.5 129,258 159,894 23.7
Federal and municipal taxes 8,694 10,711 7,724 (11.2) (27.9) 32,026 37,129 15.9
COFINS 21,584 26,417 26,436 22.5 0.1 80,373 99,006 23.2
PIS/PASEP 3,507 4,293 4,296 22.5 0.1 13,055 16,088 23.2
Inspection fee 1,124 1,123 1,124 (0.0) 0.1 3,558 4,495 26.3
Other tax expenses - - 3,164 - - 247 3,176 1,185.7
General and administrat ive expenses 139,958 132,858 155,882 11.4 17.3 476,077 546,904 14.9
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 82
N E T I N V E S T M E N T I N C O M E
Figure 107 – Pension Plans| Net investment income (R$ million) Figure 108 – Pension plans | Inflation and TR rates (%)
3.8
2.3
1.4
2.8
2.6
1.7 1.00.7
2.02.3
1.9
3.9
3.0 2.9
0.5
0.70.2 0.40.6
0.5 0.4 0.5 0.6
0.5
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
IPCA IGP-M TR
Source: Banco Central do Brasil
QUARTERLY ANALYSIS
In the 4Q16, the net investment income dropped by 16.3% YoY, as a result of the 1.8 p.p. compression in the spread between the
interest earning assets and the interest bearing liabilities.
In the quarter, the adjusted interest revenues declined 47.1% YoY, as a result of the 13.2 p.p. contraction in the average yield on assets
classified as held to maturity. The yield on interest earning assets was impacted by lower IGP-M and IPCA inflation indexes, which
remunerate a large portion of these assets, partially offset by the expansion in the volume of interest earning assets.
Adjusted interest expenses dropped by 57.3%, justified by the decline of 9.7 p.p. in the average yield, driven by the lower IGP-M, which
is the index that remunerates a large portion of the company’s interest bearing liabilities.
YEAR-TO-DATE ANALYSIS
In 2016, the net investment income dropped by 5.6%, explained by the 0.4 p.p. contraction in the spread between the interest earning
assets and the interest bearing liabilities.
Adjusted interest revenues dropped by 9.1%, as a result of the 3.4 p.p. decline in the average yield on investments classified as held to
maturity. The yield on interest earning assets was impacted by the drop in both IGP-M and IPCA inflation indexes, partially offset by the
growth in the average balance of interest earning assets.
Adjusted interest expenses dropped by 10.7%, justified by the decrease of 2.3 p.p. in the average yield on interest bearing liabilities, as a
result of the lower IGP-M, as a large portion of these liabilities is pegged to IGP-M.
Table 72 – Pension Plans | Financial income and expenses
163
130
112
134145
136
116 112
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
A djusted interest revenues 536,802 316,870 283,883 (47.1) (10.4) 1,707,052 1,552,130 (9.1)
Revenues with mark to market financial
investments 17,490 18,077 34,451 97.0 90.6 46,633 84,507 81.2
Revenues with held to maturity financial
investments 519,312 298,793 249,432 (52.0) (16.5) 1,660,419 1,467,623 (11.6)
A djusted interest expenses (403,299) (201,294) (172,150) (57.3) (14.5) (1,168,542) (1,043,562) (10.7)
Interest accrual on technical reserves (403,299) (201,294) (172,150) (57.3) (14.5) (1,168,542) (1,043,562) (10.7)
N et investment inco me 133,503 115,576 111,733 (16.3) (3.3) 538,510 508,568 (5.6)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 83
Table 73 – Pension Plans | 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.
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.
R $ tho usand A verage vo lume A verage rate N et change
Earning assets
M ark to market financial investments 8,763 8,198 16,961
Held to maturity financial investments 19,916 (289,796) (269,881)
T o tal¹ 28,339 (281,258) (252,919)
Interest bearing liabilit ies
Technical reserves (16,404) 247,554 231,149
T o tal (16,404) 247,554 231,149
4Q16/ 4Q15
R $ millio nA verage
balance
Interest
revenues
A nnualized
rate (%)
A verage
balance
Interest
revenues
A nnualized
rate (%)
Earning assets
M ark to market financial investments 1,020 17 7.0 1,367 34 10.6
Held to maturity financial investments 9,731 519 23.1 10,575 249 9.9
T o tal 10,750 537 21.5 11,943 284 10.0
4Q15 4Q16
R $ millio nA verage
balance
Interest
expenses
A nnualized
rate (%)
A verage
balance
Interest
expenses
A nnualized
rate (%)
Interest bearing liabilit ies
Technical reserves 9,212 (403) 16.4 10,183 (172) 6.7
T o tal 9,212 (403) 16.4 10,183 (172) 6.7
4Q15 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 84
Table 76 – Pension Plans | Year-to-date - 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.
Table 77 – Pension Plans | Year-to-date - 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 - Interest bearing liabilities - average balance and interest rates¹
¹ Technical reserves of Traditional and P/VGBL plans in the granting stage.
R $ tho usand A verage vo lume A verage rate N et change
Earning assets
M ark to market financial investments (680) 38,554 37,874
Held to maturity financial investments 122,537 (315,334) (192,797)
T o tal¹ 116,112 (271,034) (154,922)
Interest bearing liabilit ies
Technical reserves (120,122) 245,102 124,980
T o tal (120,122) 245,102 124,980
2016/ 2015
R $ millio nA verage
balance
Interest
revenues
A nnualized
rate (%)
A verage
balance
Interest
revenues
A nnualized
rate (%)
Earning assets
M ark to market financial investments 1,089 47 4.3 1,081 85 7.9
Held to maturity financial investments 9,448 1,660 17.7 10,309 1,468 14.3
T o tal 10,538 1,707 16.3 11,390 1,552 13.7
2015 2016
R $ millio nA verage
balance
Interest
expenses
A nnualized
rate (%)
A verage
balance
Interest
expenses
A nnualized
rate (%)
Interest bearing liabilit ies
Technical reserves 9,087 (1,169) 13.0 9,834 (1,044) 10.7
T o tal 9,087 (1,169) 13.0 9,834 (1,044) 10.7
2015 2016
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 85
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 (%)
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
H eld to maturity securit ies 9,966,356 10,498,649 10,651,926 6.9 1.5
Pre-fixed 96,248 80,233 82,643 (14.1) 3.0
Inflation 9,870,108 10,418,416 10,569,283 7.1 1.4
M ark to market securit ies 940,226 1,513,453 1,221,254 29.9 (19.3)
Pre-fixed 139,089 205,252 265,460 90.9 29.3
Floating 494,051 994,457 641,388 29.8 (35.5)
Inflation 307,086 313,744 314,406 2.4 0.2
T o tal 10,906,582 12,012,102 11,873,180 8.9 (1.2)
B alance C hg. %
90.1 89.0 91.8 93.3 91.7 89.4 89.3 91.7
5.5 6.3 6.0 4.5 5.8 8.2 8.3 5.4
4.4 4.7 2.2 2.2 2.5 2.3 2.4 2.9
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Inflation Floating Pre-fixed
79.8 82.6 83.1 83.0 86.5 87.9 88.1 89.4
13.8 12.2 12.1 12.8 9.5 9.0 9.0 7.85.2 4.1 3.9 3.4 3.1 2.6 2.3 2.2
1.3 1.1 0.8 0.8 0.8 0.6 0.6 0.6
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Stocks/Other Debentures and commercial papers
CDBs, DPGEs, CRIs, FDICs, LHs and LFs Government bonds
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 86
B A L A N C E S H E E T A N A L Y S I S
Table 80 – Pension Plans | Balance sheet
S O L V E N C Y
Table 81 – Pension Plans | Solvency¹
¹ Information based on the accounting principles adopted by SUSEP.
