IRB-Brasil Resseguros S.A. · IRB-Brasil Resseguros S.A. 3 Why it is a Key Audit Matter How the matter was addressed in the audit Measurement and recognition of technical

(A free translation of the original in Portuguese)

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IRB-Brasil Resseguros S.A. Parent company and consolidated financial statements at December 31, 2018 and independent auditor's report

Parent Company and Consolidated Financial Statements

December 31, 2018

www.irbre.com

(A free translation of the original in Portuguese)

PricewaterhouseCoopers, Rua do Russel 804, Edifício Manchete, 6º e 7º, Rio de Janeiro, RJ, Brasil, 22210-010, T: +55 (21) 3232 6112, www.pwc.com.br

Independent auditor's report on the parent company and consolidated financial statements

To the Board of Directors and Shareholders IRB-Brasil Resseguros S.A.

Opinion

We have audited the accompanying parent company financial statements of IRB-Brasil Resseguros S.A. (the "Company"), which comprise the balance sheet as at December 31, 2018 and the statements of income, comprehensive income, changes in equity and cash flows for the year then ended, as well as the accompanying consolidated financial statements of IRB-Brasil Resseguros S.A. and its subsidiaries ("Consolidated"), which comprise the consolidated balance sheet as at December 31, 2018 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IRB-Brasil Resseguros S.A. and of IRB-Brasil Resseguros S.A. and its subsidiaries as at December 31, 2018, and the financial performance and the cash flows for the year then ended, as well as the consolidated financial performance and the cash flows for the year then ended, in accordance with accounting practices adopted in Brazil, including those applicable to entities supervised by the Superintendence of Private Insurance (SUSEP) and with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis for opinion

We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Parent Company and Consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the ethical requirements established in the Code of Professional Ethics and Professional Standards issued by the Brazilian Federal Accounting Council, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Key Audit Matters

Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the parent company and consolidated financial statements taken as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters.

Our audit for the year ended December 31, 2018 was planned and executed considering that the operations of the Company and its subsidiaries did not present significant changes in relation to the previous year. The Key Audit Matters have, accordingly, remained substantially the same as those of the previous financial year.

Matters

Why it is a Key Audit Matter

How the matter was addressed

IRB-Brasil Resseguros S.A.

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Why it is a Key Audit Matter How the matter was addressed in the audit

Measurement and recognition of technical provisions for reinsurance contracts (Notes 8, 19 and 27.9)

At December 31, 2018, the Company and its subsidiaries have obligations arising from reinsurance contracts recorded under "Technical Provisions - Reinsurance and Retrocessions" ("Technical Provisions"), totaling R$ 8,823,037 thousand in the consolidated financial statements. The net amount of retrocession assets being equivalent to R$ 5,727,202 thousand. The determination of reinsurance contract technical provisions involves management's judgment in preparing methodologies for these provisions, based on assumptions and supporting information, and relying on the Company's experienced actuarial professionals.

Management performs a Liability Adequacy Test ("LAT") to capture possible shortfalls in the liabilities from reinsurance agreements. The LAT involves the determination of the present value of estimated gross retrocession future cash flows, discounted at the rate obtained through the Svensson model for the fixed IPCA coupon curves and the exchange coupon. A LAT also considered assumptions over claims calculated as described in Note 27.9.

This was an area of focus in our audit since the use of different assumptions and methodologies for the measurement and recognition of these technical provisions may result in material differences on the measurement of these provisions and on the Company's results.

Our audit procedures included, among others, an understanding and the testing of the effectiveness of the relevant internal controls over the recognition, evaluation and approval process of the Company and its subsidiaries' reinsurance technical provisions. We also considered the approval controls over those preparing the actuarial technical support notes and determined whether they had the appropriate qualification and experience.

In addition, we tested the main financial and actuarial assumptions used by management in determining provisions and compared them with the assumptions used by the market and / or based on the Company's historical background. We re-performed the calculation, on a test basis, of the amounts of the technical reserves at December 31, 2018. Additionally, we tested the completeness and integrity of the databases for the issuance of policies and losses or retrocession agreements, as the case may be, through computer-based audit techniques.

We consider that the assumptions used in establishing technical provisions are reasonable, the result of the calculation of provisions reflects the assumptions used and the disclosures made are consistent with the information obtained.

Reinsurance premiums (Notes 25.1 e 27.14)

For the year ended December 31, 2018, the consolidated financial statements presented reinsurance premiums totaling R$ 6,961,340 thousand. The measurement of reinsurance premiums is a complex process due to the various variables that are used in their calculation, among which: (i) the analysis and acceptance of risk in the underwriting process; (ii) the processing and accounting of the premium according to the types of agreements - optional or automatic - and; (iii) the criteria for the distribution of the premiums -

Our audit procedures included, among others:

. Understanding and testing the effectiveness of the relevant internal controls over the underwriting process, the recognition of reinsurance premiums issued and the information technology systems that support these processes and controls.

. Use of computer auditing techniques to confirm the integrity of the operational data of


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Why it is a Key Audit Matter How the matter was addressed in the audit

proportional and non-proportional. Several aspects must be determined to calculate the estimates and record the reinsurance premiums at the correct amounts and in the correct periods.

We consider the recognition of reinsurance premiums process to be a significant area of audit focus due to the amounts involved, the numerous peculiarities involved in the risk acceptance process and complexities in accounting recognition.

premiums issued, for later comparison with the amounts recorded in the accounting system.

. On a sample basis, tests of reinsurance operations transactions focusing on the confirmations of the contractual variables, inspection of supporting documentation (contracts and policies). In addition, an analysis of the consistency of policies applied in the recognition of effective and estimated premiums, from the contracts and policies.

. Tests of subsequent settlement of premiums issued and inspection of documents to ensure receipt of the amounts recorded in the respective accounts.

As a result of the application of these procedures, we consider that the variables used in the recognition of reinsurance premiums are consistent with the accounting policies of the Company and its subsidiaries.

Other matters

Statements of Value Added

The parent company and consolidated Statements of Value Added for the year ended December 31, 2018, prepared under the responsibility of the Company's management and presented as supplementary information for IFRS and SUSEP purposes, were submitted to audit procedures performed in conjunction with the audit of the Company's financial statements. For the purposes of forming our opinion, we evaluated whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in Technical Pronouncement CPC 09 - "Statement of Value Added". In our opinion, these Statements of Value Added have been properly prepared in all material respects, in accordance with the criteria established in the Technical Pronouncement, and are consistent with the parent company and consolidated financial statements taken as a whole.

Other information accompanying the parent company and consolidated financial statements and the auditor's report

The Company's management is responsible for the other information that comprises the Management Report.

Our opinion on the parent company and consolidated financial statements does not cover the Management Report, and we do not express any form of audit conclusion thereon.

In connection with the audit of the parent company and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent with the financial statements or our knowledge obtained in the audit or


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otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in the Management Report, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the parent company and consolidated financial statements

Management is responsible for the preparation and fair presentation of the parent company and consolidated financial statements in accordance with accounting practices adopted in Brazil, including those applicable to entities supervised by SUSEP, and with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company and consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the financial reporting process of the Company and its subsidiaries.

Auditor's responsibilities for the audit of the parent company and consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the parent company and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the parent company and consolidatedfinancial statements, whether due to fraud or error, design and perform audit proceduresresponsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the internal control of the Company and its subsidiaries.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related to eventsor conditions that may cast significant doubt on the ability of the Company to continue as a going


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concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the parent company and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the parent company and consolidatedfinancial statements, including the disclosures, and whether these financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the Key Audit Matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Rio de Janeiro, February 7, 2019

PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5

Patricio Marques Roche Contador CRC 1RJ081115/O-4

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Management Report 2018

Management Report - Fiscal Year 2018

Dear Shareholders,

We submit for your review the Management Report, IRB Brasil RE's Financial Statements, and the Independent

Auditor's Report of the Financial Statements for the fiscal year ended December 31, 2018.

The consolidated financial statements were prepared in accordance with the accounting principles adopted in Brazil

issued by the Brazilian Accounting Standards Board (CPC), and the standards set by the Brazilian Corporate Law (Law

No. 6,404/76), the Brazilian Private Insurance Authority (SUSEP), the Brazilian Private Insurance Board (CNSP), and

the International Financial Reporting Standards (IFRS).

The information contained herein is available on IRB Brasil RE's Investor Relations website

(http://ri.irbre.com/ptb/central-de-resultados), and on the Brazilian Securities and Exchange Commission's (CVM)

website (www.cvm.gov.br).

MESSAGE FROM THE MANAGEMENT

Highlights

2018 was marked with an increase of 20.4% in our overall written premium, which totaled R$6.96 billion; this result

was in line with our guidance reported for the year, which projected growth of 17% to 21% in written premium

compared to 2017.

We maintained our growth strategy, focusing on efficiency and profitability. Our underwriting result increased

43.2% by the end of the year; our administrative efficiency improved, we closed the year with an administrative

expense-to-earned premium ratio of 4.8%, and we maintained our financial asset management efficiency.

Consequently, our net income rose 31.8% year-over-year in 2018, to R$1.22 billion, with return on average equity

(ROAE) of 32.1%. We shall pay dividends and interest on capital for the amount of R$893.4 million, or 75% of our

reported adjusted net income for 2018. The proposed amounts will be submitted for approval by the Annual

Shareholders' Meeting to be held in March 2019.

We have been a publicly-held company for over a year now—our IPO was held on July 31, 2017—and our shares

gained the most value in 2018 among the companies in the IBrX 100 index of the 100 most actively traded and best

representative stocks of the Brazilian stock market, where our stock was listed in May 2018. Early last year, IRB

shares were quoted at R$32.48, and closed 2018 at R$83.46, an increase of 157% in 2018. Our market cap grew

from R$10 billion in December 2017 to R$26 billion by the end of 2018.

In addition to IBrX 100, our stock was listed on other relevant market indices, such as the MSCI (Morgan Stanley

Capital International) Brazil, a benchmark for several global investment funds; and in the June revision FTSE, our

stock was listed on the Renaissance Latin America index, which represents the activities and performance of new

issuers whose primary trading market is Latin America.

As part of our strategy of building a closer relationship with our clients, IRB Brasil RE was the leader of the Insurance

Forum 2018 event, which discussed the importance of the insurance and reinsurance market for the global

economy, in preparation for the G20 meeting. The insurance and reinsurance market had an exclusive meeting at

the G20 - held in September in Bariloche, Argentina - with important discussions and innovations also introduced

by IRB.

http://ri.irbre.com/ptb/central-de-resultados

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In September 2018, we promoted the IRB Innovation Day, an event to rethink and reinvent our Company, which

gathered important names of the technology, marketing, digital, and design markets. An Innovation Committee was

created to discuss themes such as service design, data science, artificial intelligence and blockchain applications for

reinsurance solutions.

Throughout the year, we also introduced Life and Agribusiness products, such as the Agro app, the tele-underwriting

tool, the P&I (Protection and Indemnity Insurance) maritime insurance product, and the High Net Worth Insurance;

we diversified business lines, offsetting the lower demand from the engineering and transportation segments; and

we expanded our international operations mainly focusing on Latin America.

One of the greatest accomplishments in 2018 was that we successfully renewed our retrocession contracts for 2019,

with the same financial conditions as in 2018 but now in better operating shape. Capacity and support were offered

by the largest players in the global reinsurance market; these partners were selected for their rating quality and for

offering strategic support in different lines, in addition to the possibility that they can transfer businesses to IRB,

looking at a long-term relationship.

The expected rebound in the GDP growth in the next four years favors the expansion of the reinsurance market,

which has grown an average 21% p.a. for the past six years. Moreover, the resumption of infrastructure projects

plus the new auctions of the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP), privatizations

and the new dynamics for VGBL pension plans are expected to breathe new life into the industry—an expansion

rate that may exceed the GDP's.

Our management is committed to continuing to expand our business with integrity and prudence when faced with

market challenges. In addition to operating and financial results, we received positive recognition—not only from

market representatives, but from society as a whole—and contribution from all our shareholders, employees,

business partners, stakeholders, and sectors of society.

Corporate Social Responsibility

Corporate Social Responsibility is a very important issue at IRB Brasil RE. Through our own initiatives or in

partnership with different institutions, we strive for improving several aspects of life in our society, developing

responsible bonds with the world we live in and the people we engage with.

In 2018, we continued our Volunteer Program, introduced in 2016, which promotes sustainability actions. This

program focuses on creating opportunities for our employees to donate time for the common good. The program

has a management and execution committee operating in three projects: "Cuidando dos Seus", "Ler 'e Amor", and

"Saúde é Vida", which have activities that are planned every year. In 2018, 26 activities were carried out, directly

assisting 40 people, in addition to 304 people indirectly assisted by blood donations, which is one of the program's

initiatives. Social actions were also carried out, engaging our internal stakeholders. Overall, four campaigns were

promoted focusing on social impact. The first campaign involved food donations, and reported a record high

collection of 9 tons of food. Employees were also encouraged to donate clothes and footwear. The campaigns

benefited eight institutions and the families assisted by the Volunteer Program. October was marked with Children's

Day, with an event gathering our employees' children and kids from two charities. Inspired by the date, our

employees also donated 160 children's books to the Ler É Amor project of the Volunteer Program.

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In November 2018, the Todos Somos Solidários campaign mobilized our employees to donate food. Nearly 740 kg

of food were donated by our employees, and IRB donated nearly 3,500 kg, totaling almost 4 tons of food to make

Christmas happier at institutions in Rio de Janeiro and São Paulo. By the end of the year, we organized the "Todos

somos uma esperança" campaign that sponsored 168 kids from charities, who received a Christmas kit containing

clothes, shoes and toys.

We ran cultural programs for schools, social institutions, and socially vulnerable groups in Rio de Janeiro.

Throughout the year, we promoted guided tours of the Museum of Tomorrow, where nearly 150 kids aged 5 to 12

were able to acquire important knowledge. The institutions that participated in these programs were PALE,

Conquista Social, Escola Dom, Escolinha de Vôlei da Adriana Samuel - Copacabana e Deodoro, and INPAR.

IRB Brasil RE's brand visibility was also prioritized when selecting sports sponsorships; in 2018 we had the Rio Open

tournament and the Sem Barreiras project.

On the social front, IRB Brasil RE strives for promoting the health and quality of life of society in general. In 2018,

we partnered with Hospital GRAACC, Lar Divino Amigo, Hospital de Câncer de Barretos, AMEO - Associação de

Medula Óssea, Instituto Desiderata, and Fundação do Câncer.

Social and Environmental Impacts, and Governance

Even though the environmental impacts deriving from its activities and the activities of its suppliers are low, IRB

Brasil RE has been adopting practices to reduce environmental damage, including processes digitization, a recycling

program, not using plastic cups, efficient use of water and electricity, and contracting a certified company for

disposing of electronics waste. Since 2017, we have invited our employees to actively participate in initiatives to

reduce waste generation through the "Reduza Seus Resíduos" program.

The welfare of our employees is important to us. Therefore, we promote annual climate campaigns in partnership

with the Great Place to Work (GPTW) institute; we have adopted the Quality of Live Program; and we promote

health campaigns, such as vaccination campaigns. Regarding social inclusion, we have the Young Apprentice

program. Seventeen youths have already become our interns, and 24% of them have been hired. It is also important

to mention that currently 47% of IRB's employees are women, and 36% of them are in managerial positions.

IRB Brasil RE also adopts rigorous criteria for contracting suppliers, including, for example, the Know Your Supplier

(KYS) policy that provides for a due diligence process before the contracts are executed. These rules, which include

non-disclosure agreements, protect our image or reputation in cases of social and environmental claim or liability.

We also have an Anti-Money Laundering and Counter Terrorist Financing Policy in place. Together with the KYS, our

Know Your Customer and Know Your Employee policies help mitigate these risks.

We are also a member of the Geneva Association and of the Sustainability Committee of the Brazilian Confederation

of Insurers (CNSeg). We are currently undergoing the process to sign the United Nations' Principles for Sustainable

Insurance, which should happen in 2019. For 2019 our goal is, therefore, to keep on advancing. We also have plans

for the installation of a new system to control water and electricity use, which will detect wastage, and for the

expansion of our volunteer practices.

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Awards and Recognition

IRB Brasil RE's upward trajectory was recognized by several awards in 2018, and not only in the reinsurance field.

Some of the top awards granted to IRB in 2018 were the following:

o Recognition by the market, ranking among the top CEO, CFO, and IR in Latin America in 2018, according

to Institutional Investor - Euromoney. IRB also ranked first among the best companies in Latin America in

its category, competing with large non-financial institutions.

o Best Brazilian reinsurer of the year, according to the Reactions magazine, through the "Reactions Latin

America Re/Insurance Awards".

o Brazil Insurer Award in the "Brazilian Entrepreneur" special category.

o The "Insurance Oscar" award by Clube Vida em Grupo, from Rio de Janeiro, chose IRB as the highlight of

the year (2017/2018) in the reinsurance field.

o IRB ranked among the three key players of the Insurance, Pension and Capitalization sector in "Estadão

Empresas Mais".

FINANCIAL HIGHLIGHTS OF THE YEAR

Written Premium, Retained Premium, and Earned Premium

In FY18, our written premium increased by 20.4% year-over-year, totaling R$6.96 billion, R$4.22 billion of which

correspond to the written premium in Brazil, and R$2.74 billion, to the written premium abroad. The growth of

20.4% in written premium in FY18 reflects the combined effect of the higher number of new contracts, our increased

share in contracts already in our portfolio, and the gain in market share throughout the year. Therefore, our result

was in line with our guidance for written premium reported for FY18, which projected growth of 17% to 21%

compared to FY17.

The property segment was the leader in written premium in Brazil in FY18, accounting for 31% of the overall written

premium in the country. Two other segments with outstanding performance in Brazil were rural (28%), and special

risks (13%).

Of the written premium abroad in the period (R$2.74 billion), the largest share came from the life segment, which

accounted for 46% of the overall written premium abroad in FY18. Another highlight abroad in the period was the

property segment, with 24% of the overall written premium, followed by the rural segment (15%), and aviation

(6%).

Our retrocession ratio was 26.9% in FY18, down 3.1 percentage points compared to the 30% ratio reported for

FY17, reflecting better negotiations—which prove our track record of a low loss ratio—and better operating

conditions.

Retained premium totaled R$5.1 billion in FY18, up 25.7% year-over-year.

In FY18, earned premium also followed the same uptrend, totaling R$4.8 billion, up 22.8% year-over-year.

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Written Premium Analysis - %

Retained Claims

The loss ratio reached 55.9% in FY18 versus 59% in FY17, a decrease of 3 percentage points year-over-year.

The retained claims account has to main items: OCR (Outstanding Claims Reserve), which reflects claims reported

in the period, and IBNR (Incurred But Not Reported), which is an actuarial reserve based on statistics to prevent

future claim reports.

In FY18, the loss ratio measured by OCR corresponded to 47.6% of the earned premium, down 2.4 percentage points

compared to the 50% reported for FY17. In nominal terms, OCR went from a net addition of R$1.95 billion in FY17

to a net addition of R$2.3 billion in FY18, an increase of 17%. This increase was due to, among other variables, the

accounting for claims relative to new contracts that occurred in 2018.

In FY18, the loss ratio measured by IBNR corresponded to 8.8% of the earned premium, nearly unchanged from

FY17 (8.6%). In nominal terms, IBNR went from a net addition of R$334,1 million in FY17 to a net addition of R$422,7

million in FY18. This increase was mainly driven by the rise in premiums in the period deriving from the higher

number of new contracts, which demand a higher IBNR addition.

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Underwriting Result

The underwriting result totaled R$1,169.6 million in FY18, an increase of 43.2% compared to FY17. The combined

effect of the growth of 20.4% in written premium and the reduction in our loss ratio—which fell by 3 p.p. from 59%

in FY17 to 56% in FY1—sustained the robust rise in our underwriting result.

Throughout 2018 we offered several training programs for insurers, focusing on the Property, Life, and Aviation

segments. New tools were implemented, such as Agility (smart questionnaire with automatic rules for acceptance

and refusal), and Tele-underwriting (a 100% digital product that uses facial analysis in the underwriting process),

adding innovation, speed and technology to our services.

Financial and Real Estate Investments

Our consolidated financial investments (parent company and subsidiaries/branches) totaled R$628.9 million in

FY18, down 16.7% compared to the R$754.9 million reported for FY17. This reduction was lower than the decrease

of 35% in the average SELIC rate in the period, which went down from 9.9% in FY17 to 6.4% in FY18.

The average daily balance of the financial investment portfolio, except for the real estate portfolio, was R$6 billion

in FY18.

The consolidated performance in reais of the management of financial assets of the parent company and

subsidiaries/branches reached 141% of CDI in FY18 versus 131% of CDI in FY17, an increase of 10 percentage points.

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This result was mainly due to strategic allocations in prefixed and inflation-pegged sovereign bonds, as well as

tactical dollar transactions, especially in the second half of the year.