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A ssets 151,421,352 186,552,883 201,232,535 32.9 7.9
Cash and cash equivalents 62 5,736 133 113.6 (97.7)
Financial assets 149,738,598 184,622,797 199,154,211 33.0 7.9
Receivables from insurance and reinsurance operations 1,940 1,890 1,506 (22.4) (20.3)
Securities and credits receivable 557,126 574,786 596,974 7.2 3.9
Prepaid expenses 34 1,169 1,265 3,611.4 8.2
Deferred costs 925,596 1,146,462 1,266,118 36.8 10.4
Credits from private pension transactions 561 - 136 (75.8) -
Fixed assets 16,414 19,012 24,843 51.4 30.7
Intangible 181,021 181,031 187,349 3.5 3.5
Liabilit ies 148,998,115 183,984,206 198,832,312 33.4 8.1
Accounts payable 234,862 454,615 578,804 146.4 27.3
Obligations with insurance and reinsurance operations 8,447 9,053 13,785 63.2 52.3
Debts from private pension transactions 3,343 1,010 3,203 (4.2) 217.0
Third party deposits 22,564 183,274 44,678 98.0 (75.6)
Technical reserves - insurance 112,776,407 143,788,358 157,270,075 39.5 9.4
Technical reserves - private pension 35,470,347 38,935,304 40,263,483 13.5 3.4
Other liabilities 482,145 612,592 658,283 36.5 7.5
Shareho lders' equity 2,423,237 2,568,677 2,400,224 (0.9) (6.6)
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A djusted shareho lder's equity (a) 2,242,182 2,386,477 3,189,674 42.3 33.7
M inimum capital requirement (b) 1,312,400 1,444,712 1,580,278 20.4 9.4
Additional capital for underwritting risk 1,161,702 1,259,590 1,289,210 11.0 2.4
Additional capital for credit risk 61,800 74,665 68,151 10.3 (8.7)
Additional capital for market risk - - 279,839 - -
Additional capital for operating risk 118,597 146,179 158,027 33.2 8.1
Correlation risk reduction (29,700) (35,721) (214,948) 623.7 501.7
C apital adequacy (a) - (b) 929,782 941,765 1,609,396 73.1 70.9
So lvency rat io (a) / (b) - % 170.8 165.2 201.8 31.0 p.p. 36.7 p.p.
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 87
4 . 4 P R E M I U M B O N D S
E A R N I N G S A N A L Y S I S
Table 82 – Premium Bonds | Income statement
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remium bo nds co llect io n 1,856,387 1,359,880 1,675,493 (9.7) 23.2 6,517,231 5,649,457 (13.3)
Changes in provisions for redemption (1,546,895) (1,139,745) (1,410,035) (8.8) 23.7 (5,383,740) (4,716,325) (12.4)
N et revenue with premium bo nds 309,492 220,135 265,458 (14.2) 20.6 1,133,491 933,132 (17.7)
Changes in technical reserves (9,848) (16,934) (13,958) 41.7 (17.6) (29,467) (50,961) 72.9
Result with lo ttery (74,029) (32,515) (56,790) (23.3) 74.7 (230,179) (175,637) (23.7)
Acquisition costs (145,173) (112,536) (127,344) (12.3) 13.2 (537,508) (435,200) (19.0)
Administrative expenses (30,993) (22,511) (30,601) (1.3) 35.9 (96,992) (90,516) (6.7)
Tax expenses (11,841) (9,486) (10,603) (10.5) 11.8 (45,192) (38,933) (13.8)
Other operating income (expenses) (3,223) (3,008) (2,584) (19.8) (14.1) (15,786) (13,238) (16.1)
R esult with premium bo nds 34,385 23,145 23,578 (31.4) 1.9 178,367 128,647 (27.9)
N et investment inco me 147,898 161,217 128,893 (12.8) (20.0) 453,897 645,048 42.1
Financial income 422,126 412,090 372,633 (11.7) (9.6) 1,490,900 1,680,713 12.7
Financial expenses (274,228) (250,873) (243,740) (11.1) (2.8) (1,037,003) (1,035,665) (0.1)
Equity income 110 114 114 3.9 0.2 393 433 10.2
Operat ing result 182,393 184,476 152,586 (16.3) (17.3) 632,657 774,128 22.4
Earnings befo re taxes and pro f it
sharing182,393 184,476 152,586 (16.3) (17.3) 632,657 774,128 22.4
Taxes (72,054) (82,063) (50,402) (30.0) (38.6) (249,041) (329,623) 32.4
Profit sharing (1,563) (1,178) (1,910) 22.2 62.1 (4,801) (5,309) 10.6
N et inco me 108,776 101,235 100,274 (7.8) (0.9) 378,815 439,196 15.9
C hg. %Quarterly F lo w A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 88
N E T I N C O M E
Figure 111 – Premium Bonds |Net income and ROAE QUARTERLY ANALYSIS
In the 4Q16, the net income of the premium bonds business segment fell 7.8% YoY to R$100.3 million, explained by the decline in the net investment income as well as in the result with premium bonds.
The ROAE dropped 13.3 p.p. YoY to 96.4%.
YEAR-TO-DATE ANALYSIS
In 2016, the net income of the premium bonds business segment amounted to R$439.2 million, 15.9% up YoY. The better performance was driven by the growth in the net investment income due to a higher net interest margin.
¹Net of taxes considering the Company’s effective income tax rate.
Table 83 – Premium Bonds | Performance ratios
29 27 28 19 18 25 12 14
75 6941
89117
78 90 86
10597
68
109
135
103 101100
102.688.8
65.4
109.7 123.0
84.1 87.9 96.4
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Net investment income¹ (R$ million)
Non-interest operating results¹ (R$mill ion)
ROAE (%)
C hg.
(p.p.)
% 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Spread 5.9 p.p. 6.4 p.p. 5.7 p.p. (0.2) (0.8) 4.1 p.p. 5.7 p.p. 1.5
Lottery ratio 23.9 14.8 21.4 (2.5) 6.6 20.3 18.8 (1.5)
Commission ratio 46.9 51.1 48.0 1.1 (3.2) 47.4 46.6 (0.8)
G&A ratio 14.9 15.9 16.5 1.6 0.6 13.9 15.3 1.4
Premium bonds margin 11.1 10.5 8.9 (2.2) (1.6) 15.7 13.8 (1.9)
Income tax rate 39.5 44.5 33.0 (6.5) (11.5) 39.4 42.6 3.2
ROAE 109.7 87.9 96.4 (13.3) 8.4 87.0 98.4 11.4
Quarterly F lo w C hg. (p.p.) A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 89
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 premium bonds margin
QUARTERLY ANALYSIS
In the 4Q16, the result with premium bonds dropped by 31.4% YoY, along with a 2.2 p.p. contraction in the premium bonds margin. This performance is explained by:
(i) the 14.2% drop in net revenues with premium bonds, as a result of the 9.7% decline in collections along with the 0.8 p.p. increase in the average reserve quote; and
(ii) the 41.7% increase in expenses with changes in technical reserves, mainly explained by higher expenses with the restatement of provision for bonus related to products pegged to the stock market performance which have as counterpart the results with mutual funds accounted in the net investment income, and does not affect the company’s net income.
The effects explained above were partially offset by both the 23.3% contraction in the lottery expenses and the 12.3% drop in
acquisition cost.
YEAR-TO-DATE ANALYSIS
In 2016, the result with premium bonds fell by 27.9%, along with a 1.9 p.p. decline in the premium bonds margin, driven by:
(i) the 17.7% drop in net revenues with premium bonds, as a result of the 13.3% decrease in premium bonds collection in
addition to the increase of 0.9 p.p. in the average reserve quote;
(ii) the 72.9% increase in expenses with changes in technical reserves, mainly driven by the restatement of the provision for
bonus related to products linked to the performance of the stock market, as explained in the quarterly analysis.
The effects aforementioned were partially offset by the 23.7% decline in expenses with lottery as well as by the 19.0% drop in the
acquisition cost.
N E T I N V E S T M E N T I N C O M E
Figure 113 – Premium Bonds | Net investment income and spread
QUARTERLY ANALYSIS
In the 4Q16, the net investment income dropped by 12.9% YoY, driven by the 8.8% contraction in the average balance of earning assets along with a 0.2 p.p. compression in the spread.
YEAR-TO-DATE ANALYSIS
In 2016, the net investment income grew 42.1%, driven by the 1.5 p.p. improvement in the spread.
50 47 4734 35
47
23 24
19.2
14.0
20.5
11.1
18.3 18.3
10.58.9
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Result with premium bonds (R$ million) Premium bonds margin (%)
124 115
67
148
213
142161
129
5.45.1
3.2
5.9
8.3
5.96.4
5.7
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Net investment income (R$ million) Spread (p.p.)
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 90
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 4Q16, premium bonds collection was 9.7% down YoY. This contraction is explained by the decrease in the average collection, since the quantity of bonds outstanding grew by 7.2% under the same comparable basis.
YEAR-TO-DATE ANALYSIS
In 2016, premium bonds collection dropped by 13.3% YoY, explained, as in the quarterly analysis, by 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 2016, the unique payment bonds accounted for 84.5% of the bonds outstanding, 2.8 p.p. up 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 at the Post Office branches
since May, 2015.
751 689 576 571 635 642 623 618
570
1,273
803
1,285
409
929737
1,058
1,321
1,961
1,379
1,856
1,043
1,5711,360
1,675
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Monthly payment Unique payment
56.8
35.1 41.830.8
60.8
40.9 45.836.9
43.2
64.9 58.269.2
39.2
59.1 54.263.1
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Monthly payment Unique payment
22.5 21.6 20.2 18.3 18.4 17.5 16.6 15.5
77.5 78.3 78.1 77.0 73.7 70.1 68.2 68.0
0.1 1.7 4.77.9 12.4 15.1 16.5
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Monthly payment Unique payment Unique payment - Postalcap
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 91
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 4Q16, the expenses with changes in provisions for redemptions dropped by 8.8% YoY, as a result of the decrease in collections. Under the same comparable basis, the average reserve quote grew by 0.8 p.p., due to the higher concentration of collections in unique payment bonds and recurring payments from monthly payment bonds, which have higher reserve quotes when compared to the first installments of the monthly payment bonds.
YEAR-TO-DATE ANALYSIS
In 2016, changes in provision for redemptions dropped by 12.4%, as a result of the decrease in collections. The average reserve quote rose by 0.9 p.p., due to the same reasons as explained in the quarterly analysis.
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
1,060
1,627
1,150
1,547
853
1,3141,140
1,410
80.282.9 83.4 83.3 81.7
83.7 83.8 84.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Changes in provisions for redemptions (R$ million) Average reserve quote (%)
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
P remium bo nds pro visio n
Init ial balance 11,475,304 10,518,070 10,388,707 (9.5) (1.2)
Constitution 1,556,121 1,151,781 1,423,938 (8.5) 23.6
Cancellations (8,912) (12,003) (10,803) 21.2 (10.0)
Transfers (1,574,653) (1,477,154) (1,929,096) 22.5 30.6
Interest accrual 222,535 208,013 197,601 (11.2) (5.0)
F inal balance 11,670,395 10,388,707 10,070,347 (13.7) (3.1)
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
P ro visio n fo r redemptio n
Init ial balance 327,696 320,206 327,748 0.0 2.4
Transfers 1,584,032 1,486,497 1,939,099 22.4 30.4
Payments (1,618,124) (1,479,588) (1,892,540) 17.0 27.9
Interest accrual 1,690 1,576 1,927 14.0 22.3
Premium bonds expiration (1,029) (943) (1,067) 3.7 13.1
F inal balance 294,265 327,748 375,167 27.5 14.5
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 92
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
In the 4Q16, the expenses related to the result with lottery fell 23.3% YoY, as a consequence of:
(i) the decline in expenses with lottery provisions constitution, due to lower collections; and
(ii) the contraction in lottery expenses.
YEAR-TO-DATE ANALYSIS
In 2016, the expenses associated with the result with lottery dropped by 23.7%, due to the decline in collections which led to a lower amount of lottery provision constitutions.
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
39
74
43
74
34
52
33
57
14.9
22.119.0
23.9
17.920.3
14.8
21.4
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Result with lottery (R$ million) Lottery ratio (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
R esult with lo ttery (74,029) (32,515) (56,790) (23.3) 74.7 (230,180) (175,637) (23.7)
Lottery provision reversal 54,103 139,122 49,399 (8.7) (64.5) 233,170 318,844 36.7
Lottery provision constitutions (80,413) (52,151) (63,700) (20.8) 22.1 (263,752) (216,698) (17.8)
Lottery expenses (47,719) (119,486) (42,489) (11.0) (64.4) (199,599) (277,783) 39.2
Quarterly F lo w C hg. % A nnual F lo w
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
P ro visio n fo r lo ttery to be held
Init ial balance 272,408 285,640 203,857 (25.2) (28.6)
Constitution 80,936 53,338 64,300 (20.6) 20.6
Reversal (54,103) (139,122) (49,399) (8.7) (64.5)
Cancellations (523) (1,187) (600) 14.7 (49.5)
Interest accrual 5,592 5,188 3,966 (29.1) (23.6)
F inal balance 304,310 203,857 222,124 (27.0) 9.0
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
P ro visio n fo r draws to be paid
Init ial balance 12,539 9,407 9,777 (22.0) 3.9
Constitution 47,671 119,475 42,490 (10.9) (64.4)
Payments (49,000) (119,185) (39,574) (19.2) (66.8)
Interest accrual 108 83 66 (39.1) (20.7)
Premium bonds expiration (4) (3) 1 - -
F inal balance 11,314 9 ,777 12,759 12.8 30.5
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 93
A C Q U I S I T I O N C O S T S
Figure 119 – Premium Bonds | Acquisition costs QUARTERLY ANALYSIS
In the 4Q16, acquisition costs dropped by 12.3% YoY, explained by the decline in premium bonds collection and the higher concentration of sales in unique payment bonds, which have a lower commission ratio when compared to the first installments of the monthly payment bonds.
YEAR-TO-DATE ANALYSIS
In 2016, acquisition costs dropped by 19.0%, due to the same reasons as explained in the quarterly analysis.