By the end of 2018, fixed income investment fund IRB Brasil RE Absoluto Títulos Públicos (Bloomberg: IRBABST BZ),

managed by IRB, had total assets (government bonds) of nearly R$2.8 billion, corresponding to 42% of our overall

financial assets portfolio (R$6.6 billion). In FY18, the fund's profitability reached 124% of CDI.

Our own portfolio had assets amounting to R$3.8 billion as at December 31, 2018; and the most important asset

group was post-fixed government bonds (LFTs).

Under item IV of Article 145 of Circular Letter SUSEP No. 517, of July 30, 2015, IRB Brasil RE hereby declares its

financial capacity is compatible with its operations, and that it intends to hold to maturity the securities classified

as "Held to maturity".

Real Estate Investments

Our real estate investments result, that is, our net revenue/expense from property for lease went up by 43.3% FY18

year-over-year, driven by (1) an increase in shopping mall revenue from lease; (2) a significant decrease in

shopkeepers' default; (3) reduced expense with maintenance and marketing; (4) new leases of commercial floors

that were vacant; and (5) lease of unused Company land to companies in the parking industry.

The real estate investments result in 2018 reflects profitability of IGP-M+11.5% p.a.; such performance exceeds by

42.3% our cost of capital for real estate assets, which is IGP-M+6%.

General and Administrative Expenses

In FY18, the administrative expense ratio fell to 4.8% in 2018 compared to 5.5% in FY17. This reduction was in line

with our guidance reported for FY18, which projected a ratio between 4.8% and 5.2%.

Our management's commitment to striving for increasing efficiency and improving profitability continues to be the

basis for our operations.

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Net Income

Net income rose 31.8% to R$1.22 billion in FY18 versus R$925 million in FY17.

Return on average equity (ROAE) rose by nearly 5 percentage points, from 26.8% in FY17 to 32.1% in FY18, driven

by the growth in our operating result, which more than offset the lower financial investments result for the period

following a lower SELIC rate.

Dividends and Interest on Shareholders' Equity

Throughout 2018, our Board approved the payment of interest on capital to shareholders for the gross amount of

R$26 million, R$180.4 million of which were already paid in November 2018. Our board has also proposed the

payment of an additional R$647.5 million as dividends.

Payment of dividends and IOC proposed by the Board for 2018 totaled R$893.4 million, or 75% of the adjusted

net income reported for FY18. The proposal for the allocation of net income for FY18 will be submitted for approval

by the Annual Shareholders' Meeting to be held in March 2019.

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OTHER HIGHLIGHTS

Risk Management

In 2013 we adopted a risk management policy to reduce underwriting, market, credit, operating, strategic, and

regulatory risks. This policy is approved and revised by the Board; its application is monitored biannually by the

Board, quarterly, by the Risk Management and Audit Committees, and regularly, by the Board of Executive Officers.

Management considers the operating structure and internal controls to verify the efficacy of the policy adopted are

adequate. IRB Brasil RE has been rated A- (excellent), positive outlook, by A.M. Best, the oldest company specializing

in risk rating in the insurance industry. According to the press release disclosed by A.M. Best, "the rating reflects the

company's strong business profile in the Brazilian reinsurance market, coupled with solid financial performance and

risk-adjusted capitalization. Following the opening of the reinsurance market, the company has undertaken several

initiatives to keep its leading position in Brazil and to intensify its international expansion process".

Training classes on the Code of Ethics and Conduct are mandatory and attended every year by 100% of our

employees in an e-learning platform. New employees have 60 days to complete the training, under penalty of not

participating in the profit sharing program. The annual training cycle was completed in December 2018, and 100%

of our employees participated in it.

We have an independent corporate ethics channel on our website, with guaranteed secrecy and anonymity.

Because we do not have individual clients, the history of reports shows very small figures; in 2018 we did not have

any report. When reports are received, they are pre-analyzed and, as necessary, they are submitted to the Ethics

Committee for review.

Corporate Governance

We have a very robust governance structure. Its key components are: the Board of Directors, Executive and Strategic

Committees, Supervisory Board, Audit Committee, External Audit, and Regulators. These different control, oversight

and governance bodies enable an independent supervision and strategic evaluation of the whole company.

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The Board has six committees (Corporate Governance, Investments, Audit, People Management, Risk Management,

and Underwriting) that regularly monitor and support the management of IRB Brasil RE.

We have a series of codes and policies in place that prove we are committed to maintaining the integrity and ethics

of our activities, such as: (1) Code of Ethics and Conduct, (2) Corporate Governance Policy, (3) Risk Management

Policy, (4) Compliance Policy, (5) Anti-Money Laundering and Counter Terrorist Financing Policy, (6) Anti-Fraud and

Corruption Policy, (7) Information Security Policy, and (8) Authority Spheres Policy.

Oversight and control bodies shall perform their activities, as determined by the Bylaws, observing the principles in

the Corporate Governance Policy, and collaborate to implement effective and bold proceedings.

In 2018, several codes were created or revised to regulate the company's operations: Code of Ethics and Conduct,

Authority Spheres Policy (Argentina), Anti-Money Laundering and Counter Terrorist Financing Policy, Anti-Fraud

and Corruption Policy, Disciplinary Statute, Internal Statute of the Audit Committee, Corporate Governance Policy,

Internal Statute of the People Management Committee, and others.

During the year, the Board of Directors held 32 meetings; the Board of Executive Officers, 56; the Supervisory Board,

14; the Audit Committee, 16; in addition to other meetings of the assisting committees.

Stock Performance

From December 28, 2017 to December 28, 2018, our stock (B3: IRBR3) reached an average daily traded volume of

R$56 million and 1.1 million trades. On December 28, 2018, our market capitalization was R$26 billion. Our stock

appreciated by 203% from our IPO to the end of 2018.

Relationship with Independent Auditors

Under CVM Instruction No. 381/03, we hereby declare IRB Brasil RE and its subsidiaries adopt a formal procedure

of verifying that PricewaterhouseCoopers' (PwC) auditors are not affected, regarding the necessary independence

and objectivity when working for the Company, by providing services to other companies.

In the fiscal year ended December 31, 2018, PwC provided additional services for the amount of R$1.4 million,

relative to the preparation of the diagnosis of IFRS implementation, advice for the implementation and disclosure

of new accounting standards, revision of fiscal assumptions, assessment of infrastructure security and web

applications. This amount corresponds to 36% of the external audit service fee.

PricewaterhouseCoopers Auditores Independentes considers the services were provided in strict observance of the

audit standards that address the independent auditor's impartiality when conducting audit works and, therefore,

do not represent a situation that could adversely affect its independence and objectivity when performing the

external audit.

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Arbitration Chamber

The Company, its shareholders and management are subject to arbitration at the Market Arbitration Chamber,

under Article 59 of its Bylaws.

Statement of the Board of Executive Officers

Under CVM Instruction No. 480/09, the Board of Executive Officers herein declares it has discussed, reviewed, and

agreed with the opinions in the Independent Auditor Report and the Financial Statements for the year ended

December 31, 2018.

Acknowledgements

We want to express our gratitude and recognition to all employees, suppliers, and partners, in addition to

shareholders and clients from insurers for choosing IRB Brasil RE as the priority reinsurer for their protection. We

also want to thank government representatives and brokers for their support and trust in our mission of providing

solutions to the insurance market, focusing on profitability, innovation, and sustainability.

Management

Board of Executive Officers Board of Directors José Carlos Cardoso Otavio Ladeira de Medeiros Fernando Passos Alexsandro Broedel Lopes Lúcia Maria da Silva Valle Pedro Duarte Guimarães Werner Romera Suffert

Vinicius José de Almeida Albernaz Hélio Lima Magalhães Heraldo Gilberto de Oliveira

Raimundo Lourenço Maria Christians

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Contents

Financial statements Statements of financial position - Assets................................................................................................................ 20

Statements of financial position - Liabilities............................................................................................................ 21 Statements of income............................................................................................................................................. 22 Statements of comprehensive income................................................................................................................... 23 Consolidated statements of changes in equity....................................................................................................... 24 Cash flow statements............................................................................................................................................. 25 Cash flow reconciliation.......................................................................................................................................... 26 Statements of value added..................................................................................................................................... 27

Section A - General information ...................................................................................................................... 28 1.1 Operations ............................................................................................................................... 28 1.2 Basis of preparation ................................................................................................................ 28 1.3 Consolidation........................................................................................................................... 29

Section B - Risks ............................................................................................................................................... 31 2 Risk management ........................................................................................................................... 31

2.1 Lines of defense ...................................................................................................................... 31 2.2 Principal types of risk .............................................................................................................. 31 2.3 Operating risks ........................................................................................................................ 31 2.4 Underwriting risks .................................................................................................................... 32 2.5 Market risk ............................................................................................................................... 35 2.6 Credit risk ................................................................................................................................ 37 2.7 Liquidity risk............................................................................................................................. 40 2.8 Valuation techniques and assumptions applied for calculating fair value ............................... 40 2.9 Measurements at fair value recognized in the statement of financial position ....................... 40 2.10 Minimum capital, risk capital and liquidity in relation to capital .............................................. 42

Section C - Information by segment ............................................................................................................... 45 3 Information by business segment ................................................................................................... 45

3.1 Statements of income by segment .......................................................................................... 45 Section D - Group structure ............................................................................................................................. 48

4 Investments ..................................................................................................................................... 48 4.1 Changes in investments .......................................................................................................... 48 4.2 Equity interest.......................................................................................................................... 49

Section E - Notes to the financial statements ................................................................................................ 50 5 Cash and cash equivalents ............................................................................................................. 50 6 Financial investments ...................................................................................................................... 50

6.1 Analysis of investments ........................................................................................................... 50 6.2 Changes in financial investments............................................................................................ 57

7 Credits for reinsurance and retrocession operations .................................................................. 58 7.1 Analysis ................................................................................................................................... 58 7.2 Account flux ............................................................................................................................. 58 7.3 Aging of credits for reinsurance and retrocession operations ................................................. 59

8 Retrocession assets - technical provisions ..................................................................................... 60 8.1 Claims - retrocession (Analysis) .............................................................................................. 60 8.2 Deferred retrocession premiums ............................................................................................. 63 8.3 Other technical provisions ....................................................................................................... 64

9 Bills and credits receivable .............................................................................................................. 64 10 Tax and social security credits .................................................................................................... 65

10.1 Tax and social security credits ............................................................................................ 65 11 Deferred acquisition costs ........................................................................................................... 67 12 Investment properties .................................................................................................................. 67 13 Property and equipment .............................................................................................................. 70 14 Intangible assets ......................................................................................................................... 72 15 Liabilities and provisions for post-employment benefits ............................................................. 73

15.1 Liabilities .............................................................................................................................. 73 15.2 Provision for post-employment benefits .............................................................................. 74

16 Provisions for taxes and contributions ........................................................................................ 74 17 Debits for reinsurance and retrocession transactions ................................................................. 75

17.1 Analysis ............................................................................................................................... 75 17.2 Account flux ......................................................................................................................... 75

18 Third party deposits ..................................................................................................................... 76

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19 Technical provisions .................................................................................................................... 77 19.1 Provision for unearned premiums and acquisition costs .................................................... 77 19.2 Provisions for unsettled claims and claims incurred but not reported ................................. 78 19.3 Other provisions .................................................................................................................. 80

20 Guarantee for technical provisions ............................................................................................. 81 21 Related parties ............................................................................................................................ 81

21.1 Compensation of key Management personnel ................................................................... 82 22 Court and tax deposits, other lawsuits and tax obligations ......................................................... 82

22.1 Civil, labor, tax and social security-related court cases ...................................................... 83 22.2 Changes in provisions for legal proceedings ...................................................................... 84 22.3 Tax proceedings .................................................................................................................. 84

23 Labor provisions .......................................................................................................................... 86 24 Shareholders' equity .................................................................................................................... 87

24.1 Capital ................................................................................................................................. 87 24.2 Treasury shares .................................................................................................................. 87 24.3 Profit reserves ..................................................................................................................... 87 24.4 Equity valuation adjustment ................................................................................................ 87 24.5 Earnings per share - basic and diluted ............................................................................... 88 24.6 Dividends and interest on equity ......................................................................................... 88

25 Analysis of the statement of income accounts ............................................................................ 89 25.1 Premiums earned - principal insurance groups .................................................................. 89 25.2 Claims incurred - principal insurance groups ...................................................................... 90 25.3 Acquisition costs.................................................................................................................. 91 25.4 Income from retrocession .................................................................................................... 91 25.5 Other operating revenues and expenses ............................................................................ 93 25.6 Administrative expenses ..................................................................................................... 93 25.7 Tax expenses ...................................................................................................................... 93 25.8 Financial result .................................................................................................................... 94 25.9 Equity result ......................................................................................................................... 94 25.10 Income and social contribution taxes .................................................................................. 94

26 Retirement and pension plans and other employee benefits ...................................................... 98 26.1 Variable contribution plans ................................................................................................ 100 26.2 Defined benefit plans ........................................................................................................ 101 26.3 Other staff benefits ............................................................................................................ 104 26.4 Total obligations of IRB Brasil RE ..................................................................................... 107 26.5 Consolidation of effects - Post-employment benefit .......................................................... 107 26.6 Sensitivity analysis ............................................................................................................ 108

Section F - Accounting policies .................................................................................................................... 110 27 Significant accounting policies .................................................................................................. 110

27.1 Translation of foreign currency .......................................................................................... 110 27.2 Cash and cash equivalents ............................................................................................... 110 27.3 Financial assets................................................................................................................. 111 27.4 Classification of reinsurance contracts ............................................................................. 113 27.5 Intangible assets ............................................................................................................... 113 27.6 Property and equipment .................................................................................................... 113 27.7 Investment property .......................................................................................................... 114 27.8 Impairment of non-financial assets ................................................................................... 114 27.9 Provisions .......................................................................................................................... 114 27.10 Current and deferred income and social contribution taxes ............................................. 116 27.11 Employee benefits ............................................................................................................. 116 27.12 Capital stock ...................................................................................................................... 117 27.13 Dividends ........................................................................................................................... 117 27.14 Recognition of revenues ................................................................................................... 117 27.15 Claims expenses and commissions .................................................................................. 118 27.16 Statement of comprehensive income ................................................................................ 118 27.17 New accounting standards, amendments and interpretations of standards ..................... 118

28 Critical accounting estimates and assumptions ........................................................................ 121 Fiscal Council's Opinion ................................................................................................................................ 123 Summary of the Audit Committee's Report on the Financial Statements for 2018 ................................. 124 Board of Directors' Opinion ........................................................................................................................... 126

IRB-Brasil Resseguros S.A. Statements of financial position as at December 31 In thousands of Reais

20 of 126

Assets Note 2018 2017 2018 2017

Current assets 10,464,310 8,225,369 10,535,080 8,330,491

Cash 27,001 16,222 43,131 25,771

Cash and cash equivalents 5 27,001 16,222 43,131 25,771

Investments 6 2,551,911 1,547,657 2,595,474 1,596,357

Credits from reinsurance and retrocession

transactions 7.1 4,651,983 3,219,998 4,652,082 3,220,012

Transactions with insurers 7.2.1 3,327,272 2,263,360 3,327,272 2,263,360

Transactions with reinsurers 7.2.2 1,304,416 949,586 1,304,416 949,586 Other operating credits 56,569 65,161 56,668 65,175 (-) Provision for credits risks 7.3 (36,274) (58,109) (36,274) (58,109)

Retrocession assets - technical provisions 3,055,590 3,246,054 3,055,607 3,274,937

Premiums - retrocession 8.2 929,100 810,820 929,100 810,820

Claims - retrocession 8.1 2,116,944 2,423,673 2,116,961 2,452,556

Other provisions 8.3 9,546 11,561 9,546 11,561

Retrocession assets - technical provisions 100,742 131,702 111,703 149,678

Bills and credits receivable 9 30,686 11,373 40,116 25,676

Tax and social security credits 10.1 70,056 120,329 71,587 124,002

Prepaid expenses 11,886 6,103 11,886 6,103

Deferred acquisition costs 11 65,197 57,633 65,197 57,633

Non-current assets 5,449,734 6,068,168 5,405,354 6,012,719

Long-term assets 4,696,466 5,307,434 4,715,167 5,403,901

Investments 6 3,327,044 4,111,301 3,366,388 4,219,705

Retrocession assets - technical provisions 28,845 49,473 28,845 49,473

Premiums - retrocession 8.2 28,845 49,473 28,845 49,473

Bills and credits receivable 1,335,480 1,142,355 1,314,837 1,130,418

Bills and credits receivable 9 224,038 107,333 237,006 108,544

Tax and social security credits 458,469 406,786 424,858 393,638

Tax credits 10.1 38,715 57,868 38,643 57,868

Deferred tax asset 10.1 419,754 348,918 386,215 335,770

Court and tax deposits 22 652,973 628,236 652,973 628,236

Deferred acquisition costs 11 5,097 4,305 5,097 4,305

Investments 636,545 629,327 573,055 477,135

Equity Interest 1.3 630,976 623,352 - -

Investment property 12 5,515 5,831 573,001 476,991

Other investments 54 144 54 144

Property and equipment 13 74,270 77,310 74,353 77,385

Intangible assets 14 42,453 54,097 42,779 54,298

Total assets 15,914,044 14,293,537 15,940,434 14,343,210

Parent Company Consolidated

IRB-Brasil Resseguros S.A. Statements of financial position as at December 31 In thousands of Reais (continued)

The accompanying notes are an integral part of the financial statements 21 of 126

Liabilities and shareholders' equity Note 2018 2017 2018 2017

Current liabilities 10,833,205 9,681,833 10,859,175 9,730,998

Accounts payable 366,208 218,825 391,450 238,462

Obligations payable 15.1 220,870 97,478 235,195 106,531

Taxes and social charges payable 32,002 23,898 32,170 23,898

Labor provisions 23 8,984 8,191 9,092 8,191

Provisions for post-employment benefits 15.2 and 26.4 38,963 38,655 38,963 38,655

Taxes and contributions payable 16 65,389 50,603 70,015 55,516

Provision for investment devaluation 1.3 - - 6,015 5,671

Debits from reinsurance and retrocession transactions 17.1 1,392,759 1,251,895 1,393,070 1,252,165

Transactions with insurers 17.2.1 251 606 251 606

Transactions with reinsurers 17.2.1 1,251,262 1,137,443 1,251,262 1,137,443 Reinsurance and retrocession brokers 17.2.2 105,788 82,759 106,099 83,029 Other operating debits 17.2.2 35,458 31,087 35,458 31,087

Third-party deposits 18 427,425 166,766 427,425 166,766

Technical provisions - reinsurance and retrocession 8,646,813 8,044,347 8,647,230 8,073,605

Property and casualty and group life insurance 8,646,813 8,044,347 8,647,230 8,073,605

Provision for unearned premiums 19.1 2,147,178 1,836,237 2,147,178 1,836,237

Risks in force issued 1,904,036 1,622,914 1,904,036 1,622,914

Risks in force but not issued 243,142 213,323 243,142 213,323

Unsettled claims 19.2 4,222,132 4,343,294 4,222,549 4,372,552

Provision for claims incurred but not reported 19.2 1,999,068 1,687,480 1,999,068 1,687,480

Other provisions 19.3 278,435 177,336 278,435 177,336

Non-current liabilities 1,080,059 1,030,521 1,080,479 1,031,029

Long-term liabilities 1,080,059 1,030,521 1,080,479 1,031,029

Accounts payable 861,960 839,788 862,380 840,296

Tax liabilities 22 435,264 418,208 435,264 418,208

Provisions for post-employment benefits 15.2 and 26.4 412,920 419,189 412,920 419,189

Obligations payable 15.1 13,776 2,391 14,196 2,899

Debits from reinsurance and retrocession transactions 789 789 789 789

Other operating debits 17.2.2 789 789 789 789

Technical provisions - reinsurance and retrocession 158,665 130,670 158,665 130,670

Property and casualty and group life insurance 158,665 130,670 158,665 130,670

Provision for unearned premiums 19.1 158,665 130,670 158,665 130,670

Risks in force issued 144,371 115,739 144,371 115,739

Risks in force but not issued 14,294 14,931 14,294 14,931

Other debits 22 58,645 59,274 58,645 59,274

Civil and labor contingencies 58,645 59,274 58,645 59,274

Total liabilities 11,913,264 10,712,354 11,939,654 10,762,027

Shareholders' equity 4,000,780 3,581,183 4,000,780 3,581,183

Capital stock 1,953,080 1,953,080 1,953,080 1,953,080

Profit reserves 1,595,109 1,277,821 1,595,109 1,277,821

Equity valuation adjustments 24.4 (113,381) (76,161) (113,381) (76,161)

Proposal for distribution of additional dividends 578,928 439,399 578,928 439,399

Treasury shares 24.2 (12,956) (12,956) (12,956) (12,956)

Total liabilities and shareholders' equity 15,914,044 14,293,537 15,940,434 14,343,210


IRB-Brasil Resseguros S.A. Statements of income Years ended December 31 In thousands of Reais, except where otherwise indicated


Note 2018 2017 2018 2017

Net premiums written 6,035,512 5,060,851 6,035,512 5,060,851

Change in technical provisions (270,874) (323,079) (270,874) (323,079)

Premiums earned 25.1 5,764,638 4,737,772 5,764,638 4,737,772

Claims incurred 25.2 (2,820,647) (2,484,074) (2,820,647) (2,484,074)

Direct claims (2,894,851) (2,474,609) (2,894,851) (2,474,609)

Salvages and reimbursements 267,583 105,508 267,583 105,508

Change in provision for claims incurred but not

reported (193,379) (114,973) (193,379) (114,973)

Acquisition costs 25.3 (140,720) (133,129) (140,720) (133,129)

Commissions (140,720) (133,129) (140,720) (133,129)

Other operating income and expenses 25.5 (18,292) (41,210) (18,292) (41,210)

Income (loss) from retrocession 25.4 (1,450,923) (1,188,729) (1,450,923) (1,188,729)

Revenue from retrocession 25.4.1 288,505 252,761 288,505 252,761

Expenses from retrocession 25.4.2 (1,736,473) (1,401,615) (1,736,473) (1,401,615)

Salvages and reimbursements to retrocessionarie (26,659) (52,092) (26,659) (52,092)

Other operating income and expenses 23,704 12,217 23,704 12,217

Administrative expenses 25.6 (221,530) (264,685) (238,346) (277,156)

Tax expenses 25.7 (144,816) (77,456) (148,866) (82,214)

Financial income 25.8 314,731 648,150 447,804 686,326

Financial revenues 1,121,032 1,955,864 1,254,914 1,994,086

Financial revenues from investment portfolio 1,037,703 1,835,775 1,161,565 1,872,556

Other financial revenues 83,329 120,089 93,349 121,530

Financial expenses (806,301) (1,307,714) (807,110) (1,307,760)

Financial expenses from investment portfolio (533,130) (1,112,339) (533,130) (1,108,016)

Other financial expenses (273,171) (195,375) (273,980) (199,744)

Equity income 25.9 138,884 55,001 77,540 53,405

Revenues (expenses) from investment property, net 24,728 (11,361) 77,077 53,805

Adjustment of investments in subsidiaries 1.3 113,693 66,762 - -

Other equity revenues (expenses), net 463 (400) 463 (400)

Operating income 1,421,325 1,251,640 1,472,188 1,270,991

Gains or losses on non-current assets (28) 36 (28) 36

Income before taxes and profit sharing 1,421,297 1,251,676 1,472,160 1,271,027

Income tax 25.10 (36,713) (135,071) (74,093) (149,246)

Social contribution tax 25.10 (165,788) (191,555) (179,271) (196,731)

Net income for the period 1,218,796 925,050 1,218,796 925,050

Number of shares 310,415,400 310,415,400 310,415,400 310,415,400

Basic and diluted earnings per share 24.5 3.93 2.98 3.93 2.98


IRB-Brasil Resseguros S.A. Statements of comprehensive income Years ended December 31 In thousands of Reais


Parent Company and Consolidated

Note 2018 2017

Net income for the year 1,218,796 925,050

Other comprehensive income

Items to be recorded to profit (loss)

Exchange rate difference on the translation of transactions abroad 24.4 (22,017) 284

Financial assets available for sale 24.4

Gains from the fair value valuation or financial assets available for

sale in the year16,118 34,817

Unrealized gains (losses) from securities - Subsidiaries 24.4 (22,506) 11,771

Income and social contribution taxes 24.4 (8,428) (15,668)

(36,833) 31,204

Items that will not be reclassified in profit (loss)

Post-employment benefits 24.4

Remeasurement of post-employment benefits liabilities 4,297 (82,302)

Remeasurement of post-employment benefits liabilities -

Subsidiaries (2,702) 15

Income and social contribution taxes 24.4 (1,982) 40,211

(387) (42,076)

Total other comprehensive income (37,220) (10,872)

Total comprehensive income for the year 1,181,576 914,178

IRB-Brasil Resseguros S.A. Statements of changes in equity In thousands of Reais


Note

Capital

stock Legal Retention of profit

Treasury

shares

Equity valuation

adjustments

Retained

earnings

Proposal for

distribution of

additional

dividends

Parent Company's

equity

Balances as of January 1, 2017 1,453,080 290,617 1,245,204 (12,956) (65,289) - 417,561 3,328,217

Adjustment to market value of securities 24.4 - - - - 30,920 - - 30,920

Cumulative translation adjustments 24.4 - - - - 284 - - 284

Actuarial losses from post-employment benefits 24.4 - - - - (42,076) - - (42,076)

Net income for the year - - - - - 925,050 - 925,050

Total comprehensive income for the year - - - - (10,872) 925,050 - 914,178

Total contributions from shareholders and distributions to shareholders - - - - - - - -

Capital increase approved at the Annual/Extraordinary Shareholders' Meeting of March 24, 2017 500,000 (290,617) (209,383) - - - - -

Additional dividend paid in 2016 - - - - - - (417,561) (417,561)

Creation of legal reserve - 46,252 - - - (46,252) - -

Creation of profit retention reserve 24.3 - - 437,528 - - (437,528) - -

Distribution of dividends 24.6 - - - - - (441,270) 439,399 (1,871)

Distribution of interest on equity 24.3 - - (241,780) - - - - (241,780)

Total contributions from shareholders and distributions to shareholders 500,000 (244,365) (13,635) - - (925,050) 21,838 (661,212)

Balances as of December 31, 2017 1,953,080 46,252 1,231,569 (12,956) (76,161) - 439,399 3,581,183

Balances as of January 1, 2018 1,953,080 46,252 1,231,569 (12,956) (76,161) - 439,399 3,581,183

Adjustment to market value of securities 24.4 - - - - (14,816) - - (14,816)

Cumulative translation adjustments 24.4 - - - - (22,017) - - (22,017)

Actuarial losses from post-employment benefits 24.4 - - - - (387) - - (387)

Net income for the year - - - - - 1,218,796 - 1,218,796

Total comprehensive income (loss) for the year - - - - (37,220) 1,218,796 - 1,181,576

Total contributions from shareholders and distributions to shareholders

Additional dividend paid in 2017 - - (8,098) - - - (439,399) (447,497)

Creation of legal reserve 24.3 - 60,940 - - - (60,940) - -

Creation of profit retention reserve 24.6 - - 264,446 - - (264,446) - -

Distribution of dividends 24.3 - - - - - (647,459) 578,928 (68,531)

Distribution of interest on equity 24.3 - - - - - (245,951) - (245,951)

Total contributions from shareholders and distributions to shareholders - 60,940 256,348 - - (1,218,796) 139,529 (761,979)

Balances as of December 31, 2018 1,953,080 107,192 1,487,917 (12,956) (113,381) - 578,928 4,000,780

Profit reserves


Cash flow statements – (Direct method) Years ended December 31 In thousands of Reais

25 of 126

2018 2017 2018 2017

Operations

Receipt of insurance premiums, social security contributions, management

fees and others 5,528,840 4,984,439 5,528,840 4,984,439

Claims recoveries and commissions 896,405 385,943 900,235 389,398

Other operating receipts (salvages, reimbursements and others) 519,404 233,610 525,396 235,569

Payment of claims, benefits, redemptions and commissions (3,963,682) (3,159,089) (3,965,510) (3,160,669)

Transfer of premiums due to risk assignment (1,762,831) (1,319,141) (1,762,831) (1,319,141)

Payment of expenses and obligations (237,610) (342,225) (242,791) (360,644)

Other operating payments (150,708) (363,249) (150,708) (364,572)

Receipt of rents and sale of properties 41,502 4,928 90,021 59,322

Receipt of interest and dividends 5,180 16,573 5,694 8,599

Creation (redemption) of court deposits (5,863) (19,046) (5,863) (19,046)

Cash from operations 870,637 422,743 922,483 453,255

Taxes and contributions paid (408,721) (265,041) (421,416) (280,826)

Financial investments

Investments at fair value through profit or loss (10,493,347) (3,241,822) (10,763,798) (3,670,561)

Sales and redemption of investments at fair value through profit or loss 9,362,816 2,887,817 9,705,450 3,242,564

Net financial investments (1,130,531) (354,005) (1,058,348) (427,997)

Net cash used in operating activities (668,615) (196,303) (557,281) (255,568)

Investment activities

Purchase of investments available for sale (2,563,032) (1,411,516) (2,566,275) (1,637,234)

Sale and redemption of investments available for sale 3,564,448 2,450,792 3,570,453 2,455,676

Receipt of investments held to maturity 288,440 5,118 288,440 5,118

Dividends received - equity interest (Subsidiaries) 71,936 46,469 - -

Payment on the purchase of:

Investments - (386,541) (36,200) -

Property and equipment (7,810) (36,434) (7,810) (36,434)

Intangible assets (19,727) (15,941) (19,727) (15,632)

Receipt from the sale of:

Property and equipment - 37 - 37

Net cash from investment activities 1,334,255 651,984 1,228,881 771,531

Financing activities

Distribution of dividends and interest on equity (684,256) (644,503) (684,256) (699,314)

Net cash used in financing activities (684,256) (644,503) (684,256) (699,314)

Decrease in cash and cash equivalents (18,616) (188,822) (12,656) (183,351)

Exchange rate changes on cash and cash equivalents 29,395 (8,499) 30,016 (8,453)

Increase (decrease) in cash and cash equivalents after exchange rate changes 10,779 (197,321) 17,360 (191,804)

Cash and cash equivalents at the beginning of the year 16,222 213,543 25,771 217,575

Cash and cash equivalents at the end of the year 27,001 16,222 43,131 25,771



Cash flow reconciliation – (Direct method) Years ended December 31 In thousands of Reais (continued)


2018 2017 2018 2017

Reconciliation between net income for the year and net cash

used in operating activities

Net income for the year 1,218,796 925,050 1,218,796 925,050

Adjustments to net income

Depreciation and amortization 47,862 33,213 50,855 39,632

Reversal of allowance for doubtful accounts (51,846) (7,936) (51,846) (7,936)

Creation (reversal) of impairment 29,437 - 29,437 -

Gain (loss) on the sale of property and equipment and intangible assets (28) 37 (28) 37

Equity in the earnings (losses) of subsidiaries (113,693) (66,762) - -

Exchange rate changes on cash and cash equivalents (29,395) (8,499) (30,016) (8,461)

Other adjustments 218 38 1,498 (6,286)

Changes in statement of financial position accounts

Investments (1,493,734) (956,836) (1,419,300) (854,949)

Credit from insurance and reinsurance transactions (1,410,803) (927,681) (1,410,803) (927,681)

Retrocession assets 211,092 412,113 211,104 413,377

Investment properties - 11,361 (60,125) (280,911)

Tax and social security credits (1,411) 91,486 (809) 91,145

Prepaid expenses (5,783) (2,632) (5,783) (2,632)

Deferred acquisition costs (8,356) (61,938) (8,356) (61,938)

Bills and credits receivable (165,085) (123,918) (176,028) (72,921)

Other assets (2,101) (4,739) (4,963) (4,739)

Court and tax deposits (24,736) (57,437) (24,736) (57,437)

Trade accounts payable 69,737 61,079 69,737 75,539

Taxes and contributions 21,461 83,521 1,526 83,962

Debits from insurance and reinsurance transactions 140,865 371,828 140,859 370,564

Third-party deposits 260,659 106,803 260,659 106,803

Technical provisions - insurance and reinsurance 630,461 (104,679) 632,704 (104,613)

Other liabilities (9,288) 342 1,281 (1,056)

Court provisions 17,056 29,883 17,056 29,883

Net cash used in operations (668,615) (196,303) (557,281) (255,568)


IRB-Brasil Resseguros S.A. Statements of value added Years ended December 31 In thousands of Reais


Revenues

Revenues from insurance transactions 6,035,512 5,060,851 6,035,512 5,060,851

Others (178,155) (178,763) (122,813) (115,048)

Reversal of allowance for doubtful accounts 51,846 7,936 51,846 7,936

Changes in technical provisions (270,874) (323,079) (270,874) (323,079)

Net operating income 5,638,329 4,566,945 5,693,671 4,630,660

Expenses

Claims (2,894,851) (2,474,609) (2,894,851) (2,474,609)

Changes in the provision of claims incurred but

not reported (193,379) (114,973) (193,379) (114,973)

Salvages and reimbursements 267,583 105,508 267,583 105,508

(2,820,647) (2,484,074) (2,820,647) (2,484,074)

Inputs acquired from third parties

Materials, energy and others (47,390) (52,583) (48,689) (52,583)

Third-party services and commissions, net (25,185) (45,414) (39,610) (54,772)

(72,575) (97,997) (88,299) (107,355)

Gross value added 2,745,107 1,984,874 2,784,725 2,039,231

Depreciation, amortization and depletion (47,862) (33,213) (50,855) (39,632)

Net value added produced by the Company 2,697,245 1,951,661 2,733,870 1,999,599

Value added received in transfer

Financial result 314,731 648,150 447,804 686,326

Profit (loss) from retrocession (1,450,923) (1,188,729) (1,450,923) (1,188,729)

Equity in the earnings (losses) of subsidiaries 113,693 66,762 - -

Others (7,224) (3,558) (7,224) (3,558)

(1,029,723) (477,375) (1,010,343) (505,961)

Total value added to be distributed 1,667,522 1,474,286 1,723,527 1,493,638

Distribution of value added

Personnel 101,407 145,150 102,500 145,150

Taxes, fees and contributions 347,319 404,086 402,231 423,438

Interest on equity and minimum mandatory

dividend 314,482 241,780 314,482 241,780

Retained earnings for the year 904,314 683,270 904,314 683,270

Value added distributed 1,667,522 1,474,286 1,723,527 1,493,638


2018 2017 2018 2017


Notes to the parent company and consolidated financial statements as at December 31, 2018 In thousands of Reais, except where otherwise indicated

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Section A - General information

1.1 Operations

IRB-Brasil Resseguros S.A. ("IRB Brasil RE", "Reinsurer" or "Company") is a private corporation established in 1939 by the then President Getúlio Vargas, headquartered at Avenida Marechal Câmara, 171, in the city of Rio de Janeiro, with offices in São Paulo, Buenos Aires, London and New York. Its business is reinsurance in Brazil and abroad. The Company's shares are traded on B3 S.A - Brasil, Bolsa, Balcão (B3). The Board of Directors approved the issuance of the December 31, 2018 parent company and consolidated financial statements on February 7, 2019. 1.2 Basis of preparation

The financial statements have been prepared in accordance with the accounting practices adopted in Brazil, including the pronouncements issued by the Brazilian Accounting Pronouncements Committee (CPC), the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the accounting practices adopted in Brazil applicable to companies supervised by the Superintendence of Private Insurance (SUSEP), and indicate all the material information specific to the financial statements, and this information alone, which is consistent with that used by Management in operating the Company. The model to present the financial statements, as defined by SUSEP in Circular Letter 517, of July 30, 2015, establishes that profit sharing expenses must be highlighted in the statement of income after Earnings before Income Tax, unlike the accounting practices adopted in Brazil, pursuant to pronouncements of CPC and IFRS, which establish that such expenses be recorded as personnel expenses. Thus, for the purpose of preparing these financial statements, the Company chose to record profit sharing expenses in the amount of R$23,785 (R$22,145 in 2017) as personnel expenses, under administrative expenses. Management understands that this difference in the presentation of the statement of income is not relevant, therefore, these financial statements comply, in all material aspects, with SUSEP's requirements established in Circular Letter 517/2018, as amended. The significant accounting policies applied in preparing these financial statements are shown in Note 27. The financial statements have been prepared using historic cost as a value base, adjusted, in the case of financial assets available for sale and other financial assets and liabilities, to reflect measurement at fair value. The preparation of parent company and consolidated financial statements requires the use of certain critical accounting estimates and the exercise of judgment on the part of Management in the process of applying the Company's accounting policies. Those areas requiring a greater degree of judgment and that are more complex, and those in which assumptions and estimates are significant for the financial statements, are shown in Note 28. IRB Brasil RE has a branch in London, whose operations are being resumed in order to expand the Company's client base in Europe and Asia. The Company also has a branch in Argentina that started operating on September 1, 2011. The book balances of these branches are registered and presented in the parent company and consolidated financial statements. (a) Individual financial statements

The parent company financial statements were prepared in accordance with the accounting practices adopted in Brazil issued by the Brazilian Accounting Pronouncements Committee (CPC), the International Financial Reporting Standards (IFRS) and the accounting practices adopted in Brazil applicable to SUSEP. Given that the accounting practices adopted in Brazil applicable to the parent company financial statements as of 2014 do not differ from the IFRS applicable to separate financial statements, which now allows the application of equity accounting method in subsidiaries, affiliates and joint ventures in separate financial statements; said policies are also in compliance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). These parent company financial statements are disclosed jointly with the consolidated financial statements.



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(b) Consolidated financial statements

The consolidated financial statements have been prepared and are being presented in accordance with the accounting practices adopted in Brazil, including the pronouncements issued by the Brazilian Accounting Pronouncements Committee (CPC), the accounting practices adopted in Brazil applicable to companies supervised by SUSEP and the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). The presentation of the parent company and consolidated Statement of Value Added (DVA) is required by Brazilian Corporate Law and by the accounting practices adopted in Brazil applicable to publicly held companies. The accounting practices adopted in Brazil issued by the Brazilian Accounting Pronouncements Committee (CPC), the International Financial Reporting Standards (IFRS) and the accounting practices in Brazil applicable to SUSESP do not require the presentation of this statement. As a result, this statement is presented as supplemental information, without prejudice to the integrity of the financial statements. 1.3 Consolidation

The Company consolidates all the entities that it controls, i.e. where it is exposed or has rights to variable returns from its involvement with the subsidiary and can control its main activities. The subsidiaries included in the consolidation are listed in Note 4.2 and the accounting policies applied in preparing the consolidated financial statements are described below: Companies under control are all those entities over which the Company has the power to determine their financial and operating policies, generally accompanied by a share of more than half the voting rights (voting capital). The existence and the effect of any rights which can currently be exercised or converted are taken into account when assessing whether the Company controls another entity. Companies under control are fully consolidated as from the date when control is transferred to the Company. Consolidation is suspended as from the date when the Company ceases to have control.

As at December 31, 2018, the Company had a subsidiary in the United States of America which is in run-off (IRB International). This subsidiary holds the real estate assets of the Reinsurer, and is an asset management company. As at December 31, 2017, it had exactly the same participation.



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The Company contributed capital to IRB Asset Management (company's wholly-owned subsidiary) in 2017. On July 16, 2018, the CVM - Brazilian Securities and Exchange Commission authorized the Company to provide Securities Portfolio Administration services by that subsidiary. Information on the subsidiaries is shown below:

The Company also holds all the shares in the following exclusive investment funds: • BB Ações 22 Fundo de Investimento; • BB IRB Brasil RE Liquidez Fundo de Investimento Renda Fixa; • Bradesco Fundo de Investimento em Ações Safe IBRX-50; • Itaú FI IRB Brasil RE Renda Fixa; • Fundo de Investimento Caixa IRB Brasil RE Renda Fixa; • Bradesco FI RF IRB Caixa; • FI Itaú Renda Fixa IRB Brasil RE Crédito Privado; • BB IRB Brasil RE FI RF LP Crédito Privado; • Fundo de Investimento RF IRB Brasil RE Absoluto; • IRB Fundo de Investimento Multimercado; • IRB Fundo de Investimento Renda Fixa Crédito Privado; The Company's consolidated financial statements include IRB International Corporation & Subsidiaries, the subsidiary IRB Investimentos e Participações Imobiliárias S.A., IRB Asset Management and the exclusive investment funds above.

2018

IRB International

Corporation &

Subsidiaries

IRB Investimentos

e Participações

Imobiliárias S.A.

IRB Asset

Management Impairment Total

Ownership interest - % 100.0% 100.0%

Number of shares held 5,000,000 168,465,949

Assets 61,593 655,402 4,223

Current and non-current liabilities 35,042 48,937 248

Shareholders' equity at the end of the year 26,551 606,465 3,975 (6,015) 630,976

Net income (loss) for the year (4,407) 119,225 (1,125) 113,693

2017

IRB International

Corporation &

Subsidiaries

IRB Investimentos

e Participações

Imobiliárias S.A.