Table 89– Premium Bonds | Changes in Acquisition Costs
127
158
108
145
84111 113
127
48.4 47.2 47.3 46.944.2 43.2
51.148.0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Acquisition costs (R$ million) Commission ratio (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Brokerage 103,634 72,108 91,417 (11.8) 26.8 374,631 300,407 (19.8)
Sales cost 41,539 40,428 35,927 (13.5) (11.1) 162,877 134,793 (17.2)
A cquisit io n co sts 145,173 112,536 127,344 (12.3) 13.2 537,508 435,200 (19.0)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 94
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 120 – Premium Bonds | G&A expenses (R$ million) QUARTERLY ANALYSIS
In the 4Q16, G&A expenses dropped by 4.9% YoY, driven mainly by:
(i) the 10.5% decrease in tax expenses, mainly due to the contraction in the taxable income for PIS/PASEP and COFINS tax collection; and
(ii) the 1.3% decline in administrative expenses, due to lower expenses with outsourcing and donations, partially offset by higher personnel and marketing expenses.
YEAR-TO-DATE ANALYSIS
In 2016, G&A expenses decreased by 9.7%, explained by:
(i) the 6.7% decline in administrative expenses, due to lower expenses with location and operation, outsourcing and donations,
partially offset by higher expenses with personnel, as a result of the annual collective bargain and the adjustment of benefits;
(ii) the 13.8% drop in tax expenses, due to the contraction of the taxable income for PIS/PASEP and COFINS taxes calculation; and
(iii) the 46.6% growth in revenues with premium bonds prescription.
Table 90– Premium Bonds | General & Administrative expenses
2024 22
31
1621 23
31
11
1310
12
810 9
115
5
2
3
5
3 3
336
41
34
46
3034 35
44
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Administrative expenses Tax expenses Other operating income (expenses)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
A dministrat ive expenses (30,993) (22,511) (30,601) (1.3) 35.9 (96,992) (90,516) (6.7)
Personnel (10,748) (11,507) (11,857) 10.3 3.0 (39,964) (45,211) 13.1
Location and operation (3,924) (3,124) (2,937) (25.2) (6.0) (17,031) (11,795) (30.7)
Outsourcing (7,864) (3,678) (6,624) (15.8) 80.1 (17,964) (14,392) (19.9)
Institutional advertisement and publicity (287) (2,328) (3,231) 1,025.8 38.8 (5,072) (5,750) 13.4
Leasing (606) (824) (861) 42.1 4.5 (2,431) (3,583) 47.4
Other (7,564) (1,050) (5,091) (32.7) 384.9 (14,531) (9,786) (32.7)
Other o perat ing inco me (expenses) (3,223) (3,008) (2,584) (19.8) (14.1) (15,786) (13,238) (16.1)
Operating expenses (3,574) (3,757) (3,910) 9.4 4.1 (17,364) (17,008) (2.1)
Printing and mailing (451) (158) (141) (68.7) (10.8) (1,001) (717) (28.4)
Legal provisions (59) (58) 2 - - (62) (148) 138.7
Other operating income (expenses) (154) 20 397 - 1,884.8 (219) 443 -
Revenue with premium bonds prescription 1,015 945 1,068 5.2 13.0 2,860 4,192 46.6
T ax expenses (11,841) (9,486) (10,603) (10.5) 11.8 (45,192) (38,933) (13.8)
COFINS (9,729) (7,690) (8,642) (11.2) 12.4 (37,208) (31,560) (15.2)
PIS (1,581) (1,249) (1,405) (11.1) 12.5 (6,046) (5,129) (15.2)
Inspection fee (488) (488) (488) - - (1,705) (1,952) 14.5
Other tax expenses (43) (59) (68) 57.4 14.7 (233) (291) 24.9
G&A Expenses (46,057) (35,005) (43,788) (4.9) 25.1 (157,970) (142,687) (9.7)
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 95
N E T I N V E S T M E N T I N C O M E
Figure 121 – Premium Bonds | Net investment income (R$ million)
Figure 122 – Premium Bonds | Annualized average interest rates and spread
Table 91– Premium Bonds | Financial income and expenses
QUARTERLY ANALYSIS
In the 4Q16, the net interest income dropped by 12.7% YoY, driven by the 8.8% contraction in the average balance of interest earning
assets along with the 0.2 p.p. decline in the spread.
Interest revenues dropped by 11.5% YoY, explained by the contraction in the average balance of investments in addition to the 0.2 p.p.
decline in the average yield on interest earning assets. The contraction of the average yield was mainly due to the lower inflation index,
which directly impacted the return on securities pegged to inflation classified as held to maturity. Such movement was partially offset
by a higher average yield on marked-to-market financial investments, due to the downward movement of the forward yield curve in
addition to the better performance of the mutual funds where the financial resources of the products with stock market income bonus
are invested.
On the other hand, interest expenses dropped by 10.5% YoY, as a result of the 11.2% decline in the balance of technical provisions, in
line with the contraction in premium bonds collections.
YEAR-TO-DATE ANALYSIS
In 2016, the net interest income rose by 32.4%, driven mainly by the 1.5 p.p. increase in the spread.
Interest revenues grew by 13.0%, due to the 1.7 p.p. increase in the average rate on interest earning assets. Such improvement is
justified by the downward movement of the forward yield curve, which positively impacted the marked-to-market pre-fixed bonds,
along with the better performance of the mutual funds where the financial resources of the products with stock market income bonus
are invested as well as the increased average return on securities held to maturity.
Interest expenses grew by 0.1%, as a result of the 0.2 p.p. increase in the average yield on interests bearing liabilities, partially offset by
the volume contraction, due to the decline in premium bonds collections.
124 115
67
148
213
142161
129
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
6.2 6.7 6.9 6.9
6.9
6.8 6.8 6.9
5.4 5.1
3.2
5.9
8.3
5.9 6.4 5.7
11.6 11.710.1
12.8
15.2
12.7 13.212.6
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Yield on interest rate of bearing l iabilities (%)Spread (p.p.)Yield on interest earnings assets (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Interest revenues 410,928 409,201 363,715 (11.5) (11.1) 1,440,892 1,628,143 13.0
Revenues with mark to market financial
investments310,562 297,046 257,584 (17.1) (13.3) 1,138,457 1,233,229 8.3
Expenses with mark to market financial
investments(11,198) (2,889) (8,918) (20.4) 208.7 (50,008) (52,570) 5.1
Revenues with held to maturity financial
investments111,134 114,561 114,220 2.8 (0.3) 350,467 444,267 26.8
Interest accrual on judicial deposits 430 483 829 92.8 71.6 1,976 3,217 62.8
Interest expenses (231,716) (218,655) (207,307) (10.5) (5.2) (866,037) (866,940) 0.1
Interest accrual on technical reserves (229,924) (214,860) (203,538) (11.5) (5.3) (859,949) (853,601) (0.7)
Other (1,792) (3,795) (3,769) 110.3 (0.7) (6,088) (13,339) 119.1
N et interest inco me 179,212 190,546 156,408 (12.7) (17.9) 574,855 761,203 32.4
Quarterly F lo w C hg. % A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 96
Table 92 – 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 93 – Premium Bonds | Quarterly figures – Earning assets – average balance and interest rates
Table 94 – 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.