IRB Asset

Management Impairment Total

Ownership interest - % 100.0% 100.0%

Number of shares held 5,000,000 168,465,949

Assets 52,007 627,588

Current and non-current liabilities 29,797 25,875

Shareholders' equity at the end of the year 22,210 601,713 5,100 (5,671) 623,352

Net income (loss) for the year 177 66,585 66,762



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Section B - Risks 2 Risk management

Risk management is considered by IRB Brasil RE to be an essential instrument for the implementation of its strategy for optimizing the use of capital and for selecting the best business opportunities, with a view to obtaining the best risk/return ratio for its shareholders. The aim of risk-management is to sustain the Company's solvency and long-term results by identifying, measuring and handling the risks to which it is exposed in the course of its business. It is also designed to meet the regulator's requirements and to ensure that the internal control system is adequate, effective and functioning efficiently. Considering the importance given to this matter, the Company appointed a Vice-President for Risks and Compliance (heading the Corporate Risk and Compliance areas), with primary responsibility for supervising risk management in IRB Brasil RE. The Statutory Board, the Board of Directors, the Risk Management Committee and other consultative and deliberative bodies are continuously committed to supporting and fostering risk-management. In April 2018, the Company was awarded an A- (excellent) classification, with a positive outlook, by the US-based rating agency A.M. Best. The rating classification reflects the Company's capitalization as being entirely adequate in relation to its risks. 2.1 Lines of defense

IRB Brasil RE considers that of all employees and collaborators to also be responsible for risk-management. In this manner, the Company's Risk Management is structured based on a model with three lines of defense, defining roles and responsibilities for risk management for each of these lines. The first line of defense is represented by the operational areas, comprising managers and staff directly responsible for the Company's procedures. Corporate Risk Management and Compliance represent the second line of defense. The Internal Audit represents the third line. In addition, the Company uses a Corporate Governance system that establishes structure and transparency in the decision-making process. 2.2 Principal types of risk

The management of corporate risks covers the following categories of risk: operating, underwriting, market, credit and liquidity - each being comprising a number of subcategories. The Company considers that these categories represent its principal types of exposure, but that the list is not exhaustive, recognizing that it can be affected by various risks. 2.3 Operating risks

Operating risk in IRB Brasil RE is the possibility that losses may be caused by failings, defects or inadequacies of internal

processes, people or systems or by external events.

Operating risks are managed in five stages: identification, analysis and measurement, handling, monitoring and reporting. In this process, the Corporate Risk Management works jointly with the risk owner, providing support and monitoring the management of operating risks at the Company's business units.

IRB Brasil RE has a Business Continuity Management program that defines procedures in the event of a contingency. The program consists of four specific contingency plans: a Disaster Recovery Plan, Operations Continuity Plan, Incident Management Plan and Business Recovery Plan. Pursuant to SUSEP Circulars 517/2015 and subsequent changes, the Company has an Operating Losses Database in

which losses arising from this category of risk are recorded and managed.



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2.4 Underwriting risks

Underwriting risk is the result of oscillations, caused by either internal or external factors, of an unexpected nature, affecting actuarial and financial assumptions used to price reinsurance contracts and to set up technical provisions. The transfer of risk by means of retrocession is one of the techniques used for minimizing and controlling underwriting risks. Like reinsurance, retrocession can cover a group of contracts or single risks (also referred to as optional risks). IRB Brasil RE currently has retrocession (or portfolio protection) programs covering lines where there is the highest exposure, with a view to stabilizing results and limiting losses, and expanding its capacity to accept strategic business. Optional retrocession can be used for specific cases, subject to case-by-case analysis. Due to the nature of risk transfer, retrocession operations imply an underlying credit risk (Note 2.6).

2.4.1 Monitoring of reinsurance liabilities by business line

The Company calculates its technical provisions as required by the regulator. The following table shows gross assets and liabilities (PSL, IBNR, IBNER, PET, PPNG, PDR) by business line:

2018 2017 2018 2017

Aviation 471,004 674,202 (376,253) (559,445)

Car 199,243 208,309 (16,885) (6,609)

Home 53,778 40,214 (177) (193)

Maritime 176,223 175,449 (56,069) (52,362)

Nuclear 169,149 13,288 (13,837) (11,790)

Property 2,111,139 2,572,302 (1,350,592) (1,496,003)

People 283,038 307,193 (38,922) (53,145)

Oil 317,307 268,534 (264,636) (223,238)

Liabilities 634,240 644,141 (348,926) (315,362)

Financial risks 465,929 511,503 (109,509) (152,746)

Rural 753,085 521,149 (50,500) (80,799)

Transport 482,636 410,808 (260,967) (210,240)

Acceptances from abroad 2,387,244 1,563,482 (171,727) (120,034)

Offshore branches 301,463 264,443 (25,435) (13,561)

Total 8,805,478 8,175,017 (3,084,435) (3,295,527)

Parent Company

Reinsurance Retrocession

2018 2017 2018 2017

Aviation 471,004 674,202 (376,253) (559,445)

Car 199,243 208,309 (16,885) (6,609)

Home 53,778 40,214 (177) (193)

Maritime 176,223 175,449 (56,069) (52,362)

Nuclear 169,149 13,288 (13,837) (11,790)

Property 2,111,139 2,572,302 (1,350,592) (1,496,003)

People 283,038 307,193 (38,922) (53,145)

Oil 317,307 268,534 (264,636) (223,238)

Liabilities 634,240 644,141 (348,926) (315,362)

Financial risks 465,929 511,503 (109,509) (152,746)

Rural 753,085 521,149 (50,500) (80,799)

Transport 482,636 410,808 (260,967) (210,240)

Acceptances from abroad 2,387,661 1,592,740 (171,744) (148,917)

Offshore branches 301,463 264,443 (25,435) (13,561)

Total 8,805,895 8,204,275 (3,084,452) (3,324,410)

Reinsurance Retrocession

Consolidated



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2.4.2 Evolution of claims

The following tables show the evolution of the Company's claims, by year of underwriting. Gross retrocession claims Retrocession - gross

Gross retrocession claims

Retrocession - gross

Underwriting year 2012 2013 2014 2015 2016 2017 2018 Total

Claims incurred in the year 342,520 1,107,829 293,187 656,095 330,900 346,916 150,968

After 1 year 975,304 1,362,435 1,331,605 2,184,610 1,970,743 1,991,309

After 2 year 1,813,805 2,039,277 1,709,391 2,588,521 3,196,097

After 3 year 2,005,247 2,074,119 1,775,186 2,856,086

After 4 year 1,994,059 2,049,767 1,833,308

After 5 year 2,000,772 2,030,091

After 6 year 1,997,598

Current estimate of accrued claims 1,997,598 2,030,091 1,833,308 2,856,086 3,196,097 1,991,309 150,968 14,055,457

Payments accrued until the reference date (1,840,950) (1,919,709) (1,629,801) (2,371,696) (2,563,223) (1,107,243) (50,978) (11,483,599)

Liabilities recognized in the statement of

financial position 156,648 110,382 203,507 484,390 632,874 884,066 99,990 2,571,858

Liabilities prior to 2012 1,449,602

IBNER 200,672

Total liabilities included in the statement of financial position 4,222,132

2018

Parent Company


Claims incurred in the year 200,595 342,520 1,107,829 293,187 656,095 330,900 346,916

After 1 year 516,906 975,304 1,362,435 1,331,605 2,184,610 1,970,743

After 2 year 765,358 1,813,805 2,039,277 1,709,391 2,588,521

After 3 year 1,028,917 2,005,247 2,074,119 1,775,186

After 4 year 972,769 1,994,059 2,049,767

After 5 year 1,019,971 2,000,772



Payments accrued until the reference date (837,927) (1,788,930) (1,831,233) (1,507,602) (1,911,484) (1,217,386) (100,011) (9,194,573)




IBNER 204,394


2017

Parent Company


Sinistros incorridos no ano 342,520 1,107,829 293,187 656,095 330,900 346,916 150,968

After 1 year 975,304 1,362,435 1,331,605 2,184,610 1,970,743 1,991,309

After 2 year 1,813,805 2,039,277 1,709,391 2,588,521 3,196,097

After 3 year 2,005,247 2,074,119 1,775,186 2,856,086

After 4 year 1,994,059 2,049,767 1,833,308

After 5 year 2,000,772 2,030,091



Payments accrued until the reference date (1,840,950) (1,919,709) (1,629,801) (2,371,696) (2,563,223) (1,107,243) (50,978) (11,483,599)




IBNER 200,672


2018

Consolidated



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Retrocession - net


Sinistros incorridos no ano 200,595 342,520 1,107,829 293,187 656,095 330,900 346,916

After 1 year 516,906 975,304 1,362,435 1,331,605 2,184,610 1,970,743

After 2 year 765,358 1,813,805 2,039,277 1,709,391 2,588,521

After 3 year 1,028,917 2,005,247 2,074,119 1,775,186

After 4 year 972,769 1,994,059 2,049,767

After 5 year 1,019,971 2,000,772



Payments accrued until the reference date (837,927) (1,788,930) (1,831,233) (1,507,602) (1,911,484) (1,217,386) (100,011) (9,194,573)




IBNER 204,394


2017

Consolidated

6


Claims incurred in the year 212,493 713,804 194,043 325,364 202,896 305,449 115,422

After 1 year 588,287 802,663 981,979 1,506,852 1,508,804 1,528,029

After 2 year 916,994 1,133,787 1,252,197 1,833,732 2,579,524

After 3 year 1,016,375 1,233,167 1,234,278 1,944,442

After 4 year 1,011,914 1,235,267 1,267,005

After 5 year 1,027,774 1,214,300



Payments accrued until the reference date (932,281) (1,172,494) (1,118,248) (1,734,325) (2,087,901) (934,871) (39,075) (8,019,194)



Liabilities prior to 2012 753,562

IBNER 118,463


2018



Claims incurred in the year 146,828 212,493 713,804 194,043 325,364 202,896 305,449

After 1 year 283,846 588,287 802,663 981,979 1,506,852 1,508,804

After 2 year 346,747 916,994 1,133,787 1,252,197 1,833,732

After 3 year 589,538 1,016,375 1,233,167 1,234,278

After 4 year 574,959 1,011,914 1,235,267

After 5 year 587,398 1,027,774

After 6 year 590,354

Current estimate of accrued claims 590,354 1,027,774 1,235,267 1,234,278 1,833,732 1,508,804 305,449 7,735,658

Payments accrued until the reference date (505,523) (887,162) (1,139,720) (1,018,493) (1,480,877) (960,469) (76,219) (6,068,463)



Liabilities prior to 2011 683,832

IBNER 108,125



2017



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2.4.3 Sensitivity analysis

The sensitivity analysis table below shows the possible outcomes on income and shareholders' equity as at and for the year ended December 31, 2018, assuming an increase of 10% in the loss ratio.

Due to the nature of the operations accepted by IRB Brasil RE, there is no material exposure to convertibility, mortality or survival ratios. Other internal studies indicate that some non-operating liabilities, related to post-employment benefits, are indexed to inflation and covered by investments in securities with the same indexing (NTN-B), and that there is no significant exposure to such risk. 2.5 Market risk

Market risk is the risk arising from changes in prices and rates in the financial market, which can cause impairment in a security or asset portfolio. The key variables affecting the market risk of IRB Brasil RE's investment portfolio are interest rates, currency rates and the liquidity of the assets. For these variables, managing the risk involves various organizational units consisting of guidelines and strategies which Management considers adequate and consistent with the Company's governance. Preventative loss management techniques include VaR (Value at Risk) and the construction of stress scenarios. 2.5.1 Value at Risk

The Company's policies define limits, processes and tools for the effective management of market risk. In addition, the investment portfolio is monitored daily to ensure that limits are respected. Value at risk (VaR) is one of the methods used to manage market risk. Measuring risk through this method estimates the maximum loss anticipated during a specific time horizon and for a certain confidence interval under normal market conditions. This measure considers the effect of diversification of risk in the total portfolio. This metric is commonly used in the market to measure market risk. However, the model uses historical data to calculate portfolio losses and it is limited by the fact that it does not measure them above the confidence level. Under the historical method, with a significance level of 95%, an observation window of 252 business days and daily returns, the daily VaR of the Company's asset portfolio estimated for December 31, 2018, was approximately R$2,609, which represents a maximum estimated loss of 0.05% of the total portfolio of assets.

Gross effects Base Scenario 10.0% Impact

Shareholders' equity 4,000,780 3,758,903 (241,877)

Net income for the period 1,218,796 976,919 (241,877)

Impact (%) on net income (19.8)

Impact (%) on shareholders' equity (6.0)

Retrocession effects, net Base Scenario 10.0% Impact

Shareholders' equity 4,000,780 3,783,643 (217,137)

Net income for the period 1,218,796 1,001,659 (217,137)

Impact (%) on net income (17.8)

Impact (%) on shareholders' equity (5.4)



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2.5.2 Foreign currency sensitivity

The Company's operates in foreign currencies but its primary exposure is mainly to the U.S. dollars. Smaller exposure to other currencies, include Sterling, Euros and Argentine Pesos. The following scenarios were considered for a sensitivity analysis of the R$/US$ exchange rate:

Probable scenario: estimated exchange rate of R$/US$ 3.81 for the close of 2019. To define the probable scenario the Market Expectations System of the Central Bank of Brazil for December 31, 2018 was taken as a reference;

Scenario I: a devaluation of 25%, in relation to the rate under the probable scenario (exchange rate -R$/US$ 2.86);

Scenario II: a devaluation of 50% in relation to the rate under the probable scenario (exchange rate R$/US$ 1.91). The following table shows the sensitivity of total assets and liabilities to the base and stressed Scenarios:

(*) Including the foreign currency portion of local currency investment funds.

2.5.3 Interest rate sensitivity

The Company is exposed to an interest rate risk, since it holds securities that accrue interest. The following scenarios were considered for a sensitivity analysis based on changes in the SELIC interest rate:

Probable base scenario: an estimated interest rate of 7.2% at the end of 2019, using the Market Expectations System of the Central Bank of Brazil for December 31, 2018 as a reference;

Scenario I: an increase of 25%, in relation to the curve of the probable scenario (interest rate 9.0%);

Scenario II: an increase of 50%, in relation to the curve of the probable scenario (interest rate 10.8%). The following table gives the sensitivity of the portfolio of financial assets to the base and stressed Scenarios:

(*) Total portfolio balance does not include current account balances (Note 6.1).

December 31,

2018

Scenarios for

December 31, 2019

Group Base Probable Scenario I Scenario II

Total assets in foreign currency (*) 5,330,252 (76,440) (1,200,034) (2,323,627)

Total liabilities in foreign currency (5,284,656) 75,786 1,189,768 2,303,751

Net exposure 45,596 (654) (10,266) (19,876)

(0.0) (0.3) (0.5)

(0.1) (0.8) (1.6)

Impact (%) on shareholders' equity

Impact (%) on net income for the period

Impact (R$ thousand)

December 31,

2018

Scenarios for

December 31, 2019

Group Base Probable Scenario I Scenario II

Total portfolio (*) 5,961,862 5,952,359 5,930,238 5,908,117

Impact (%) on total portfolio (0.2) (0.5) (0.9)

Impact (R$) (9,503) (31,624) (53,745)

(0.2) (0.8) (1.3)

Impact (%) on profit (loss) (0.8) (2.6) (4.4)

Impact (R$ thousand)

Impact (%) on shareholders' equity



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Consolidated analysis by economic stress tests

Management subjected its portfolio to a selection of hypothetical the worldwide economic historic stress tests using the Predictive method, i.e. taking account of the correlations existing between the different risk factors. From the results of this analysis, it was concluded that the highest risk from an adverse economic scenario for the investment portfolio would be an Asian financial crisis, similar to that in Asia in 1997 when there was a sequence of currency devaluations, starting in Thailand and spreading rapidly to most of the Asian market. This, in turn, caused a steep drop in equity markets cuts in import revenues and political turbulence, leading to a loss of 1.1% in the portfolio. The worldwide economic stress tests analyzed were: Mexican Crisis (1995), Asian Crisis (1997), Russian Devaluation (1998), Tech Wreck (2000), Sept 11 (2001) and Fall 2008 (2008). Currency futures contracts

The Company's investment policy includes the possibility of currency hedging at times when it is exposed to high volatility from foreign currency assets and liabilities. 2.6 Credit risk

IRB Brasil RE considers that the primary source of credit risk is its retrocession operations. In order to minimize this risk, the Company has adopted the policy of undertaking retrocession operations with companies with proven recorded ratings of not less than A- (S&P, Fitch and AM Best) or A3 (Moody's), and has its own method of classifying retrocessionaires. The Reinsurer's exposure is mitigated by applying retrocession limits (individual and aggregate) for counterparties, which are reviewed and approved at least once a year by the Security Committee. The table below indicates the quality of the current retrocessionaires of IRB Brasil RE: Retrocession assets

(*)The ratings are allocated by the following agencies: S&P - Standard & Poor's, Moody's, A.M. Best and Fitch.

2018

Rating range (*) Local Admitted Occasional Total

AAA or equivalent - 3.4 0.2 3.6

AA or equivalent 0.2 37.2 4.5 41.9

A or equivalent - 11.5 42.6 54.1

BBB or equivalent 0.1 - - 0.1

Unrated 0.2 0.1 - 0.3

0.5 52.2 47.3 100.0

% of reinsurers participating in

agreements and hedge operations in

force

2017

Rating range (*) Local Admitted Occasional Total

AAA or equivalent - 3.6 0.4 4.0

AA or equivalent 0.2 35.2 4.1 39.5

A or equivalent 0.1 9.5 46.5 56.1

BBB or equivalent 0.1 - - 0.1

Unrated 0.2 0.1 - 0.3

0.6 48.4 51.0 100.0

% of reinsurers participating in

agreements and hedge operations in

force



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Credit ratings for reinsurance operations are shown in the following table: Credit ratings for operations

(*)The credit ratings for operations are measured according to the Company's internal criteria.

The credit risk for investment funds and financial instruments is limited as the counterparties are banks with high credit ratings awarded by the major international rating agencies. The following techniques are used to control and mitigate credit risk: definition of retrocession limits for each entity; monitoring of credit risk exposure; monitoring of changes and trends in the insurance and reinsurance markets and in the financial market; and preventative loss management.

2018

% exposure with

reinsurers

% exposure with

insurers

per rating range per rating range

Rating range (*) Local Admitted Occasional Total Total

A or equivalent 0.1 0.7 37.4 38.2 52.2

B or equivalent 0.1 0.3 9.2 9.6 8.2

CCC+ or equivalent 0.9 1.0 27.1 29.0 25.4

CCC or equivalent 0.1 2.1 17.2 19.4 14.2

CC or equivalent - - 0.2 0.2 -

CCC- or equivalent 0.2 - 3.4 3.6 -

D or equivalent - - - - -

1.4 4.1 94.5 100.0 100.0

2017

% exposure with

reinsurers

% exposure with

insurers

per rating range per rating range

Rating range (*) Local Admitted Occasional Total Total

A or equivalent 0.1 0.5 36.9 37.5 47.4

B or equivalent 0.2 0.4 8.6 9.2 7.8

CCC+ or equivalent 0.6 1.2 26.0 27.8 18.8

CCC or equivalent 0.1 2.0 17.1 19.2 10.4

CC or equivalent - - 0.2 0.2 -

CCC- or equivalent 0.2 0.1 2.5 2.8 2.0

D or equivalent - - 3.3 3.3 13.6

1.2 4.2 94.6 100.0 100.0



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Exposure to credit risk

The table below presents the total exposure to credit risk for the Company's several asset categories and the aging list of assets overdue.

Balance

2017

Cash and cash equivalents 27,001 27,001 16,222

At fair value through profit or loss

Private 105,424 105,424 173,081

Public 1,458,570 1,458,570 320,096

Foreign 768,972 768,972 606,934

Available for sale

Private 195,368 195,368 111,450

Public 3,117,043 3,117,043 4,033,902

Foreign 233,578 233,578 127,762

Held to maturity

Private - - 285,733

Credits from transactions with insurers

and reinsurers 3,869,138 251,129 126,175 152,469 68,839 220,507 4,688,257 3,307,861

Total financial assets and assets

from insurance and reinsurance

agreements

9,775,094 251,129 126,175 152,469 68,839 220,507 10,594,213 8,983,041

Book value61 to 120

days

121 to 180

days

More than 180

days

Parent Company

2018

Assets overdue and not impaired

Portfolio breakdown per class and

category

Assets not

overdue and not

impaired

Up to 30

days

31 to 60

days

Balance

2017

Cash and cash equivalents 43,131 43,131 25,771

At fair value through profit or loss

Private 143,583 143,583 266,969

Public 1,458,819 1,458,819 320,161

Foreign 768,972 768,972 606,934

Available for sale

Private 224,368 224,368 289,406

Public 3,117,063 3,117,063 3,903,951

Foreign 249,057 249,057 142,908

Held to maturity

Private - - 285,733

Credits from transactions with insurers

and reinsurers 3,869,138 251,129 126,175 152,469 68,839 220,606 4,688,356 3,307,875

Total financial assets and assets

from insurance and reinsurance

agreements

9,874,131 251,129 126,175 152,469 68,839 220,606 10,693,349 9,149,708

31 to 60

days

61 to 120

days

121 to 180

days

Portfolio breakdown per class and

category

Assets not

overdue and not

impaired

Up to 30

days

Consolidated

2018

Assets overdue and not impaired

More than 180

daysBook value



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2.7 Liquidity risk

Liquidity risk is associated with the Company's risk, even if it is solvent, does not have the resources to meet its obligations in a timely manner, or only comply with them by selling assets in unfavorable conditions, implying financial losses. To manage this risk, the Company seeks to allocate a minimum reserve in highly liquid funds to meet short-term cash requirements. This risk is continuously supervised by monitoring the cash flows of assets and liabilities over time, as shown in the table below.