R $ tho usand A verage vo lume A verage rate N et change
Earning assets
M ark to market financial investments (68,612) 17,914 (50,698)
Held to maturity financial investments 22,346 (19,260) 3,086
Judicial deposits 102 297 399
T o tal¹ (35,073) (12,140) (47,213)
Interest bearing liabilit ies
Technical reserves - premium bonds 25,627 759 26,386
Other² (551) (1,426) (1,977)
T o tal¹ 21,593 2,816 24,409
4Q16/ 4Q15
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 9,533,908 299,364 13.2 7,472,180 248,666 14.2
Held to maturity financial investments 3,184,270 111,134 14.7 3,958,763 114,220 12.3
Judicial deposits 740,876 430 0.2 844,404 829 0.4
T o tal 13,459,053 410,928 12.8 12,275,347 363,715 12.6
4Q15 4Q16
R $ tho usandA verage
balance
Interest
expenses
A nnualized
rate (%)
A verage
balance
Interest
expenses
A nnualized
rate (%)
Interest bearing liabilit ies
Technical reserves - premium bonds 12,258,108 (229,924) 7.3 10,887,302 (203,538) 7.4
Other¹ 807,348 (1,792) 0.9 945,619 (3,769) 1.6
T o tal 13,065,456 (231,716) 6.9 11,832,920 (207,307) 6.9
4Q15 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 97
Table 95 – 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 96 – Premium Bonds | Year-to-date figures – Earning assets average – balance and interest rates
Table 97 – 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.
R $ tho usand A verage vo lume A verage rate N et change
Earning assets
M ark to market financial investments (104,977) 197,187 92,210
Held to maturity financial investments 32,185 61,615 93,800
Judicial deposits 351 890 1,241
T o tal¹ (46,497) 233,748 187,251
Interest bearing liabilit ies
Technical reserves - premium bonds 36,527 (30,179) 6,348
Other² (1,581) (5,670) (7,251)
T o tal¹ 27,517 (28,420) (903)
2016/ 2015
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 8,978,472 1,088,449 12.2 8,245,345 1,180,659 14.4
Held to maturity financial investments 3,605,693 350,467 9.8 3,887,313 444,267 11.5
Judicial deposits 679,271 1,976 0.3 762,510 3,217 0.4
T o tal 13,263,435 1,440,892 11.0 12,895,167 1,628,143 12.7
2015 2016
R $ tho usandA verage
balance
Interest
expenses
A nnualized
rate (%)
A verage
balance
Interest
expenses
A nnualized
rate (%)
Interest bearing liabilit ies
Technical reserves - premium bonds 12,053,189 (859,949) 7.2 11,558,584 (853,601) 7.4
Other¹ 749,087 (6,088) 0.8 849,845 (13,339) 1.6
T o tal 12,802,276 (866,037) 6.8 12,408,429 (866,940) 7.0
2015 2016
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 98
Table 98 – Premium Bonds | Mark to market and derivatives effect
Table 99 – Premium Bonds | Financial investments portfolio breakdown
Figure 123 – Premium Bonds | Asset allocation (%) Figure 124 – Premium Bonds | Financial investments breakdown by index (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
M ark to market 11,228 21,214 18,010 60.4 (15.1) (99,398) 184,679 -
Derivatives 7,191 (484) 398 (94.5) - 64,572 (79,996) -
N et result 18,418 20,729 18,407 (0.1) (11.2) (34,827) 104,682 -
Quarterly F lo w C hg. % A nnual F lo w
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
M ark to market securit ies 9,139,843 7,593,514 7,350,846 (19.6) (3.2)
Pre-fixed 5,747,410 4,213,695 4,276,045 (25.6) 1.5
Floating 3,120,721 3,078,288 1,243,013 (60.2) (59.6)
Inflation 204,031 222,973 1,753,947 759.6 686.6
Equity funds 67,086 77,160 76,164 13.5 (1.3)
Other 596 1,398 1,677 181.3 19.9
H eld to maturity securit ies 3,767,412 3,910,312 4,007,213 6.4 2.5
Pre-fixed 2,728,170 2,926,031 3,022,675 10.8 3.3
Inflation 1,039,242 984,281 984,539 (5.3) 0.0
T o tal 12,907,255 11,503,826 11,358,060 (12.0) (1.3)
B alance C hg. %
15.7 14.5 15.1 15.7 17.2 14.7 13.5 14.0
5.5 4.7 4.7 4.4 4.5 4.2 4.1 5.2
75.0 75.0 75.4 75.5 73.1 73.1 72.975.3
3.2 5.2 4.3 3.9 4.6 7.4 8.9 4.9
0.7 0.7 0.6 0.5 0.6 0.6 0.7 0.7
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Time deposits and other Debentures and commercial papers
Government bonds Repo + cash
Equity funds
2.9 2.3 2.2 2.2 2.3 2.7 2.9 23.9
59.4 61.0 65.6 62.9 60.7 57.6 55.5
58.2
36.7 35.8 31.4 34.1 36.1 38.9 40.5
16.9
0.9 0.9 0.8 0.7 0.8 0.9 1.0 1.0
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Inflation Pre-fixed Floating Equity funds
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 99
B A L A N C E S H E E T A N A L Y S I S
Table 100 – Premium Bonds | Balance sheet
S O L V E N C Y
Table 101– Premium Bonds | Solvency¹
¹Information based on the accounting principles adopted by SUSEP.
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A ssets 13,818,201 12,619,196 12,308,691 (10.9) (2.5)
Cash and cash equivalents 817 262 89 (89.1) (66.1)
Financial assets 12,907,255 11,503,826 11,358,060 (12.0) (1.3)
Securities and credits receivable 897,342 1,098,483 935,255 4.2 (14.9)
Prepaid expenses 1,388 5,512 1,495 7.7 (72.9)
Investments 1,228 1,212 1,207 (1.7) (0.4)
Fixed assets 2,885 2,693 2,765 (4.2) 2.7
Intangible 3,728 3,381 3,276 (12.1) (3.1)
Other assets 3,558 3,827 6,544 83.9 71.0
Liabilit ies 13,376,436 12,237,951 11,857,599 (11.4) (3.1)
Accounts payable 181,231 192,212 229,201 26.5 19.2
Premium bonds operations debits 10,844 10,055 14,213 31.1 41.4
Technical reserves - premium bonds 12,354,369 11,011,804 10,762,799 (12.9) (2.3)
Other liabilities 829,992 1,023,880 851,386 2.6 (16.8)
Shareho lders' equity 441,765 381,245 451,092 2.1 18.3
C hg. %B alance
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A djusted shareho lders' equity (a) 436,643 372,346 515,705 18.1 38.5
M inimum capital required (b) 264,643 286,238 308,499 16.6 7.8
Additional capital for underwritting risk 44,367 111,602 98,322 121.6 (11.9)
Additional capital for credit risk 219,630 193,694 199,259 (9.3) 2.9
Additional capital for operating risk 19,796 18,677 17,845 (9.9) (4.5)
Additional capital for market risk - - 70,695 - -
Benefit o f correlation between risks (19,150) (37,735) (77,623) 305.3 105.7
C apital adequacy (a) - (b) 172,000 86,108 207,205 20.5 140.6
So lvency rat io (a) / (b) - % 165.0 130.1 167.2 2.2 p.p. 37.1 p.p.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 100
4 . 5 R E I N S U R A N C E
E A R N I N G S A N A L Y S I S
Table 102 – Reinsurance | Income statement
Table 103 – Reinsurance | Managerial performance ratios
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P remiums writ ten 1,061,516 1,041,343 964,796 (9.1) (7.4) 3,723,512 4,188,263 12.5
Changes in technical reserves - premiums 43,584 (73,476) 145,650 234.2 - 20,158 (26,089) -
Earned premiuns 1,105,100 967,867 1,110,447 0.5 14.7 3,743,670 4,162,174 11.2
Claims incurred (771,922) (841,440) (416,742) (46.0) (50.5) (2,285,680) (2,589,635) 13.3
Acquisition costs (12,361) (23,270) (22,691) 83.6 (2.5) (95,430) (103,521) 8.5
Other operating income (expenses) 88,625 (23,632) 32,827 (63.0) - 8,546 20,829 143.7
Administratives expenses (85,591) (49,263) (79,052) (7.6) 60.5 (238,786) (239,906) 0.5
Tax expenses (33,331) (27,628) (21,078) (36.8) (23.7) (92,756) (122,484) 32.0
Result with reinsurance (231,452) (92,903) (294,040) 27.0 216.5 (835,670) (752,135) (10.0)
N et investment inco me 211,373 196,172 187,076 (11.5) (4.6) 845,266 805,023 (4.8)
Financial income 246,331 198,526 153,305 (37.8) (22.8) 1,994,292 1,166,123 (41.5)
Financial expenses (34,958) (2,354) 33,771 - - (1,149,026) (361,100) (68.6)
Equity income 10,483 18,765 31,721 202.6 69.0 4,488 70,816 1,477.9
Operat ing result 280,923 124,668 528,469 88.1 323.9 1,053,648 1,251,161 18.7
Gains or losses on non-current assets (4) (8) (4) (14.2) (53.8) 21 0 (98.6)
Earnings befo re taxes and pro f it
sharing280,919 124,660 528,465 88.1 323.9 1,053,669 1,251,161 18.7
Taxes (76,876) (52,226) (161,026) 109.5 208.3 (273,466) (398,204) 45.6
Profit sharing (3,196) (5,975) 1,024 - - (23,000) (16,900) (26.5)
N et inco me 200,847 66,459 368,464 83.5 454.4 757,203 836,057 10.4
Quarterly F lo w C hg. % A nnual F lo w
C hg. (p.p.)
% 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
P erfo rmance rat io s
Loss ratio 69.9 86.9 37.5 (32.3) (49.4) 61.1 62.2 1.2
Commission ratio 1.1 2.4 2.0 0.9 (0.4) 2.5 2.5 (0.1)
Underwriting margin 8.1 1.1 33.9 25.9 32.9 14.1 17.2 3.1
G&A ratio 2.7 10.4 6.1 3.3 (4.3) 8.6 8.2 (0.4)
Combined ratio 94.7 109.3 72.1 (22.5) (37.2) 94.6 91.0 (3.6)
Expanded combined ratio 79.5 90.9 61.7 (17.7) (29.2) 77.1 76.2 (0.9)
Net margin 18.2 6.9 33.2 15.0 26.3 20.2 20.1 (0.1)
ROAE 25.3 8.6 45.7 20.4 37.1 24.4 25.5 1.1
Quarterly F lo w C hg. (p.p.) A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 101
B A L A N C E S H E E T A N A L Y S I S
Table 104 – Reinsurance | Balance sheet
S O L V E N C Y
Table 105 – Reinsurance | Solvency
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A ssets 14,501,793 14,070,456 13,621,374 (6.1) (3.2)
Cash and cash equivalents 13,952 197,569 213,543 1,430.6 8.1
Financial assets 6,247,276 6,061,323 5,771,097 (7.6) (4.8)
Receivables from insurance and reinsurance operations 2,129,814 2,349,349 2,429,070 14.1 3.4
Reinsurance and retrocession - technical reserves 4,212,755 3,617,544 3,562,950 (15.4) (1.5)
Securities and credits receivable 1,622,708 1,544,519 1,301,920 (19.8) (15.7)
Prepaid expenses 1,247 4,780 3,330 167.0 (30.3)
Investments 126,040 161,759 196,044 55.5 21.2
Fixed assets 35,905 38,372 46,720 30.1 21.8
Intangible 112,096 95,241 96,700 (13.7) 1.5
Liabilit ies 11,274,946 10,946,604 10,295,118 (8.7) (6.0)
Accounts payable 727,341 768,663 624,393 (14.2) (18.8)
Obligations with insurance and reinsurance operations 977,916 984,605 1,270,554 29.9 29.0
Technical reserves - reinsurance 9,093,387 8,750,380 7,949,961 (12.6) (9.1)
Third party deposits 2,917 4,131 - - -
Other liabilities 473,385 438,826 450,210 (4.9) 2.6
Shareho lders' equity 3,226,847 3,123,851 3,326,256 3.1 6.5
B alance C hg. %
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A djusted shareho lders' equity (a) 3,034,998 2,770,049 2,706,975 (10.8) (2.3)
M inimum capital required (b) 1,028,097 928,519 842,506 (18.1) (9.3)
Additional capital for underwritting risk 620,443 572,108 491,219 (20.8) (14.1)
Additional capital for credit risk 522,245 456,462 429,736 (17.7) (5.9)
Additional capital for operating risk 37,282 35,877 32,595 (12.6) (9.1)
Additional capital for market risk - - 37,905 - -
Benefit o f correlation between risks (151,873) (135,927) (148,950) (1.9) 9.6
C apital adequacy (a) - (b) 2,006,901 1,841,530 1,864,470 (7.1) 1.2
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 102
4 . 6 D E N T A L I N S U R A N C E
E A R N I N G S A N A L Y S I S
Table 106 – Dental Insurance | Income statement
B A L A N C E S H E E T A N A L Y S I S
Table 107 – Dental Insurance | Balance sheet
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
Operat ing revenues 4,700 4,858 7,267 54.6 49.6 11,967 21,941 83.3
Health assistance plans revenues 4,700 4,858 7,267 54.6 49.6 11,967 21,941 83.3
Administratives expenses (4,572) (3,939) (4,703) 2.9 19.4 (12,499) (15,413) 23.3
Tax expenses (255) (341) (530) 107.7 55.2 (904) (1,547) 71.1
Other revenues (expenses) - (274) 274 - - - - -
Operat ing result (127) 304 2,308 - 659.7 (1,436) 4,981 -
N et investment inco me 154 380 371 141.5 (2.1) 427 1,137 166.4
Financial revenues 201 437 443 120.1 1.5 567 1,392 145.4
Financial expenses (47) (57) (72) 54.0 25.5 (140) (255) 82.8
Earnings befo re taxes and pro f it
sharing27 684 2,680 9,738.0 291.8 (1,009) 6,118 -
Taxes - 112 (1,411) - - 742 (2,291) -
N et inco me 27 796 1,269 4,557.7 59.4 (267) 3,827 -
Quarterly F lo w C hg. % A nnual F lo w
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A ssets 9,699 17,370 21,165 118.2 21.9
Cash and cash equivalents 139 135 781 461.9 479.9
Financial assets 5,896 11,829 13,507 129.1 14.2
Receivables from insurance and reinsurance operations 601 2,112 3,058 408.8 44.8
Tax assets 1,974 2,088 1,409 (28.6) (32.5)
Other assets 1,089 1,206 2,410 121.3 99.8
Liabilit ies 7,654 8,267 10,794 41.0 30.6
Technical reserves 4,322 4,370 5,850 35.4 33.9
Tax liabilities 388 266 375 (3.4) 40.9
Other liabilities 2,944 3,631 4,569 55.2 25.8
Shareho lders' equity 2,045 9,103 10,371 407.1 13.9
B alance C hg. %
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 103
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 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.