(*)The flow of assets consists of the sum of cash flows arising from assets available for security, cash and cash equivalents, retrocession assets and receivables. (**)The flow of liabilities consists of technical reinsurance provisions.

2.8 Valuation techniques and assumptions applied for calculating fair value

The determination of fair value of financial assets and liabilities is described below: (a) Fair value of financial assets and liabilities with standard terms and conditions which are traded on active markets is determined on the basis of the prices observed in those markets. (b) Fair value of derivative instruments is based on quoted prices. Currency futures contracts are measured based on exchange rates and yield curves obtained for prices and for contracts with the same maturity dates. Fair value of other financial assets and liabilities (excepting those listed above) is determined according to generally accepted pricing models and based on discounted cash flow analysis. 2.9 Measurements at fair value recognized in the statement of financial position

The following table provides an analysis of the financial instruments measured at fair value after initial recognition, grouped into Levels 1 and 2 according to the degree to which fair value is observable: (a) Level 1 fair value measurement is obtained from quoted (unadjusted) prices in active markets for identical assets or liabilities. (b) Level 2 fair value measurement is obtained from variables, other than the quoted prices included in Level 1, which are observable for the asset or liability directly (i.e. as prices) or indirectly (i.e. based on prices). (c) Level 3 fair value measurement are those obtained from valuation techniques, which include variables for the asset or liability, but not based on observable market date (non-observable data).

2018

Parent Company

Assets (*) Liabilities (**) Assets (*) Liabilities (**)

Flow - up to 12 months 6,825,519 3,861,729 6,840,977 3,861,910

Flow - 12 to 24 months 1,124,576 1,917,507 1,124,679 1,917,598

Flow - 24 to 36 months 714,800 1,080,202 715,265 1,080,255

Flow - 36 to 48 months 172,523 572,624 172,554 572,652

Flow - more than 48 months 377,768 1,280,615 377,858 1,280,679

9,215,186 8,712,677 9,231,333 8,713,094

Consolidated



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2.9.1 Details of fair value of financial assets held to maturity

2018 2017 2018 2017

Financial assets at fair value

through profit or loss

Financial treasury bills Level 1 1,066,185 7,028 1,066,185 7,028

Repo transactions Level 1 392,385 313,068 392,634 313,133

Investment fund units Level 1 76,878 173,240 115,738 267,760

Fixed term deposits Level 1 640,404 277,223 640,404 277,223

Units of variable income funds Level 1 32,068 26,585 31,549 26,585

Shares from Brazilian companies Level 1 51,437 9,228 51,437 9,228

Shares held abroad Level 3 - 233,500 - 233,500

Debentures Level 1 1,666 1,309 1,666 1,309

Debentures - Inepar Level 3 11,858 11,798 11,858 11,798

Fixed term deposits Level 2 - 46,500 - 46,500

Real estate funds Level 1 8,213 - 8,213 -

government bonds held abroad Level 1 51,690 - 51,690 -

Others Level 2 182 632 - -

Total 2,332,966 1,100,111 2,371,374 1,194,064

Financial assets available for sale

Financial treasury bills Level 1 2,651,667 3,363,989 2,651,667 3,363,989

National treasury bills Level 1 - 219,820 - 219,820

National treasury notes Level 1 443,848 401,155 443,848 401,155

Exclusive fund units Level 1 140,529 - 140,529 -

Non-exclusive fund units Level 2 - - - -

Real estate funds Level 1 - - 29,094 48,004

Debentures Level 1 26,338 20,563 26,338 20,563

Financial bills Level 1 25,901 89,851 25,901 89,851

Repo transactions Level 1 21,528 48,938 21,548 48,956

Commercial paper Level 1 2,506 1,019 2,506 1,019

Others Level 2 94 17 - -

Government bonds held abroad Level 1 197,150 93,990 197,150 93,990

American Depositary Receipts - ADR Level 1 6,553 4,425 6,553 4,425

Fixed income securities held abroad Level 1 29,875 29,347 29,875 29,347

U.S. Treasury Securities Obligations Level 1 - - 6,819 6,766

Obligations of U.S. Government

corporations and agenciesLevel 2 - - 2,043 1,432

Non-U.S. Government Level 1 - - - 1,019

Sec Issued by States & Terr. Level 2 - - 1,025 219

Corporate securities Level 2 - - 4,721 4,428

Short-term investments Level 1 - - 871 1,282

Total 3,545,989 4,273,114 3,590,488 4,336,265


2017

Book Value Market Value Book Value Market Value

Financial assets held to maturity

Financial bills - private - - 285,733 285,733

Total - - 285,733 285,733


2018



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2.9.2 Methods and assumptions used in estimating the fair value of an asset

All the methods and assumptions for valuation based on "marking on the curve" and at market, after defining the type of marking for each asset, are fully consistent with the methodology detailed in IRB Brasil RE's asset marking manuals. These in turn are fully consistent with the custodians' marking manuals who provide services and are responsible for the calculation of marking, both to market and on the curve. In the case of "marking on the curve" a purchase price is fixed for the financial instruments in question and is used as a reference to calculate an interest rate for the entire period of the financial investment, recognizing the appreciation of the asset on a "pro-rata" basis, i.e. taking into account the purchase price of the security and accruing interest in proportion to the time elapsed since issue, appropriated daily. This type of marking ignores losses unless the asset is sold. Since the calculation is always based on the purchase price plus a daily appropriation of interest, the yield is always positive. The end result for "marking on the curve" is similar to "marking to market", provided the security does not have to be sold before maturity. For "marking to market", expected future rates curves are used in order to calculate the present value of each asset. In these cases, when it is necessary to structure forward interest rates, the mapping is based on market expectations of rates over longer periods. The curves are constructed in line with prices observed for fixed-income instruments for specific periods, taking account of all the liquid vertices (traded on the most recent business day) using primarily prices published by ANBIMA - the Brazilian Association of Financial and Capital Market Entities. This mapping, although continual, can only be observed for specific periods. Thus, it is necessary to estimate the interest rate curve for periods with no related rates or rates traded in the market, which for IRB Brasil RE is effected using exponential interpolation. 2.10 Minimum capital, risk capital and liquidity in relation to capital

CNSP Resolution 321/2015, as amended, establishes the methodology for the calculation of risk capital based on underwriting, credit, operating and market risks, calculation of adjusted shareholders' equity, as well as the criteria of liquidity and solvency. These are based on the following concepts: I Minimum capital requirement: the amount of capital which local reinsurers must maintain at all times in order to operate, being the higher of base capital and risk capital. II Base capital: a fixed sum of capital, amounting to R$60,000, which a local reinsurer must maintain at all times. III Risk capital: a variable amount of capital which a local reinsurer must maintain at all times, in order to guarantee the risks inherent in its operations, as provided for in the regulations. IV Net assets: All the assets accepted by the National Monetary Council in up to 100% of coverage for technical provisions. V Liquidity in relation to risk capital: a situation in which the total of net assets exceeds the amount required for covering provisions in more than 20% of the risk capital obtained on deducting the flow of unregistered transactions from the calculation of market risk capital.



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2.10.1 Calculation of the minimum capital requirement

Considering the methodology established by the regulatory body, the Company presents a sufficiency of adjusted shareholders' equity in relation to the minimum required capital calculated on the base date of December 31, 2018:

(*) Shareholders' equity used for calculating solvency. (**) The higher of total risk capital and base capital. (***) The value of risk capital as at December 31, 2017, has been amended, due to adjustments in the calculation of capital based on credit risk.

(****) The amount of tax credits (Note 10.1) deducted in calculating adjusted shareholders' equity is the surplus exceeding 15% of the minimum capital requirement (CMR).


2018 2017

Risk capital based on underwriting risk 667,619 523,073

Risk capital based on credit risk 269,891 324,364

Risk capital based on operating risk 42,329 33,518

Risk capital based on market risk 158,695 82,900

Benefit from risk diversification (202,721) (161,909)

Total risk capital (***) 935,813 801,946

Base capital 60,000 60,000

Minimum capital required (**) 935,813 801,946

Adjusted shareholders' equity (*) 3,003,046 2,593,474

Sufficiency of adjusted shareholders' equity 2,067,233 1,791,528

2018 2017

Shareholders' equity 4,000,780 3,581,183

Deductions

Prepaid expenses (11,886) (6,103)

Equity interest (630,976) (623,353)

Intangible assets (42,453) (54,097)

Rights/obligations of offshores branches (90,563) (103,312)

Tax credits (****) (279,383) (228,626)

Other deductions (50) (50)

Economic adjustments 57,577 27,832

Adjusted shareholders' equity 3,003,046 2,593,474



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2.10.2 Liquidity in relation to risk capital

The Company presented sufficient levels of net assets at year-ends, surplus to cover provisions and exceeding the minimum rate established by current regulations. The table below shows the result of the calculation of liquidity in relation to risk capital.

(*) Financial investments linked to technical provisions. (**) As provided for in CNSP Resolution 321/15, the risk capital used to calculate liquidity is net of the unregistered flows used to calculate risk capital based on market risk.

(*) Financial investments linked to technical provisions. (**) As provided for in CNSP Resolution 321/15, the risk capital used to calculate liquidity is net of the unregistered flows used to calculate risk capital based on market risk.

2018 2017

Elegible assets (*) 5,618,963 5,155,857

Technical provisions (8,712,677) (8,074,546)

Retrocession assets 3,084,435 3,295,527

Reducing assets (818,026) (701,966)

Credit rights 1,302,813 991,258

20.0% coverage of total risk capital (**) (181,957) (165,826)

Liquidity sufficiency 293,551 500,304

Parent Company

2018 2017

Elegible assets (*) 5,618,963 5,155,857

Technical provisions (8,713,094) (8,103,804)

Retrocession assets 3,084,452 3,324,410

Reducing assets (818,026) (701,966)

Credit rights 1,302,813 991,258

20.0% coverage of total risk capital (**) (181,957) (165,826)

Liquidity sufficiency 293,151 499,929

Consolidated



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Section C - Information by segment 3 Information by business segment 3.1 Statements of income by segment

IRB Brasil RE's business segments are aligned with its executive structure, reflecting the internal financial reports of operating performance in Brazil and abroad which Management uses in conducting the business. Net income is the key factor used by Management to monitor results. As at December 31, 2018 and 2017, IRB Brasil RE's income by geographical region is as below:

2018 2017 2018 2017

Premiums written 6,035,512 5,060,851 6,035,512 5,060,851

Premiums written - Brazil 3,639,559 3,228,231 3,639,559 3,228,231

Premiums written - abroad 2,395,953 1,832,620 2,395,953 1,832,620

Premiums earned 5,764,638 4,737,772 5,764,638 4,737,772

Premiums earned - Brazil 3,418,822 3,084,906 3,418,822 3,084,906

Premiums earned - abroad 2,345,816 1,652,866 2,345,816 1,652,866

Claims incurred (2,820,647) (2,484,074) (2,820,647) (2,484,074)

Claim incurred - Brazil (832,588) (1,339,528) (832,588) (1,339,528)

Claim incurred - abroad (1,988,059) (1,144,546) (1,988,059) (1,144,546)

Acquisition cost (140,720) (133,129) (140,720) (133,129)

Acquisition cost - Brazil (64,558) (66,101) (64,558) (66,101)

Acquisition cost - abroad (76,162) (67,028) (76,162) (67,028)

Loss from retrocession (1,450,923) (1,188,729) (1,450,923) (1,188,729)

Loss from retrocession - Brazil (1,363,339) (1,123,437) (1,363,339) (1,123,437)

Loss from retrocession - abroad (87,584) (65,292) (87,584) (65,292)

Gross margin 1,352,348 931,840 1,352,348 931,840

Gross margin - Brazil 1,158,337 555,840 1,158,337 555,840

Gross margin - abroad 194,011 376,000 194,011 376,000

Other operating income and expenses (18,292) (41,210) (18,292) (41,210)

Administrative expenses (221,530) (264,685) (238,346) (277,156)

Tax expenses (144,816) (77,456) (148,866) (82,214)

Operating income 967,710 548,489 946,844 531,260

Financial income 314,731 648,150 447,804 686,326

Equity income 138,884 55,001 77,540 53,405

Gains or losses from non-current assets (28) 36 (28) 36

Earnings before income and social contribution taxes 1,421,297 1,251,676 1,472,160 1,271,027

Income and social contribution taxes (202,501) (326,626) (253,364) (345,977)





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The Company's Management bases its decision-making management accounts which differ from those shown in the statement of income, as prepared in accordance with the accounting practices generally accepted in Brazil for reinsurers, as shown below:

2018 2017 2018 2017

Reinsurance premiums - Brazil (a) 4,219,742 3,710,490 4,219,742 3,710,490

Reinsurance premiums - abroad (a) 2,744,126 2,073,072 2,744,126 2,073,072

Premiums assigned in retrocession (b) (1,869,978) (1,732,643) (1,869,978) (1,732,643)

Retained premiums 5,093,890 4,050,919 5,093,890 4,050,919

Changes in technical provisions ( c) (296,755) (144,972) (296,755) (144,972)

Earned premiums 4,797,135 3,905,947 4,797,135 3,905,947

Retained claims (d) (2,682,750) (2,304,282) (2,682,750) (2,304,282)

PSL (2,283,983) (1,952,134) (2,283,983) (1,952,134)

IBNR (422,677) (334,082) (422,677) (334,082)

Others 23,910 (18,066) 23,910 (18,066)

Acquisition cost (e) (906,642) (700,767) (906,642) (700,767)

Gross income 1,207,743 900,898 1,207,743 900,898

Other operating expenses (f) (168,623) (148,013) (171,980) (151,797)

Administrative expenses (g) (220,564) (212,161) (228,181) (214,846)

Financial and equity income (h) 643,456 782,905 705,974 808,725


Equity income 24,728 (11,361) 77,077 53,805

Income before taxes 1,462,012 1,323,629 1,513,556 1,342,980

Taxes, contributions and profit sharing (i) (243,216) (398,579) (294,760) (417,930)





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The table below presents a reconciliation between the balances in the statement of income and the management accounts.

2018 2017 2018 2017

Net premiums written 6,035,512 5,060,851 6,035,512 5,060,851

Gross premium written (a) 6,961,338 5,783,294 6,961,338 5,783,294

Reinsurance commission (e) (925,826) (722,443) (925,826) (722,443)

Changes in technical provisions (270,874) (323,079) (270,874) (323,079)

Changes in technical provisions - premiums (c) (230,438) (240,167) (230,438) (240,167)

Changes in technical provisions - commissions (e) 52,759 189 52,759 189

Changes in technical provisions - other provisions (c) (93,195) (83,101) (93,195) (83,101)

Premiums earned 5,764,638 4,737,772 5,764,638 4,737,772

Claims incurred (d) (2,820,647) (2,484,074) (2,820,647) (2,484,074)

Acquisition cost (e) (140,720) (133,129) (140,720) (133,129)

Loss from retrocession (1,450,923) (1,188,729) (1,450,923) (1,188,729)

Recovery of claims incurred (d) 449,244 437,397 449,244 437,397

Salvages and reimbursements to retrocessionarie (d) (26,652) (52,092) (26,652) (52,092)

IBNR recovery (d) (160,745) (184,636) (160,745) (184,636)

Premiums assigned in retrocession (b) (1,868,931) (1,732,243) (1,868,931) (1,732,243)

Commission on premiums assigned in retrocession (e) 106,000 147,343 106,000 147,343

Changes in technical provisions - premiums assigned (c ) 26,868 178,296 26,868 178,296

Changes in technical provisions - commission assigned (e) (420) 4,989 (420) 4,989

Changes in technical provisions - other provisions (c ) 10 - 10 -

Other retrocession income (f) 22,067 9,908 22,067 9,908

Other income - acquisition cost (e) 1,636 2,309 1,636 2,309

Gross margin 1,352,348 931,840 1,352,348 931,840

Other operating income and expenses (18,292) (41,210) (18,292) (41,210)

Other operating income and expenses (f) (53,581) (72,445) (53,581) (72,445)

Provision for credit coverage (h) (30,664) (241) (30,664) (241)

Other financial income (h) 65,953 31,476 65,953 31,476

Administrative expenses (221,530) (264,685) (238,346) (277,156)

Profit sharing (i) - (22,145) - (22,145)

Tax expenses (f) (268) (2,048) (268) (2,048)

Other tax expenses (i) (4,394) (6,883) (4,394) (6,883)

Other administrative expenses (g) (214,549) (212,161) (221,853) (214,080)

Other financial income (loss) (h) 4,310 (113) (5,202) (10,665)

Other operating income and expenses (f) (6,629) (21,335) (6,629) (21,335)

Tax expenses (144,816) (77,456) (148,866) (82,214)

Tax - subsidiaries and affiliates (i) (15,758) (14,143) (16,439) (14,143)

Tax expenses (f) (129,058) (63,313) (132,415) (67,097)

Other taxes (h) - - (12) (974)

Operating income 967,710 548,489 946,844 531,260


Interest on acquisition cost (e) (71) (25) (71) (25)

Interest on premiums assigned (b) (1,047) (400) (1,047) (400)

Interest on premiums abroad (a) 274 198 274 198

Interest on premiums in Brazil (a) 2,256 70 2,256 70

Interest on claims (d) (123,950) (20,877) (123,950) (20,877)

Tax expenses (f) (1,154) 1,220 (1,154) 1,220

Financial income (h) 458,986 696,746 592,059 734,922

Other financial income (loss) (i) (20,563) (28,782) (20,563) (28,782)

Equity income 138,884 55,001 77,540 53,405

Other equity income (h) 144,899 55,001 83,868 54,171

Other administrative expenses (g) (6,015) - (6,328) (766)

Gains (losses) from non-current assets (h) (28) 36 (28) 36

Earnings before income and social contribution taxes 1,421,297 1,251,676 1,472,160 1,271,027

Income and social contribution taxes (i) (202,501) (326,626) (253,364) (345,977)





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Section D - Group structure

4 Investments 4.1 Changes in investments

(i) On February 29, 2016, IRB Brasil RE incorporated IRB Investimentos e Participações Imobiliárias S.A., a wholly-

owned subsidiary, for the purpose of holding its interests in shopping malls, including wholly-owned subsidiaries and equity

interests in real estate ventures. In December 2016, its authorized capital was R$168,466, fully subscribed and paid in.

Following the shareholders' Extraordinary General Meeting on February 17, 2017, the Company increased its capital by

R$400,000, through the issue of 400,000,000 new common shares; at December 31, 2017, subscribed capital paid in

totals R$381,441 and unpaid capital totals R$18,559. As a result, capital stock as at December 31, 2017 was R$549,907,

comprising paid-up capital of R$568,466 and capital to be paid in of R$18,559.

A constituent shareholders' meeting of IRB Asset Management, held on December 13, 2017, set the amount of capital at

R$5,100 to be paid in immediately.

(ii) On April 6, 2018, IRB International Corporation, executed a Share Purchase Agreement with an affiliate of Quest

Group Holdings Limited ("Quest") to sell all shares held by IRB Brasil RE indirectly in the United Americas Insurance

Company ("UAIC"), a subsidiary of IRB International Corporation. The transaction totaled US$5.3 million and settled was

paid on January 15, 2019.

2018 2017

Initial position 623,352 224,393

Capital increase (i) 4,797 386,541

Income from subsidiaries 113,693 66,762

Equity valuation adjustment (22,363) -

Dividends paid (92,168) (54,861)

Exchange rate changes 3,198 517

Reversal (provision) of impairment (ii) 467 -

Final position 630,976 623,352

Parent Company



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4.2 Equity interest

(*) Direct subsidiaries of IRB Investimentos e Participações Imobiliárias.

2018

Name Country Business Relationship

Direct interest on

common shares

Indirect interest on

common shares

IRB Internacional USA Holding company Subsidiary 100.0%

IRB Asset Management BrazilManagement of financial

assetsSubsidiary

100.0%

IRB Investimentos e Participações Imobiliárias Brazil Real estate management Subsidiary 100.0%

IRB Santos Dumont (*) Brazil Real estate management Indirect subsidiary 100.0%

IRB Chile (*) Brazil Real estate management Indirect subsidiary 100.0%

IRB Uso (*) Brazil Real estate management Indirect subsidiary 100.0%

IRB Renda (*) Brazil Real estate management Indirect subsidiary 100.0%

BB Ações 22 Fundo de Investimento Brazil Investment fund Subsidiary 100.0%

BB IRB Brasil RE Liquidez Fundo de Investimento Renda Fixa Brazil Investment fund Subsidiary 100.0%

Bradesco Fundo de Investimento em Ações Safe IBRX-50 Brazil Investment fund Subsidiary 100.0%

Itaú FI IRB Brasil RE Renda Fixa Brazil Investment fund Subsidiary 100.0%

Fundo de Investimento Caixa IRB Brasil RE Renda Fixa Brazil Investment fund Subsidiary 100.0%

Bradesco FI RF IRB Caixa Brazil Investment fund Subsidiary 100.0%

FI Itaú Renda Fixa IRB Brasil RE Crédito Privado Brazil Investment fund Subsidiary 100.0%

BB IRB Brasil RE FI RF LP Crédito Privado Brazil Investment fund Subsidiary 100.0%

Fundo de Investimento RF IRB Brasil RE Absoluto Brazil Investment fund Subsidiary 100.0%

IRB Fundo de Investimento Multimercado Brazil Investment fund Subsidiary 100.0%

IRB Fundo de Investimento Renda Fixa Crédito Privado Brazil Investment fund Subsidiary 100.0%

Consolidated

Percentage

2017

Name Country Business Relationship

Direct interest on

common shares

Indirect interest on

common shares

IRB Internacional USA Holding company Subsidiary 100.0%

IRB Asset Management BrazilManagement of financial

assetsSubsidiary

100.0%

IRB Investimentos e Participações Imobiliárias Brazil Real estate management Subsidiary 100.0%

IRB Santos Dumont (*) Brazil Real estate management Indirect subsidiary 100.0%

IRB Chile (*) Brazil Real estate management Indirect subsidiary 100.0%

IRB Uso (*) Brazil Real estate management Indirect subsidiary 100.0%

IRB Renda (*) Brazil Real estate management Indirect subsidiary 100.0%

BB Ações 22 Fundo de Investimento Brazil Investment fund Subsidiary 100.0%

BB Peabiru Fundo de Investimento Renda Fixa Brazil Investment fund Subsidiary 100.0%

Bradesco Fundo de Investimento em Ações Safe IBRX-50 Brazil Investment fund Subsidiary 100.0%

Itaú FI IRB Brasil RE Renda Fixa Brazil Investment fund Subsidiary 100.0%

Caixa FI IRB Brasil RE Renda Fixa Brazil Investment fund Subsidiary 100.0%

Bradesco FI IRB Brasil RE Renda Fixa Brazil Investment fund Subsidiary 100.0%

Bradesco FI IRB Brasil RE Renda Fixa Supreme Brazil Investment fund Subsidiary 100.0%

Itaú FI IRB Brasil RE LP Crédito Privado Brazil Investment fund Subsidiary 100.0%

Caixa FI IRB Brasil RE LP Crédito Privado Brazil Investment fund Subsidiary 100.0%

B.Brasil FI IRB Brasil RE LP Crédito Privado Brazil Investment fund Subsidiary 100.0%

Bradesco FI IRB Brasil RE LP Crédito Privado Brazil Investment fund Subsidiary 100.0%

Fundo de Investimento RF IRB Brasil RE Absoluto Brazil Investment fund Subsidiary 100.0%

Consolidated

Percentage



50 of 126

Section E - Notes to the financial statements

5 Cash and cash equivalents

The balance of this account is as follows:

6 Financial investments

6.1 Analysis of investments

2018 2017 2018 2017

Cash and cash equivalents in Brazilian currency 1,162 210 1,858 6,141

Cash and cash equivalents in foreign currency 25,839 16,012 41,273 19,630

Total 27,001 16,222 43,131 25,771


2018

Amount

assessed

based on the

curve

Market

value/book

value

Amount

assessed

based on the

curve

Market

value/book

value

Average

interest rate -

%

Total

Fixed income securities- Public

Financial treasury bills 1,066,185 1,066,185 2,651,244 2,651,667 SELIC 3,717,852

National treasury notes - - 439,031 443,848 8.48% a.a. 443,848

Repo transactions 392,385 392,385 21,528 21,528 SELIC 413,913

Fixed income securities - Private

Debentures 13,524 13,524 26,282 26,338 105.4% CDI 39,862

Financial bills - - 25,828 25,901 105.1% CDI 25,901

Commercial papers - - 2,506 2,506 105.% CDI 2,506

Real estate funds 8,213 8,213 - - - 8,213

Exclusive fund units - - 140,486 140,529 - 140,529

Others 182 182 94 94 - 276

Equity securities - - -

Exclusive fund units 32,068 32,068 - - - 32,068

Shares from Brazilian companies 51,437 51,437 - - - 51,437

1,563,994 1,563,994 3,306,999 3,312,411 4,876,405

Investments abroad

Fixed income securities- Public 51,690 51,690 208,051 197,150 5.3% a.a. 248,840


Non-exclusive investment fund units 76,878 76,878 - - - 76,878

American Deposits Receipt - - 23,279 6,553 - 6,553

Fixed income securities (HSBC) - - 31,151 29,875 2.6% a.a. 29,875

Fixed term deposits abroad (i) 640,404 640,404 - - 2.1% a.a. 640,404

768,972 768,972 262,481 233,578 1,002,550

Total 2,332,966 2,332,966 3,569,480 3,545,989 5,878,955

% 39.7% 60.3% 100.0%

Current 2,332,966 218,945 2,551,911

Non-current - 3,327,044 3,327,044

Parent Company

Fair value through profit or loss Available for sale



51 of 126


Amount

assessed

based on the

curve

Market

value/book

value

Amount

assessed

based on the

curve

Market

value/book

value

Amount

assessed

based on the

curve

Market

value/book

value

Average

interest rate -

%

Total

Fixed income securities - Public

Financial treasury bills 7,028 7,028 3,360,541 3,363,989 - - SELIC 3,371,017

National treasury notes - - 420,569 401,155 - - IPCA + 3.8% a.a. 401,155

National Treasury bills - - 221,137 219,820 - - 9.2% a.a. 219,820

Repo transactions 313,068 313,068 48,938 48,938 - - SELIC 362,006


Debentures 13,107 13,107 20,503 20,563 - - 110.0%CDI 33,670

Fixed term deposits 46,500 46,500 - - - - - 46,500

Financial bills - - 89,624 89,851 285,733 285,733 106.4%CDI 375,584

Commercial papers - - 1,018 1,019 - - 106.8%CDI 1,019

Exclusive fund units 77,029 77,029 - - - - - 77,029

Other 632 632 17 17 - - - 649

Equity securities 32,571 35,813 35,813

489,935 493,177 4,162,347 4,145,352 285,733 285,733 - 4,924,262

Investments abroad

Fixed income securities - Public - - 100,329 93,990 - - 6.8% a.a. 93,990


Non-exclusive investment fund units 96,211 96,211 - - - - 23.6% 96,211

American Deposits Receipt - - 19,873 4,425 - - - 4,425

Fixed income securities (HSBC) - - 30,175 29,347 - - 2.5% a.a. 29,347

Fixed term deposits abroad (i) 277,223 277,223 - - - - 5.3% a.a. 277,223

Other investments abroad 233,500 233,500 - - - - - 233,500

606,934 606,934 150,377 127,762 - - 734,696

Total 1,096,869 1,100,111 4,312,724 4,273,114 285,733 285,733 - 5,658,958

% 19.5% 75.5% 5.0% 100.0%

Current 1,100,111 161,813 285,733 1,547,657

Non-current - 4,111,301 - 4,111,301

Fair value through profit or loss Available for sale Held to maturity

Parent Company

2017

Amount

assessed

based on the

curve

Market

value/book value

Amount

assessed

based on the

curve

Market

value/book

value

Average

interest

rate - %

Total


Financial treasury bills 1,066,185 1,066,185 2,651,244 2,651,667 SELIC 3,717,852

National treasury notes - - 439,031 443,848 8.48% a.a. 443,848

Repo transactions 392,634 392,634 21,548 21,548 SELIC 414,182


Debentures 13,524 13,524 26,282 26,338 105.43% CDI 39,862

Financial bills - - 25,828 25,901 105.1% CDI 25,901

Commercial papers - - 2,506 2,506 2.14% CDI 2,506

Exclusive fund units 8,213 8,213 140,486 140,529 - 148,742

Real estate funds - - 29,268 29,094 - 29,094

Non-exclusive investment fund units 38,860 38,860 - - - 38,860

Exclusive fund units 31,549 31,549 - - - 31,549

Shares from Brazilian companies 51,437 51,437 - - - 51,437

1,602,402 1,602,402 3,336,193 3,341,431 4,943,833

Investments abroad

Fixed income securities- Public 51,690 51,690 208,051 197,150 5.3% a.a. 248,840


Non-exclusive investment fund units 76,878 76,878 - - 105.3% 76,878

American Deposits Receipt - - 23,279 6,553 - 6,553

Fixed income securities (HSBC) - - 31,151 29,875 2.5% a.a. 29,875

Fixed term deposits abroad (i) 640,404 640,404 - - 2.14% a.a. 640,404

U.S. Treasury Securities Obligations of U.S. - - 6,736 6,819 - 6,819

Obligation of U.S. Government Corporations and

Agencies- - 2,032 2,043 - 2,043

Non-U.S. Government - - - - - -

Short-Term Investments - - 871 871 - 871

Sec Issued by States & Terr. - - 1,018 1,025 - 1,025

Corporate Securities - - 4,693 4,721 - 4,721

768,972 768,972 277,831 249,057 - 1,018,029

Total 2,371,374 2,371,374 3,614,024 3,590,488 5,961,862

% 39.8% 60.2% 100.0%

Current 2,371,374 224,100 2,595,474

Non-current - 3,366,388 3,366,388

Consolidated

2018

Fair value through profit or loss Available for sale

Equity securities



52 of 126


(i) Time deposits held abroad

These are time deposits placed with Citibank (99.0%) and Banco Patagonia (1.0%), with maturities of between 12 and 120 days. The investments are denominated in U.S. dollars and Argentine Pesos. Of the time deposits, 47.0% is held as corresponding entry to other securities issued by financial institutions in favor of the Company.

Amount

assessed

based on the

curve

Market

value/book value

Amount

assessed

based on the

curve

Market

value/book

value

Amount

assessed

based on

the curve

Market

value/book

value

Average

interest rate -

%

Total


Financial treasury bills - - 3,360,541 3,363,989 - - SELIC 3,363,989

National treasury notes - - 420,569 401,155 - - IPCA + 3.8% a.a. 401,155

National Treasury bills 7,028 7,028 221,137 219,820 - - 9.2% a.a. 226,848

Repo transactions 313,133 313,133 48,956 48,956 - - SELIC 362,089


Debentures 13,107 13,107 20,503 20,563 - - 110.0%CDI 33,670

Fixed term deposits 46,500 46,500 - - - - - 46,500

Financial bills - - 89,624 89,851 285,733 285,733 105.4%CDI 375,584

Commercial papers - - 1,018 1,019 - - 106.8%CDI 1,019

Non-exclusive real estate funds - - 50,044 48,004 - - - 48,004

Exclusive fund units 77,029 77,029 - - - - - 77,029

Non-exclusive fund units 94,520 94,520 - - - - - 94,520

Equity securities 32,571 35,813 - - 35,813

583,888 587,130 4,212,392 4,193,357 285,733 285,733 5,066,220

Investments abroad

Fixed income securities - Public - - 100,329 93,990 - - 6.8% a.a. 93,990


Non-exclusive investment fund units 96,211 96,211 - - - - 23.6% 96,211

American Deposits Receipt - - 19,873 4,425 - - - 4,425

Fixed income securities (HSBC) - - 30,175 29,347 - - 2.5% a.a. 29,347

Fixed term deposits abroad (i) 277,223 277,223 - - - - 5.3% a.a. 277,223

Other investments abroad 233,500 233,500 - - - - - 233,500

U.S. Treasury Securities Obligations of U.S. - - 6,766 6,766 - - - 6,766

Obligation of U.S. Government Corporations and

Agencies- - 1,432 1,432 - - - 1,432

Non-U.S. Government - - 1,019 1,019 - - - 1,019

Sec Issued by States & Terr. - - 219 219 - - - 219

Corporate Securities - - 4,428 4,428 - - - 4,428

Short-term Investments - - 1,282 1,282 - - - 1,282

606,934 606,934 165,523 142,908 - - 749,842

Total 1,190,822 1,194,064 4,377,915 4,336,265 285,733 285,733 5,816,062

% 20.5% 74.6% 4.9% 100.0%

Current 1,194,064 116,560 285,733 1,596,357

Non-current - 4,219,705 - 4,219,705

Fair value through profit or loss Available for sale Held to maturity

Consolidated

2017



53 of 126

6.1.1 Analysis of investments by type and maturity date

Parent Company

2018

1 to 181 to More than Total

180 days 365 days 365 days

Fair value through profit or loss


Financial treasury bills - 7,124 - 1,059,061 1,066,185

Repo transactions - 392,385 - - 392,385


Debentures 13,524 - - - 13,524

Real estate funds 8,213 - - - 8,213

Others 182 - - - 182

Variable income securities

Shares from Brazilian companies 82,986 - - - 82,986

Others 519 - - - 519

Investments abroad

Fixed income securities - Public - 51,690 - - 51,690


Non-exclusive investment fund units 76,878 - - - 76,878

Fixed term deposits abroad - 640,404 - - 640,404

182,302 1,091,603 - 1,059,061 2,332,966


Financial treasury bills - - 38,465 2,613,202 2,651,667

National treasury notes - - - 443,848 443,848



Debentures - - - 26,338 26,338

Exclusive investment fund units 140,529 - - - 140,529

Financial bills - - - 25,901 25,901

Commercial papers - 2,506 - - 2,506

Others 94 - - - 94

Investments abroad

Fixed income securities - Public - - 197,150 197,150


American Deposits Receipt 6,553 - - - 6,553

Fixed income securities (HSBC) - 5,674 3,596 20,605 29,875

147,176 29,708 42,061 3,327,044 3,545,989

Total 5,878,955

No maturity date

Available for sale



54 of 126


Parent Company

2017

1 to 181 to More than Total




Financial treasury bills - 6,768 - 260 7,028



Debentures 13,107 - - - 13,107

Fixed term deposits 46,500 - - - 46,500


Others 368 - - - 368

Equity securities

Shares from Brazilian companies 35,813 - - - 35,813

Others 264 - - - 264

Investments abroad



Other investments abroad 233,500 - - - 233,500

502,792 597,059 - 260 1,100,111


Financial treasury bills - 16,227 19,254 3,328,508 3,363,989


National Treasury Bills - - - 219,820 219,820



Debentures - 1,664 607 18,292 20,563

Financial bills - 9,343 56,103 24,405 89,851

Commercial papers - - - 1,019 1,019

Others 17 - - - 17

Investments abroad

Fixed income securities - Public - 742 - 93,248 93,990




4,442 78,921 78,450 4,111,301 4,273,114

Held to maturity

Financial bills - 285,733 - - 285,733

- 285,733 - - 285,733

Total 5,658,958

Available for sale

No maturity date



55 of 126


1 to 181 to More than




Financial treasury bills - 7,124 - 1,059,061 1,066,185



Debentures 13,524 - - - 13,524

Exclusive investment fund units - - - - -

Real estate funds 8,213 - - - 8,213


Equity securities -

Exclusive fund units 31,549 - - - 31,549

Shares from companies abroad 51,437 - - - 51,437

Investments abroad

Fixed income securities- Public - 51,690 - - 51,690




220,461 1,091,852 - 1,059,061 2,371,374


Financial treasury bills - - 38,465 2,613,202 2,651,667




Real estate funds - - - 29,094 29,094

Debentures - - - 26,338 26,338

Exclusive fund units 140,529 - - - 140,529

Financial bills - - 25,901 25,901

Commercial papers - 2,506 - - 2,506

Investments abroad

Fixed income securities - Public - - - 197,150 197,150


Non-exclusive investment fund units - - - - -



U.S. Treasury Securities Obligations of U.S. - 1,795 462 4,562 6,819

Obligation of U.S. Government Corporations and Agencies - 294 383 1,366 2,043

Short-Term Investments - 871 - - 871

Sec Issued by States & Terr. - 116 212 697 1,025

Corporate Securities - 1,096 - 3,625 4,721

147,082 33,900 43,118 3,366,388 3,590,488

Total 5,961,862

Available for sale

Consolidated

2018

No maturity date Total



56 of 126


1 to 181 to More than




Financial treasury bills - 6,768 - 260 7,028



Debentures 13,107 - - - 13,107

Fixed term deposits 46,500 - - - 46,500



Equity securities 35,813 35,813

Investments abroad



Other investments abroad 233,500 - - - 233,500

596,680 597,124 - 260 1,194,064


Financial treasury bills - 9,343 56,103 2,212,677 2,278,123

National treasury notes - 16,227 19,254 1,541,391 1,576,872

Repo transactions - - - 48,956 48,956


Non-exclusive real estate fund units - - - 48,004 48,004

Debentures - 1,664 607 18,292 20,563

Financial bills - - - 219,820 219,820

Commercial papers - - - 1,019 1,019

Investments abroad

Fixed income securities - Public - 742 - 93,248 93,990




U.S. Treasury Securities Obligations of U.S. - 1,059 741 4,966 6,766

Obligation of U.S. Government Corporations and Agencies - - - 1,432 1,432

Non-U.S. Government - - 134 885 1,019

Sec Issued by States & Terr. - - 219 - 219

Corporate Securities - - 267 4,161 4,428

Short-term Investments 1,282 - - - 1,282

5,707 31,042 79,811 4,219,705 4,336,265

Held to maturity

Financial bills - 285,733 - - 285,733

- 285,733 - - 285,733

Total 5,816,062

Total

Available for sale

Consolidated

2017

No maturity date



57 of 126

6.2 Changes in financial investments

Parent Company

Fair value through

profit or loss

Available for

sale

Held to

maturityTotal

Balance as of December 31, 2016 653,503 4,854,044 263,551 5,771,098

Investments 3,241,822 1,411,516 - 4,653,338

Earnings - redemption (23,768) (402,140) - (425,908)

Principal - redemption (2,864,049) (2,048,652) (5,118) (4,917,819)


Adjustment to market value - 34,817 - 34,817

Exchange rate changes 3,177 (2,005) (167) 1,005

Balance as of December 31, 2017 1,100,111 4,273,114 285,733 5,658,958

Fair value through

profit or loss

Available for

sale

Held to

maturityTotal


Investments 10,493,347 2,563,032 - 13,056,379

Earnings - redemption (33,268) (451,570) (88,770) (573,608)




Exchange rate changes 17,396 9,870 - 27,266

Others 20,232 - - 20,232

Balance as of December 31, 2018 2,332,966 3,545,989 - 5,878,955

Consolidated

Fair value through

profit or loss

Available for

sale

Held to

maturityTotal

Balance as of December 31, 2016 673,464 4,659,626 263,551 5,596,641

Investments 3,670,561 1,637,234 - 5,307,795

Earnings - redemption (23,768) (402,140) - (425,908)




Exchange rate changes 3,177 (2,005) (167) 1,005


Fair value through

profit or loss

Available for

sale

Held to

maturityTotal


Investments 10,763,798 2,566,275 - 13,330,073

Earnings - redemption (32,993) (451,570) (88,770) (573,333)




Exchange rate changes 17,396 10,543 - 27,939

Others 20,232 - - 20,232

Balance as of December 31, 2018 2,371,374 3,590,488 - 5,961,862



58 of 126

7 Credits for reinsurance and retrocession operations

Accounts for reinsurance and retrocession credits mainly consist of balances receivable from the operations of Brazilian and foreign insurers and reinsurers, plus premiums receivable, commissions, claim indemnities receivable and credits arising from past transactions by the London branch, as follows:

7.1 Analysis

7.2 Account flux

7.2.1 Transactions with insurance companies

2018 2017 2018 2017

Current

Transactions with insurers (7.2.1) 3,327,272 2,263,360 3,327,272 2,263,360

Transactions with reinsurers (7.2.2) 1,304,416 949,586 1,304,416 949,586

Other operating credits 56,569 65,161 56,668 65,175

Allowance for doubtful accounts (36,274) (58,109) (36,274) (58,109)

4,651,983 3,219,998 4,652,082 3,220,012

Non-current

Transactions with insurer (7.2.1) - 29,754 - 29,754

Allowance for doubtful accounts - (29,754) - (29,754)

- - - -

Total 4,651,983 3,219,998 4,652,082 3,220,012


Actual

Premium

Estimated

Premium

RVNE

PremiumClaim Total

Balance as of December 31, 2016 992,605 427,444 305,437 134,280 1,859,766

Premiums receivable 852,659 768,416 163,994 - 1,785,069

Payments received (787,298) (573,425) (119,172) - (1,479,895)

Salvages, reimbursements and advances for

settlement of claims - - - 92,113 92,113

Exchange rate changes 23,663 8,284 2,481 1,633 36,061

Balance as of December 31, 2017 1,081,629 630,719 352,740 228,026 2,293,114

Current 2,263,360

Non-current 29,754

Total 2,293,114


Actual

Premium

Estimated

Premium

RVNE

PremiumClaim Total

Balance as of December 31, 2017 1,081,629 630,719 352,740 228,026 2,293,114

Premiums receivable 3,700,159 1,280,193 77,482 - 5,057,834

Payments received (3,728,306) (485,282) (7,499) - (4,221,087)

Salvages, reimbursements and advances for

settlement of claims - - - 115,627 115,627

Exchange rate changes 7,483 33,504 35,290 5,507 81,784

Balance as of December 31, 2018 1,060,965 1,459,134 458,013 349,160 3,327,272

Current 3,327,272

Non-current -

Total 3,327,272




59 of 126

7.2.2 Transactions with reinsurers

7.3 Aging of credits for reinsurance and retrocession operations

An analysis of maturities of credits for reinsurance and retrocession operations is shown below:

A provision of R$36,274 has been set up to cover doubtful debts in accounts payable and receivable, overdue and not yet maturing, for a total of R$3,294,709 in the parent company and R$3,294,497 in the consolidated accounts, taking into account past default by clients. The provision is calculated according to the Company's own methodology, by segregating business partners among Brazilian operators, foreign operators and related parties, and rating classifications based on past default, clients with liabilities not settled and special treatment for clients in negotiations.