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 104
5 . 1 B B C O R R E T O R A
E A R N I N G S A N A L Y S I S
Table 108 – Brokerage | Income statement
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
B ro kerage revenues 657,517 672,219 732,394 11.4 9.0 2,559,078 2,764,298 8.0
Administrative expenses (52,073) (47,336) (49,804) (4.4) 5.2 (232,314) (196,921) (15.2)
Personnel expenses 202 (4,913) (5,726) - 16.5 (1,976) (12,398) 527.3
Other operating income (expenses) (3,267) (3,594) (7,969) 143.9 121.7 (7,531) (18,971) 151.9
Tax expenses (49,133) (80,318) (88,517) 80.2 10.2 (189,513) (311,621) 64.4
Operat ing result 553,245 536,058 580,378 4.9 8.3 2,127,744 2,224,387 4.5
N et investment inco me 48,527 43,168 70,501 45.3 63.3 147,412 199,064 35.0
Financial income 48,536 54,481 70,547 45.4 29.5 174,801 225,471 29.0
Financial expenses (9) (11,313) (46) 430.9 (99.6) (27,388) (26,407) (3.6)
Earnings befo re taxes 601,772 579,226 650,879 8.2 12.4 2,275,156 2,423,451 6.5
Taxes (202,777) (195,253) (215,870) 6.5 10.6 (766,962) (813,513) 6.1
N et inco me 398,996 383,973 435,009 9.0 13.3 1,508,194 1,609,938 6.7
C hg. % Quarterly F lo w A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 105
A D J U S T E D N E T I N C O M E
Figure 125 – BB Corretora | Adjusted net income QUARTERLY ANALYSIS
BB Corretora reported a net income of R$435.0 million in the 4Q16, 9.0% higher YoY, explained by:
(i) the 11.4% growth in brokerage revenues, partially offset by the 4.9 p.p. decrease in the EBIT margin, mainly due to higher PIS/PASEP and COFINS tax rates in force since March 2016; and
(ii) the 45.3% growth in the net investment income, as a result of both the increase in the average balance of financial investments and the higher average yield.
BB Corretora’s net margin declined 1.3 p.p. YoY, reaching 59.4%.
YEAR-TO-DATE ANALYSIS
In 2016, the net income amounted to R$1.6 billion, 6.7% up YoY, explained by:
(i) the 8.0% growth in brokerage revenues, partially offset by the decline in the EBIT margin, explained by the rise in the PIS/PASEP
and COFINS tax rates since March 2016; and
(ii) the 35.0% growth in the net investment income, as a result of both the higher average rate and the increased balance of
financial investments.
BB Corretora’s net margin dropped 0.7 p.p. as compared to 2015 to 58.2%.
Table 109 – BB Corretora | Managerial performance ratios
354389 366
399371
420384
435
83.5 81.383.7 84.1 83.1
80.1 79.7 79.2
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted net income (R$ million) Operating margin (%)
C hg.
(p.p.)
% 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
G&A expenses 15.9 20.3 20.8 4.9 0.5 16.9 19.5 2.7
Tax expenses 7.5 11.9 12.1 4.6 0.1 7.4 11.3 3.9
Operating margin 84.1 79.7 79.2 (4.9) (0.5) 83.1 80.5 (2.7)
Income tax rate 33.7 33.7 33.2 (0.5) (0.5) 33.7 33.6 (0.1)
Net margin 60.7 57.1 59.4 (1.3) 2.3 58.9 58.2 (0.7)
Quarterly F lo w C hg. (p.p.) A nnual F lo w
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 106
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$732.4 million in the 4Q16, 11.4% up YoY, explained by:
(i) the 54.2% growth in brokerage revenues coming from Brasilprev, due to higher pension plans contributions; and
(ii) the 10.1% increase in brokerage revenues arising from BB MAPFRE SH1, driven mostly by increased term life insurance sales, in addition to the accrual of unearned commissions.
The growth in commissions from these two businesses was partially offset by:
(i) the 14.1% drop in brokerage revenues arising from Brasilcap, due to lower premium bonds collection, along with an increased
share of unique payment bonds and recurring payments from monthly payment bonds, which have lower commission rates
when compared to the first installments of monthly payment bonds; and
(ii) the 10.3% decline in brokerage revenues arising from MAPFRE BB SH2, as a consequence of the decrease in auto and casualties
insurance sales.
YEAR-TO-DATE ANALYSIS
In 2016, brokerage revenues grew by 8.0% YoY, explained by:
(i) the 12.7% increase in brokerage revenues arising from BB MAPFRE SH1, driven mostly by increased sales of term life and rural
insurance, in addition to the accrual of unearned commissions; and
(ii) the 27.7% 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 21.8% contraction in the brokerage revenues arising from Brasilcap, due to lower premium bonds collection along with an
increased share of unique payment bonds and recurring payments from monthly payment bonds; and
(ii) the 6.2% drop in brokerage revenues arising from MAPFRE BB SH2, as a consequence of the decrease in auto insurance sales.
Table 110 – BB Corretora | Brokerage revenues breakdown
Figure 127 – BB Corretora | Brokerage revenues breakdown (%)
Figure 128 – BB Corretora | Unearned commissions breakdown (%)
610673
619658 632
728672
732
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
BB M APFRE SH1 360,455 404,675 396,880 10.1 (1.9) 1,416,987 1,596,729 12.7
M APFRE BB SH2 80,415 76,690 72,125 (10.3) (6.0) 325,281 304,971 (6.2)
Brasilprev 114,227 124,119 176,151 54.2 41.9 451,464 576,616 27.7
Brasilcap 99,153 65,437 85,189 (14.1) 30.2 357,296 279,502 (21.8)
Other 3,266 1,297 2,049 (37.3) 58.0 8,050 6,480 (19.5)
T o tal 657,516 672,219 732,394 11.4 9.0 2,559,078 2,764,298 8.0
Quarterly F lo w C hg. % A nnual F lo w
54.6 52.459.9 54.8
60.7 56.5 60.254.2
13.5 12.2
13.012.2
12.510.6
11.49.8
17.8 19.915.3
17.417.7
22.6 18.524.1
13.9 15.3 11.4 15.18.9 10.0 9.7 11.6
0.2 0.2 0.3 0.5 0.2 0.3 0.2 0.3
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
MAPFRE BB SH1 MAPFRE BB SH2 Brasilprev Brasilcap Other
82.9 84.9 82.8 83.6 83.3 83.3 83.2 83.4
5.5 5.25.3 4.9 4.9 5.0 4.9 5.1
7.9 7.4 7.7 7.2 7.5 7.3 7.3 7.2
2.9 2.2 2.0 2.0 2.2 1.8 2.0 2.1
0.8 0.4 2.2 2.2 2.1 2.6 2.6 2.3
Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16
Life P&C Auto Custom Rural
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 107
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 4Q16, the G&A ratio rose 4.9 p.p. YoY, driven by the increase in tax expenses, as a consequence of the Brazilian Internal Revenue Service Rule Nr. 1,628, dated as of March 17
th, 2016, which
changed the PIS/PASEP and the COFINS tax regime for the insurance brokers.
Due to this change, insurance brokers, previously framed in the cumulative system, turned to the non-cumulative regime and, as a consequence, the PIS/PASEP and the COFINS tax rates on gross brokerage revenues increased from 4.65% to 9.25%. It is worth noting that the tax rate on financial revenues remained at 4.65%.
Under the same analysis, the growth observed in tax expenses was partially offset by the contraction of 4.4% in administrative
expenses, due to lower expenses with operational support and administrative cost of products.
YEAR-TO-DATE ANALYSIS
In 2016, the G&A ratio rose by 2.7 p.p. to 19.5%, explained mainly by the growth in tax expenses, as a consequence of the increased
PIS/PASEP and COFINS tax rates, as of March 2016. Such growth observed in tax expenses was partially offset by the contraction of
15.2% in administrative expenses, due to lower expenses with administrative cost of products and operational support.
Table 111 – BB Corretora | General & Administrative expenses
Table 112 – BB Corretora | Banco do Brasil distribution network
Source: Banco Central do Brasil
100126
101 104 107
145 136152
16.518.7
16.3 15.9 16.919.9 20.3 20.8
9.111.3
8.9 8.4 8.0 8.0 8.3 8.7
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
G&A Expenses (R$ million) G&A ratio (%) G&A ratio ex-taxes (%)
C hg. %
R $ tho usand 4Q15 3Q16 4Q16 On 4Q15 On 3Q16 2015 2016 On 2015
A dministrat ive expenses (52,073) (47,336) (49,804) (4.4) 5.2 (232,314) (196,921) (15.2)
Administrative cost of products (17,209) (13,971) (15,709) (8.7) 12.4 (87,963) (61,551) (30.0)
Operational support (26,613) (23,037) (22,353) (16.0) (3.0) (108,711) (94,779) (12.8)
Information technology (8,233) (8,760) (8,088) (1.8) (7.7) (35,150) (35,162) 0.0
Other (18) (1,567) (3,654) 20,252.0 133.2 (490) (5,429) 1,008.9
T ax expenses (49,133) (80,318) (88,517) 80.2 10.2 (189,513) (311,621) 64.4
PIS/PASEP (4,591) (11,445) (12,543) 173.2 9.6 (17,768) (42,891) 141.4
COFINS (28,250) (53,266) (58,482) 107.0 9.8 (109,343) (204,035) 86.6
ISS (16,276) (15,607) (17,491) 7.5 12.1 (62,385) (64,692) 3.7
IOF (17) - - - - (18) (2) (91.0)
P erso nnel expenses 202 (4,913) (5,726) - 16.5 (1,976) (12,398) 527.3
Other o perat ing inco me (expenses) (3,267) (3,594) (7,969) 143.9 121.7 (7,530) (18,971) 151.9
G&A Expenses (104,271) (136,161) (152,016) 45.8 11.6 (431,334) (539,910) 25.2
Quarterly F lo w C hg. % A nnual F lo w
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 rk5,429 23.7 5,430 23.1 5,440 23.2
Northeast 1,134 31.3 1,137 30.5 1,139 30.6
North 320 27.9 320 27.0 320 27.0
M idwest 482 26.3 484 26.0 486 26.1
South 1,064 24.7 1,057 23.9 1,060 24.1
Southeast 2,429 20.3 2,432 19.7 2,435 19.9
D ec/ 16D ec/ 15 Sep/ 16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 108
N E T I N V E S T M E N T I N C O M E
Figure 130 – BB Corretora | Net investment income (R$ million) QUARTERLY ANALYSIS
In the 4Q16, the net investment income grew by 45.3% YoY, driven by:
(i) the 15.6% increase in the average balance of earning assets; and
(ii) the higher average yield on interest earning assets, due to the accrual of the Selic rate on recoverable taxes, which amounted to R$14.2 million. The balance of recoverable taxes arises from taxes withheld by companies for which BB Corretora provided brokerage services, and was used to offset taxes payable in the 4Q16.
YEAR-TO-DATE ANALYSIS
In 2016, the financial income rose by 35.0%, as a result of:
(i) the 15.2% increase in the average balance of earning assets; and
(ii) the higher average yield on earnings assets, due to a higher average Selic rate as well as the interest accrual on recoverable
taxes, as explained before.
Table 113 – BB Corretora | Quarterly figures – Earning assets average balance and interest rates
Table 114 – BB Corretora | Quarterly figures – Interest bearing liabilities average balance and interest rates
25
4034
49
35
50
43
71
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
R $ tho usandA verage
balanceR evenues
A nnualized
rate (%)
A verage
balanceR evenues
A nnualized
rate (%)
Earning assets
Cash and financial instruments 1,409,134 45,188 13.5 1,663,776 52,918 13.6
Other assets 155,208 3,348 8.9 174,566 3,472 8.3
Current tax assets 67,430 - - 47,971 14,156 186.1
T o tal 1,631,771 48,536 12.4 1,886,312 70,547 16.1
4Q15 4Q16
R $ tho usandA verage
balanceExpenses
A nnualized
rate (%)
A verage
balanceExpenses
A nnualized
rate (%)
Interest bearing liabilit ies
Dividends payable 382,533 - - 409,491 - -
Other liabilities 391 (9) 8.5 414 (46) 7.8
T o tal 382,924 (9) 0 .0 409,905 (46) 0 .0
4Q15 4Q16
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 109
Table 115 – BB Corretora | Year-to-date – Earning assets average balance and interest rates
Table 116 – BB Corretora | | Year-to-date figures – Interest bearing liabilities average balance and interest rates
R $ tho usandA verage
balanceR evenues
A nnualized
rate (%)
A verage
balanceR evenues
A nnualized
rate (%)
Earning assets
Cash and financial instruments 1,544,385 162,036 10.6 1,809,970 197,359 10.9
Other assets 150,597 12,582 8.4 168,257 13,956 8.3
Current tax assets 63,810 183 0.3 47,970 14,156 29.6
T o tal 1,758,793 174,801 10.0 2,026,198 225,471 11.2
2015 2016
R $ tho usandA verage
balanceExpenses
A nnualized
rate (%)
A verage
balanceExpenses
A nnualized
rate (%)
Interest bearing liabilit ies
Dividends payable 727,876 (27,345) 3.8 792,024 (25,897) 3.3
Other liabilities 407 (23) 10.8 403 (79) 8.0
T o tal 728,284 (27,368) 3 .8 792,426 (25,976) 3 .3
2015 2016
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 110
B A L A N C E S H E E T A N A L Y S I S
Table 117 – Brokerage | Balance sheet
R $ tho usand D ec/ 15 Sep/ 16 D ec/ 16 On D ec/ 15 On Sep/ 16
A ssets 2,768,782 2,691,198 3,117,826 12.6 15.9
Cash and cash equivalents 1,020,762 674,226 1,156,051 13.3 71.5
Securities 633,970 688,117 809,161 27.6 17.6
Current tax assets 112,319 367,833 148,962 32.6 (59.5)
Commission receivable 843,796 790,423 824,624 (2.3) 4.3
Other assets 157,935 170,598 179,028 13.4 4.9
Liabilit ies 2,733,798 2,272,249 3,055,858 11.8 34.5
Dividends payable 765,065 - 818,982 7.0 -
Provision 9,360 12,691 12,475 33.3 (1.7)
Current tax liabilities 221,503 625,250 554,037 150.1 (11.4)
Unearned commissions 1,717,550 1,614,327 1,650,408 (3.9) 2.2
Other liabilities 20,320 19,981 19,956 (1.8) (0.1)
Shareho lders' equity 34,984 418,949 61,968 77.1 (85.2)
C hg. % B alance
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 111
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);
BB Seguridade Participações S.A. | Management Discussion & Analysis 4Q16 112
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.