Premium Claims Others Total

Balance as of December 31, 2016 294,121 167,532 4,041 465,694

Premiums receivable 708,978 - - 708,978

Payments received (230,651) - - (230,651)

Recovery of claims - (29,481) - (29,481)

Exchange rate change 32,082 266 (42) 32,306

Other credits - - 2,740 2,740


Premium Claims Others Total


Premiums receivable 1,639,791 - - 1,639,791

Payments received (1,364,653) - - (1,364,653)

Recovery of claims - (25,065) - (25,065)

Exchange rate change 91,297 - 279 91,576

Other credits - - 13,181 13,181

Balance as of December 31, 2018 1,170,965 113,252 20,199 1,304,416


AgingTransactions

creditTransactions debit

Allowance

for doubtful

accounts

Total

Falling due 3,869,138 (1,131,651) (19,343) 2,718,144

Overdue up to 30 days 251,129 (27,317) (4,774) 219,038

Overdue from 31 to 60 days 126,175 (40,875) (1,473) 83,827




Overdue for more than 365 days 141,653 (120,627) (5,667) 15,359

Total 4,688,257 (1,393,548) (36,274) 3,258,435

Parent Company

2018

AgingTransactions

creditTransactions debit

Allowance

for doubtful

accounts

Total

Falling due 3,869,138 (1,131,651) (19,343) 2,718,144

Overdue up to 30 days 251,129 (27,317) (4,774) 219,038





Overdue for more than 365 days 141,752 (120,938) (5,667) 15,147

Total 4,688,356 (1,393,859) (36,274) 3,258,223

Consolidated

2018



60 of 126

8 Retrocession assets - technical provisions

8.1 Claims - retrocession (Analysis)

Outstanding claims and claims incurred but not reported, as shown below:

Unsettled

claims

Unsettled

claims under

judicial dispute

Claims

incurred but

not reported

Total

Aviation 250,544 10,835 81,577 342,956

Car 1,718 37 10,903 12,658

Home 139 - 7 146

Maritime 23,862 1,259 4,820 29,941

Nuclear 33 - - 33

Property 707,140 75,614 143,454 926,208

People 13,186 1,448 10,589 25,223

Oil 62,216 301 7,974 70,491

Liabilities 186,287 22,691 68,647 277,625

Financial risks 54,816 5,411 30,009 90,236

Rural 21,832 4,066 4,428 30,326

Transport 188,918 381 26,099 215,398

Acceptances from abroad 65,933 - 15,226 81,159

Offshore branches 8,163 - 6,381 14,544

Total 1,584,787 122,043 410,114 2,116,944

Parent Company

2018

Unsettled

claims

Unsettled

claims under

judicial dispute

Claims

incurred but

not reported

Total

Aviation 326,728 8,228 179,557 514,513

Car 2,357 37 646 3,040

Home 145 - 45 190

Maritime 23,252 1,796 5,080 30,128

Property 796,084 63,877 218,535 1,078,496

People 21,869 1,387 13,044 36,300

Oil 53,261 237 10,539 64,037

Liabilities 210,750 30,398 21,599 262,747

Financial risks 77,138 4,790 59,556 141,484

Rural 40,281 4,193 9,602 54,076

Transport 168,611 1,084 4,739 174,434


Offshore branches 9,443 - 902 10,345

Total 1,768,115 116,027 539,531 2,423,673

Parent Company

2017



61 of 126

8.1 Claims - retrocession (Analysis)

Unsettled

claims

Unsettled

claims under

judicial dispute

Claims

incurred but

not reported

Total

Aviation 250,544 10,835 81,577 342,956

Car 1,718 37 10,903 12,658

Home 139 - 7 146

Maritime 23,862 1,259 4,820 29,941

Nuclear 33 - - 33

Property 707,140 75,614 143,454 926,208

People 13,186 1,448 10,589 25,223

Oil 62,216 301 7,974 70,491

Liabilities 186,287 22,691 68,647 277,625

Financial risks 54,816 5,411 30,009 90,236

Rural 21,832 4,066 4,428 30,326

Transport 188,918 381 26,099 215,398


Offshore branches 8,163 - 6,381 14,544

Total 1,585,204 122,043 409,714 2,116,961

2018

Consolidated

Unsettled

claims

Unsettled

claims under

judicial dispute

Claims

incurred but

not reported

Total

Aviation 326,728 8,228 179,557 514,513

Car 2,357 37 646 3,040

Home 145 - 45 190

Maritime 23,252 1,796 5,080 30,128

Property 796,084 63,877 218,535 1,078,496

People 21,869 1,387 13,044 36,300

Oil 53,261 237 10,539 64,037

Liabilities 210,750 30,398 21,599 262,747

Financial risks 77,138 4,790 59,556 141,484

Rural 40,281 4,193 9,602 54,076

Transport 168,611 1,084 4,739 174,434


Offshore branches 38,701 - 527 39,228

Total 1,797,373 116,027 539,156 2,452,556

Consolidated

2017



62 of 126

8.1.1 Account flux

Unsettled claimsClaims incurred but

not reported Total

Balance as of December 31, 2016 2,292,696 724,582 3,017,278

Settlement of claims (3,895,258) (273,372) (4,168,630)

Creation of provision for claims 3,486,704 88,321 3,575,025



not reported Total



Creation of provision for claims 932,013 82,821 1,014,834


Parent Company


not reported Total



Creation of provision for claims 3,457,002 87,946 3,544,948



not reported Total



Creation of provision for claims 932,013 82,796 1,014,809


Consolidated



63 of 126

8.2 Deferred retrocession premiums

Actual Estimated RVNE Actual Estimated RVNE Total

Aviation 26,477 4,426 418 (89) (41) (12) 31,179

Car 2,967 1,311 - (38) (17) - 4,223

Home - 31 - - - - 31

Maritime 20,768 4,384 2,229 (909) (248) (97) 26,127

Nuclear 13,491 - 1,432 (1,012) - (107) 13,804

Property 349,555 58,152 33,117 (11,383) (5,663) (1,559) 422,219

People 10,558 4,425 1,432 (987) (1,648) (88) 13,692

Oil 170,321 7,230 23,862 (5,996) (185) (1,088) 194,144

Liabilities 44,720 28,402 1,646 (3,021) (2,266) (105) 69,376

Financial risks 14,812 - 1,721 (93) - (102) 16,338

Rural 19,542 139 1,122 (405) (50) (194) 20,154

Transport 22,792 16,849 12,358 (1,941) (1,941) (2,914) 45,203

Acceptances from abroad 88,847 363 1,805 (326) (13) (112) 90,564

Offshore branches 9,842 2,655 - (918) (688) - 10,891

Total 794,692 128,367 81,142 (27,118) (12,760) (6,378) 957,945

Current 929,100

Non-current 28,845


2018

Provision for unearned premiums Deferred reinsurance commission


Aviation 34,133 3,938 2,007 (115) (16) (50) 39,897

Car 2,287 999 398 (80) (35) (17) 3,552

Home - - 5 - - (1) 4

Maritime 14,240 7,178 1,360 (125) (370) (50) 22,233

Nuclear 11,427 - 1,319 (857) - (99) 11,790

Property 319,513 66,584 45,415 (12,058) (3,257) (2,460) 413,737

People 4,561 11,923 1,737 (676) (475) (232) 16,838

Oil 140,273 15,751 8,805 (4,609) (394) (625) 159,201

Liabilities 35,224 19,063 3,049 (1,760) (3,022) (317) 52,237

Financial risks 8,146 - 1,284 (68) - (277) 9,085

Rural 25,172 5,101 1,022 (2,553) (1,804) (215) 26,723

Transport 15,261 13,660 10,749 (449) (1,521) (2,069) 35,631

Acceptances from abroad 61,176 3,910 3,255 (1,116) (869) (207) 66,149

Offshore branches 114 3,235 - (3) (130) - 3,216

Total 671,527 151,342 80,405 (24,469) (11,893) (6,619) 860,293

Current 810,820

Non-current 49,473



2017



64 of 126

8.2.1 Account flux

8.3 Other technical provisions

The provision for technical surpluses guarantees the amounts intended for the distribution of technical surpluses arising from contracts, and the provision for related costs covers claim-related expenses.

9 Bills and credits receivable


Balance as of December 31, 2016 520,801 110,060 89,898 (28,455) (11,801) (7,522) 672,981

Deferral based on risk (395,795) (124,779) (39,838) 16,289 13,383 1,460 (529,280)

Incorporation 546,521 166,061 30,345 (12,303) (13,475) (557) 716,592




Deferral based on risk (461,503) (146,765) (24,032) 16,979 15,160 1,452 (598,709)

Incorporation 584,668 123,790 24,769 (19,628) (16,027) (1,211) 696,361




2018 2017

Aviation 2,117 5,035

Car 5 17

Home 2 -

Maritime 2,166 3,770

People 6 6

Oil 1 -

Liabilities 1,926 380

Financial risks 2,935 2,177

Rural 21 1

Transport 367 175

Total 9,546 11,561


2018 2017 2018 2017

Current

Amounts receivable from properties 23,200 - 31,918 9,977

Amounts receivable from court agreements 4,200 3,939 4,200 3,939

Advances to suppliers 1,450 6,147 1,450 6,147

Advances to employees 849 442 849 442

Others 987 845 1,699 5,171

Total current 30,686 11,373 40,116 25,676

Non-current

Amounts receivable from the Brazilian Federal

Savings Bank 16,098 16,098 16,098 16,098

Amounts receivable from court agreements 4,200 7,878 4,200 7,878

Amounts receivable from Previrb 160,988 46,853 160,988 46,853

Amounts receivable from agreements 42,752 36,504 55,720 37,715

Total non-current 224,038 107,333 237,006 108,544

254,724 118,706 277,122 134,220




65 of 126

10 Tax and social security credits

10.1 Tax and social security credits

(*) Refer to overpayments of PIS (R$65,360) from a broadening of the tax base claim, which was finally decided on October 29, 2013, and a request for reimbursement filed on December 19, 2013. Only credits for which there is no doubt or for which no dispute exists as to the basis of calculation are included. These credits have been used by the Company to settle monthly direct tax debits (PIS and COFINS). A total of R$51,804 was offset in the year. (**) Provisional Measure 675 of May 21, 2015, increased the rate for Social Contribution tax to 20% for the period from September 1, 2015 to December 31, 2018. On January 1, 2019, the rate will return to 15%.

2018 2017

Current

Contributions and overpaid taxes recoverable (*) 66,017 114,844

Withholding income tax 72 59

Taxes to offset/ recoverable 3,967 5,426

70,056 120,329

Non-current

Contributions and overpaid taxes recoverable 38,715 57,868

Deferred tax asset (**) 419,754 348,918

458,469 406,786

528,525 527,115

Parent Company

2018 2017

Current

Contributions and overpaid taxes recoverable (*) 66,017 114,844

Withholding income tax 1,603 3,732

Taxes to offset/ recoverable 3,967 5,426

71,587 124,002

Non-current

Contributions and overpaid taxes recoverable 38,643 57,868

Deferred tax asset (**) 386,215 335,770

424,858 393,638

496,445 517,640

Consolidated



66 of 126

10.1.1 Tax credits on temporary differences

Deferred income and social contribution taxes on temporary differences are as follows:

(*) Plus deferred tax asset as per to article 38 of Normative Instruction 1,520 of 2014.

In 2017, deferred income and social contribution tax credits arising from temporary differences were calculated at the rates of 25% and 20%, respectively. For temporary differences expected to be realized on or after January 1, 2019, the Company has used a rate of 15% to calculate the deferred social contribution tax.

(a) The use of tax credits is based on an actuarial calculation of the realization of labor provisions and takes into account Management's expectations of the realization of the asset.

(b) The realization of tax credits on the allowance for doubtful accounts is related to the expected administrative or judicial recovery of the credit or Management's decision to write them off as a loss.

(c) The realization of tax credits on the provisions for labor, tax and social security contingencies depends on a definitive ruling and on the date the litigation is settled.

IRPJ CSLL IRPJ CSLL

Non-current

Labor provisions (a) 451,883 451,883 457,853 457,853

Provision for investment devaluation - - 140,763 140,763

Provision for profit sharing 13,776 13,776 - -

Allowance for doubtful accounts (b) 205,979 205,979 237,209 237,209

Provision for tax and social security contigencies (c) 178,073 178,073 161,017 161,017

Adjustment to market value - securities available for sale 23,491 23,491 39,609 39,609

Actuarial gains and losses - post-employment benefits (31,432) (31,432) (36,880) (36,880)

Provision for labor contingencies (c) 58,215 58,215 56,274 56,274

Adjustment to market value - investment 5,351 5,351 (41,882) (41,882)

Restatement of tax/labor court deposits (227,897) (227,897) (200,854) (200,854)

Other provisions (*) 368,957 376,925 3,003 3,003

Tax base 1,046,396 1,054,364 816,112 816,112

Effective nominal rate 25.0% 15.0% 25.0% 20.0%

Tax credit - temporary differences 261,599 158,155 204,028 144,890

Parent Company

2018 2017

IRPJ CSLL IRPJ CSLL

Non-current

Labor provisions (a) 451,883 451,883 457,853 457,853

Provision for investment devaluation - - 140,763 140,763

Provision for profit sharing 13,776 13,776 - -

Allowance for doubtful accounts (b) 205,979 205,979 237,209 237,209

Provision for tax and social security contigencies (c) 178,073 178,073 161,017 161,017

Adjustment to market value - securities available for sale (75,153) (75,153) 938 938

Actuarial gains and losses - post-employment benefits (31,432) (31,432) (36,880) (36,880)

Provision for labor contingencies (c) 58,215 58,215 56,274 56,274

Adjustment to market value - investment 5,351 5,351 (41,882) (41,882)

Restatement of tax/labor court deposits (227,897) (227,897) (200,854) (200,854)

Other provisions (*) 368,957 376,925 3,003 3,003

Tax base 947,752 955,720 777,441 777,441

Effective nominal rate 25.0% 15.0% 25.0% 20.0%

Tax credit - temporary differences 236,938 149,277 194,360 141,410

Consolidated

2018 2017



67 of 126

11 Deferred acquisition costs

12 Investment properties

Actual Estimated RVNE Total Actual Estimated RVNE Total

Aviation 1,454 99 243 1,796 2,219 34 294 2,547

Car 79 9 59 147 115 10 26 151

Home 78 16 56 150 76 10 10 96

Maritime 1,879 3 988 2,870 1,445 1 317 1,763

Property 8,356 1,098 2,062 11,516 8,600 345 1,402 10,347

People 863 16 449 1,328 1,118 4 95 1,217

Oil 5,493 - 1,653 7,146 4,925 - 1,258 6,183

Liabilities 1,742 68 214 2,024 1,256 36 215 1,507

Financial risks 587 297 27 911 441 223 24 688

Rural 271 375 176 822 176 166 13 355

Transport 3,597 158 3,000 6,755 3,232 33 1,474 4,739

Acceptances from abroad 16,480 8,822 7,206 32,508 18,929 4,613 7,211 30,753

Offshore branches 1,906 415 - 2,321 1,538 54 - 1,592

Total 42,785 11,376 16,133 70,294 44,070 5,529 12,339 61,938


2018 2017

Shopping

MallsTotal

Gross cost of investment property

Balance as of December 31, 2016 7,879 7,879


Accumulated depreciation

Balance as of December 31, 2016 (1,733) (1,733)

Depreciation (315) (315)


Net balance 5,831 5,831






Depreciation (316) (316)


Net balance 5,515 5,515

Parent Company



68 of 126

12 Investment properties

Land BuildingsShopping

MallsTotal


Balance as of December 31, 2016 16,447 763 385,406 402,616

Acquisition - 1,574 97,489 99,063

Disposal - - (275) (275)



Balance as of December 31, 2016 - (763) (17,192) (17,955)

Devaluation - (1) (6,732) (6,733)

Disposal - - 275 275


Net balance 16,447 1,573 458,971 476,991



Acquisition - 15,858 85,350 101,208

Disposal - (1,520) - (1,520)




Depreciation - (8) (3,299) (3,307)

Disposal - - (371) (371)


Net balance 16,447 15,903 540,651 573,001

Consolidated



69 of 126

(a) Below is an analysis of investments in shopping malls, with the percentage holdings of IRB Investimentos e Participações Imobiliárias S.A. and improvements completed during the year ended December 31, 2018:

Investments in shopping malls, with a market value of R$1,105,904 as at December 31, 2018, are recorded at cost. The Company estimates the cash flow from these investments annually and sets up provisions for losses when necessary. The present value of minimum commercial leasing payments receivable by the Company is as follows:

2018 2017

Investment -

%Improvements Improvements

Park Shopping - Brasília 20.0% 14,821 14,148

Esplanada - Sorocaba 15.0% 207 63

Praia de Belas - Porto Alegre 20.0% 927 609

Minas Shopping - Belo Horizonte 19.0% 1,379 57

Shopping Barra - Salvador 20.0% - -

Balance of improvements in operating shopping malls 17,334 14,877

Depreciation of improvements

Park Shopping - Brasília

Net balance of improvements in operating shopping malls 13,536 11,447

Improvements

(3,798) (3,430)

2018 2017

Up to 1 year 41,928 43,715

From one to five years 140,353 152,005

More than five years 124,062 147,303

Total 306,343 343,023



70 of 126

13 Property and equipment

Lands and

buildings

Data processing

Equipment

Telecommunication

equipment

Furniture,

machinery and

fixtures

Other property

and equipmentVehicles Total

Gross cost of property and

equipment

Balance as of December 31, 2016 21,882 47,995 3,540 9,365 15,578 115 98,475

Additions - 8,951 46 68 30,437 - 39,502

Write-offs - 33 - (3,564) - - (3,531)

Transfers 40,480 - - 559 (41,039) - -



Balance as of December 31, 2016 (9,942) (34,602) (1,700) (5,481) (18) (13) (51,756)

Depreciation (1,042) (6,122) (656) (596) (527) (23) (8,966)

Write-offs - 1 - 3,585 - - 3,586


Net balances 51,378 16,256 1,230 3,936 4,431 79 77,310


equipment


Additions 128 2,568 450 87 3,760 81 7,074

Write-offs - (103) - (91) - - (194)

Transfers 1,366 - 643 3,077 (5,086) - -




Depreciation (2,316) (5,899) (684) (572) (514) (38) (10,023)

Write-offs - 103 - - - - 103

Balance as of December 31, 2018 (13,300) (46,519) (3,040) (3,064) (1,059) (74) (67,056)

Net balances 50,556 12,925 1,639 6,437 2,591 122 74,270

Parent Company



71 of 126

13 Property and equipment

Lands and

buildings

Data processing

Equipment

Telecommunication

equipment

Furniture,

machinery and

fixtures

Other property

and equipmentVehicles Total


equipment


Additions - 8,953 46 70 30,510 - 39,579

Write-offs - 31 - (3,564) - - (3,533)

Transfers 40,480 - - 559 (41,039) - -




Depreciation (1,042) (6,122) (656) (596) (527) (23) (8,966)

Write-offs - 1 - 3,585 - - 3,586


Net balances 51,378 16,256 1,230 3,938 4,504 79 77,385


equipment


Additions 128 2,568 450 91 3,760 81 7,078

Write-offs - (103) - (86) - - (189)

Transfers 1,366 - 643 3,077 (5,086) - -




Depreciation (2,316) (5,899) (684) (573) (514) (38) (10,024)

Write-offs - 103 - - - - 103

Balance as of December 31, 2018 (13,300) (46,519) (3,040) (3,065) (1,059) (74) (67,057)

Net balances 50,556 12,925 1,639 6,447 2,664 122 74,353

Consolidated



72 of 126

14 Intangible assets

Software

development cost

Software

under

development

Total

Gross cost of intangible assets

Balance as of December 31, 2016 127,977 2,073 130,050

Additions 13,039 2,699 15,738

Transfers (1,428) 1,428 -


Accumulated amortization

Balance as of December 31, 2016 (67,774) - (67,774)

Amortization (23,917) - (23,917)


Net balance 47,897 6,200 54,097



Additions 21,655 4,224 25,879

Transfers 5,694 (5,694) -




Amortization (37,523) - (37,523)


Net balance 37,723 4,730 42,453

Parent Company



73 of 126

14 Intangible assets

15 Liabilities and provisions for post-employment benefits 15.1 Liabilities

Software

development cost

Software

under

development

Total



Additions 13,039 2,900 15,939

Transfers (1,428) 1,428 -




Amortization (23,917) - (23,917)


Net balance 47,897 6,401 54,298



Additions 21,655 4,350 26,005

Transfers 5,694 (5,694) -




Amortization (37,524) - (37,524)


Net balance 37,722 5,057 42,779

Consolidated


2018 2017 2018 2017

Trade accounts payable 2,573 6,396 12,824 14,479

Liabilities due to acquisition of securities 49,992 - 49,992 -

Dividends 69,995 2,854 69,995 2,854

Interest on equity 66,426 61,753 66,426 61,753

Profit sharing 23,137 23,137 23,137 23,137

Compensation of key management personnel 18,198 4,264 18,198 4,264

Others 4,325 1,465 8,819 2,943

Total 234,646 99,869 249,391 109,430

Current 220,870 97,478 235,195 106,531

Non-current 13,776 2,391 14,196 2,899



74 of 126

15.2 Provision for post-employment benefits

(i) Post-employment benefit - retirement pension

The Company pays for supplementary pension benefits and death benefits for staff hired up to December 31, 1968, supplemental pension benefits for staff who retired up to February 28, 1975, and supplemental pensions for beneficiaries of staff deceased on or before February 28, 1975.

(ii) Post-employment benefit - medical and dental insurance

Self-managed medical insurance plans (outpatients), surgical plans (in-patients), obstetric and dental plans, in addition to reimbursements and pharmaceutical benefits for active staff, retired staff and pensioners and their dependents: for employees hired before May 31, 2004. Dependents are spouses, children (up to 24 years old) and parents who earn less than one minimum salary. Only spouses and children (up to 24 years old) are considered as dependents of staff admitted as from June 1, 2004. For staff admitted on or after October 14, 1996, IRB Brasil RE meets 50% of the cost of the plan, i.e. of the amounts for tables I and II (items 5.1.4 and 5.1.5 of section 1 of the Regulations of the PCAM (Medical Assistance Contribution Plan); the employees and beneficiaries pay the remaining 50%. For staff admitted on or before October 13, 1996, the contribution of the employee and dependents varies from 0.3% to 2% of the items that make up the reference base for salary. Contributions are deducted from salary monthly, varying according to the date of admission, the amount of base salary (%) and the age bracket (tables).

(iii) Post-employment benefit - life insurance

For staff admitted up to 1998, IRB Brasil RE pays 100% of the premium, and 50% for staff admitted from 1999 onwards. Participation by employees is optional. Staff who retire based on time of contribution may remain in the plan, but must pay the full premium themselves. IRB Brasil RE pays the entire premium for staff who retire due to disability.

(iv) Post-employment benefit - funeral allowance

This benefit is available only to staff admitted in or before October 31, 1996. The allowance is limited to R$1,344.87 for a simple funeral, R$1,554.63 for cremation and R$2,640.80 for a funeral with cremation.

16 Provisions for taxes and contributions

2018 2017

Post-employment benefit - Retirement (i) 149,951 154,270

Post-employment benefit - Health plan (ii) 298,110 300,371

Post-employment benefit - Life insurance (iii) 1,879 1,556

Post-employment benefit - Funeral allowance (iv) 1,943 1,647

451,883 457,844

Current 38,963 38,655

Non-current 412,920 419,189

451,883 457,844


2018 2017 2018 2017

IRPJ payable 25,863 25,713 29,052 28,690

CSLL payable 31,316 21,927 32,469 23,064

PIS/ COFINS payable 8,210 2,963 8,494 3,762

Total 65,389 50,603 70,015 55,516




75 of 126

17 Debits for reinsurance and retrocession transactions

Accounts for reinsurance and retrocession debits mainly consist of balances payable for operations of Brazilian and foreign insurers and reinsurers, plus premiums payable, commissions, claim indemnities payable and debits arising from past transactions by London branch, as follows: 17.1 Analysis

17.2 Account flux 17.2.1 Transactions with insurers and reinsurers

2018 2017 2018 2017

Current

Transactions with insurers (17.2.1) 251 606 251 606

Transactions with reinsurers (17.2.1) 1,251,262 1,137,443 1,251,262 1,137,443

Reinsurance brokers, retrocession and othera (17.2.2) 105,788 82,759 106,099 83,029

Other operating debits (17.2.2) 35,458 31,087 35,458 31,087

1,392,759 1,251,895 1,393,070 1,252,165

Non-current

Other operating debits 789 789 789 789

1,393,548 1,252,684 1,393,859 1,252,954



Premiums Claims Others Total


Premiums, comissions and retrocession interest payable 905,540 - - 905,540

Premiums, comissions and retrocession interest paid (594,740) - - (594,740)

Reisurance claim payable - 6,856 - 6,856

Reisurance claim paid - (46) - (46)

Other payables - - 22,066 22,066

Other amounts paid - - (14,258) (14,258)

Exchange rate changes 11,914 (626) 159 11,447


Premiums Claims Others Total


Premiums, comissions and retrocession interest payable 2,024,219 - - 2,024,219

Premiums, comissions and retrocession interest paid (1,889,265) - - (1,889,265)

Reisurance claim paid - (45,519) - (45,519)

Other payables - - 77,197 77,197

Other amounts paid - - (94,283) (94,283)

Exchange rate changes 36,349 - 4,766 41,115

Balance as of December 31, 2018 1,237,961 - 13,552 1,251,513



76 of 126

17.2.2 Transactions with brokers and other debits

18 Third party deposits

An analysis of the balance of the account, by age of deposit, follows:

Parent Company

Commissions Other debits Total


Brokerage commission payable 48,891 - 48,891

Brokerage commission paid (17,698) - (17,698)

Other debits payable - 808 808

Exchange rate changes 2,449 513 2,962






Other debits payable - 8,354 8,354

Exchange rate changes 4,811 (3,983) 828


Consolidated





Other debits payable - 808 808

Exchange rate changes 2,719 513 3,232






Other debits payable - 8,354 8,354

Exchange rate changes 4,811 (3,983) 828


2018 2017

Up to 30 days 220,202 47,424

From 31 to 60 days 38,756 94,002

From 61 to 120 days 121,778 14,520

From 121 to 80 days 31,698 2,574

From 181 to 365 days 14,991 8,246

427,425 166,766




77 of 126

19 Technical provisions 19.1 Provision for unearned premiums and acquisition costs


Aviation 22,504 9,643 3,765 (1,176) (1,681) (26) 33,029

Car 6,360 2,226 817 (750) (257) - 8,396

Home 3,091 8,361 967 (250) (1,114) - 11,055

Maritime 32,737 7,801 12,113 (414) (792) (148) 51,297

Nuclear 13,931 - 1,467 - - - 15,398

Property 479,170 160,405 74,817 (13,114) (31,074) (1,143) 669,061

People 23,717 9,605 11,533 (133) (1,722) - 43,000

Oil 174,240 7,611 31,094 (2,007) (4) (298) 210,636

Liabilities 60,000 33,518 3,616 (1,371) (7,457) (53) 88,253

Financial risks 165,377 67,832 4,769 (64,669) (28,964) (411) 143,934

Rural 76,970 274,645 11,601 (16,988) (69,066) (512) 276,650

Transport 52,219 36,568 40,471 (3,309) (6,701) (3,723) 115,525

Acceptances from abroad 203,633 417,995 68,192 (17,232) (79,833) (1,472) 591,283

Offshore branches 38,753 20,833 - (5,113) (6,147) - 48,326

1,352,702 1,057,043 265,222 (126,526) (234,812) (7,786) 2,305,843

Current 2,147,178

Non-current 158,665

Parent Company and

Consolidated

2018



Aviation 31,581 7,723 5,123 (1,201) (1,219) (292) 41,715

Car 5,656 2,297 1,464 (736) (390) (290) 8,001

Home 4,353 1,749 1,444 (164) (259) (259) 6,864

Maritime 30,394 9,572 6,397 (1,803) (475) (379) 43,706

Nuclear 11,893 - 1,384 - - - 13,277

Property 481,327 119,383 82,937 (19,150) (16,263) (3,386) 644,848

People 16,229 15,928 13,265 - (4,651) (2,616) 38,155

Oil 151,363 16,580 13,656 (2,130) - (258) 179,211

Liabilities 48,581 22,482 4,917 (2,217) (3,925) (285) 69,553

Financial risks 148,417 49,720 6,449 (58,297) (21,199) (2,085) 123,005

Rural 157,162 103,457 10,409 (37,620) (24,793) (2,454) 206,161

Transport 44,042 21,986 28,822 (2,689) (3,445) (2,865) 85,851

Acceptances from abroad 271,203 206,586 69,567 (32,379) (41,323) (2,411) 471,243

Offshore branches 22,500 20,503 - (2,566) (5,120) - 35,317

1,424,701 597,966 245,834 (160,952) (123,062) (17,580) 1,966,907

Current 1,836,237

Non-current 130,670


Parent Company and

Consolidated

2017



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19.1.1 Account flux

19.2 Provisions for unsettled claims and claims incurred but not reported

(*) Includes a reserve for the risk of environmental pollution, diseases and other damage caused by asbestos. These estimates are subject to a higher level of uncertainty than for other risks, because of the greater difficulty in foreseeing the occurrence and progress of this type of claim.

Actual Estimated RVNE Actual Estimated RVNE

Balance as of December 31, 2016 1,325,957 453,976 220,386 (170,993) (95,562) (31,466)

Deferral based on risk (582,824) (323,798) (88,312) 115,912 61,263 14,906

Incorporation 681,568 467,788 113,760 (105,871) (88,763) (1,020)


Actual Estimated RVNE Actual Estimated RVNE


Deferral based on risk (713,115) (278,157) (56,217) 99,726 52,789 12,707

Incorporation 641,116 737,234 75,605 (65,300) (164,539) (2,913)

Balance as of December 31, 2018 1,352,702 1,057,043 265,222 (126,526) (234,812) (7,786)




Parent

CompanyConsolidated

Unsettled

claims

Unsettled claims

under judicial

dispute

Claims incurred

but not reported

Unsettled

claims

Unsettled claims

under judicial

dispute

Claims

incurred but

not reported

Reinsurance Reinsurance Reinsurance Reinsurance Reinsurance Reinsurance

Aviation 295,199 14,793 122,051 295,199 14,793 122,051

Car 125,405 23,144 40,651 125,405 23,144 40,651

Home 19,130 866 10,246 19,130 866 10,246

Maritime 102,105 2,196 20,266 102,105 2,196 20,266

Nuclear 2 - - 2 - - Property 1,124,040 153,525 293,873 1,124,040 153,525 293,873

People 110,369 8,991 93,154 110,369 8,991 93,154

Oil 98,147 355 8,164 98,147 355 8,164

Liabilities 362,140 75,995 101,390 362,140 75,995 101,390

Financial risks 152,368 11,864 112,263 152,368 11,864 112,263

Rural 158,365 10,639 190,292 158,365 10,639 190,292

Transport 311,713 3,015 48,658 311,713 3,015 48,658

Acceptances from abroad 932,668 - 830,022 933,085 - 830,022

Offshore branches (*) 125,098 - 128,038 125,098 - 128,038

3,916,749 305,383 1,999,068 3,917,166 305,383 1,999,068

2018



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19.2.1 Account flux

19.2.2 Claims being challenged in court

As at December 31, 2018 and 2017, the balance of unsettled claims includes claims being challenged in court related mainly to whether they are covered under the terms of a contract, or differences between amounts claimed by the insured and the valuation of legal consultants, legal counsel or the technical area of the Reinsurer. The percentages calculated actuarially, based on the probability of loss, and the corresponding provision set up, are as follows:

These court claims are booked as liabilities under the heading of unsettled claims and amounts recoverable under retrocession are classified in the "retrocession assets - technical provisions" group, under the heading of claims - retrocession.

Unsettled

claims

Claims incurred

but not reported

Unsettled

claims

Claims incurred

but not reported

Balance as of December 31, 2016 4,982,898 1,547,368 4,982,898 1,577,065

Settlement of claims (1,823,374) (353,821) (1,823,022) (383,518)

Creation of provision for claims 1,183,770 493,933 1,212,676 493,933


Unsettled

claims

Claims incurred

but not reported

Unsettled

claims

Claims incurred

but not reported


Settlement of claims (2,028,959) (343,124) (2,028,959) (343,124)

Creation of provision for claims 1,907,797 654,712 1,878,956 654,712



Probability Quantity

Total exposure

value % Unsettled Claim Retrocession Net

Probable 586 332,849 39% 129,811 (38,332) 91,479

Possible 496 432,683 36% 155,766 (69,102) 86,664

Remote 176 396,120 5% 19,806 (14,609) 5,197

1,258 1,161,652 305,383 (122,043) 183,340


2018

Probability Quantity

Total exposure

value % Unsettled Claim Retrocession Net

Probable 671 355,898 42% 149,477 (45,673) 103,804

Possible 564 413,211 35% 144,624 (58,795) 85,829

Remote 201 353,740 5% 17,687 (11,559) 6,128

1,436 1,122,849 311,788 (116,027) 195,761


2017



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19.2.2.1 Aging of court claims

19.3 Other provisions The provision for technical surpluses was set up in 2009 providing a guarantee to cover amounts for the distribution of technical surpluses arising from contracts and the provision for related claim expenses.

2018

Aging Retrocession - gross Retrocession Retrocession - net

From 0 to 60 days 199 - 199

From 121 to 180 days 2,739 (993) 1,746

From 181 to 365 days 27,719 (14,436) 13,283

More than 365 days 274,726 (106,614) 168,112

305,383 (122,043) 183,340


2018 2017

Aviation 5,931 8,161

Car 1,646 1,427

Home 12,481 6,941

Maritime 359 218

Nuclear 223 11

Property 17,449 15,460

People 34,240 36,777

Oil 6 215

Liabilities 6,463 2,352

Financial risks 45,501 28,894

Rural 117,140 40,641

Transport 3,725 5,982

Acceptances from abroad 33,271 30,257

278,435 177,336




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20 Guarantee for technical provisions

Under CMN Resolution 4,444, of November 13, 2015, as amended by CMN Resolution 4,633 of February 22, 2018, the technical provisions of the Reinsurer are secured as follows:

21 Related parties

The principal transactions between the Reinsurer and related parties (shareholders) under normal market conditions are as follows:

These are reinsurance and retrocession transactions with insurance companies which are shareholders of the Reinsurer. The balances are included in "credits for reinsurance and retrocession transactions" and "debits for reinsurance and retrocession transactions" in the statement of financial position and statement of income accounts.

2018 2017 2018 2017

Technical reinsurance provisions 8,805,478 8,175,017 8,805,895 8,204,275

(-) Technical provisions - Branches abroad 92,801 100,471 92,801 100,471

(-) Retrocession assets 3,084,435 3,295,527 3,084,452 3,324,410

(+) Reduction asset - PPNG 821,734 702,539 821,734 702,539

(-) Provision-reduction asset - acquisition cost 3,708 573 3,708 573

(-) Receivables 1,302,813 991,258 1,302,813 991,258

Amount to be insured 5,143,455 4,489,727 5,143,855 4,490,102

Assets available for guarantee:

Exclusive investment fund units 3,650,494 2,316,060 3,650,494 2,316,060

Shares from other companies - 9,228 - 9,228

Financial treasury bills 1,059,061 2,164,602 1,059,061 2,164,602

Financial bills - 285,733 - 285,733

National treasury notes 68,483 65,362 68,483 65,362

Times deposits 633,897 219,634 633,897 219,634

Sovereign debt securities 197,150 93,989 197,150 93,989

Real estate funds 8,213 - 8,213 -

Debentures 1,665 1,249 1,665 1,249

Total assets 5,618,963 5,155,857 5,618,963 5,155,857


2018 2017

Receivable Payable Receivable Payable Profit (loss) Profit (loss)

With equity interest in the reinsurer

Premiums 345,517 - 18,884 - 1,942,334 1,961,759

Retrocessions - 101,578 - 120,822 (659,024) (653,893)

Retained premiums 1,283,310 1,307,866

Changes in technical provisions - - - - (189,962) (24,859)

Earned premiums 1,093,348 1,283,007

Indemnities and claims expenses 4,068 6,445 5,949 25,925 (511,642) (806,890)

Commissions - 33,929 - 5,337 (235,087) (230,758)

Others - 292 - 8,096 (492) (5,977)

349,585 142,244 24,833 160,180 346,126 239,382


2018 2017



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21.1 Compensation of key Management personnel

Total compensation for officers and members of the Company's other boards and committees, as at December 31, 2018 and 2017, was as follows:

(*) Refers to the "Outperform Program", which consists of a bonus payable to the Statutory Executive Officers if the goal of doubling the Company's market cap between May 2018 and May 2021 is achieved, as long as IRBR3's shares appreciate more than the iBovespa index over the same period. The fair value of the obligation was calculated based on valuation techniques in order to estimate the accounting effects with a reasonable degree of accuracy. The Company regularly reviews the fair value and the accounting provisions. 22 Court and tax deposits, other lawsuits and tax obligations

Short-term benefits to

management

Long-term benefits to

management

Post-employment

benefitsTotal

Accounts payable

2017 1,873 2,391 - 4,264

2018 4,422 13,776 (*) - 18,198

Profit (loss)

2017 11,417 - 270 11,687

2018 29,924 - - 29,924


Court and tax

depositsOther debits Tax liabilities

Tax 485,746 - 435,264

COFINS 8,389 - -

PIS 4,306 - -

Social contribution 458,295 - 435,264

Income tax 13,545 - -

ISS 1,211 - -

Social Security 122,290 - -

INSS 121,110 - -

FGTS 1,180 - -

Labor and Civil 44,937 58,645 -

Labor claims 33,525 58,213 -

Civil claims 11,412 432 -

Non-current 652,973 58,645 435,264


2018

Court and tax

depositsOther debits Tax liabilities

Tax 466,992 - 418,208

COFINS 8,041 - -

PIS 4,128 - -

Social contribution 440,860 - 418,208

Income tax 12,822 - -

ISS 1,141 - -

Social Security 117,026 - -

INSS 115,846 - -

FGTS 1,180 - -

Labor and Civil 44,218 59,274 -

Labor claims 30,789 56,271 -

Civil claims 13,429 3,003 -

Non-current 628,236 59,274 418,208


2017



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22.1 Civil, labor, tax and social security-related court cases The Company is involved in the following court cases, classified by their nature, the probability of loss, amounts at risk and amounts provisioned:

(*)The sum of R$435,264 (R$418,208 as at December 31, 2017) is registered as accounts payable - tax obligations and the amount of R$58,645 (R$59,274 as at December 31, 2017) is registered as a contingent liability.

The "tax liabilities" provisions are legal obligations of the Company amounting to R$435,264 (R$418,208 in 2017) which are currently the subject of court cases and, accordingly, their settlement depends on court rulings which may be appealed. For these legal obligations, the Company provisions 100% of the amounts at risk, irrespective of the loss classification advised by legal counsel handling the cases. Pursuant to CPC 25 - Provisions, Contingent Liabilities and Contingent Assets, the difference between the provision for legal liabilities and the total of the tax cases (R$278,578) is not provisioned. This accounting standard stipulates that liabilities classified as possible or remote losses are not provided for, or when they cannot be estimated with sufficient degree of accuracy. Provisions shown as "other debits" are items open to interpretation and are included as contingent liabilities as required by CPC 25. Accordingly, the amounts at risk of loss are only recognized for cases where the risk of a cash outflow is regarded as probable. For cases where a loss is possible, this standard requires that they only be disclosed in the notes to the accounts. Remote risks of loss are not disclosed.

Tax

Probable 1 435,264 - 435,264

Possible 17 278,378 - -

Remote 1 200 - -

19 713,842 - 435,264

Social Security

Possible 11 72,760 - -

Remote 1 10,609 - -

12 83,369 - -

Labor and Civil

Probable 55 58,645 58,645 -

Possible 127 67,501 - -

Remote 3 2,220 - -

185 128,366 58,645 -


2018

Number Value at riskBalance of

other debits (*)

Balance of tax

liabilities (*)



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22.2 Changes in provisions for legal proceedings

22.3 Tax proceedings 22.3.1 INSS and ISS

Following audits by the National Institute of Social Security (INSS) and the Attorney's Office of the Municipality of Rio de Janeiro (ISS - Service Tax), assessments were issued and tax execution actions were filed in 1999 and 1989, respectively, based on alleged differences in the tax and social security classifications adopted by the Company. The Company filed administrative appeals for the cancellation of these penalties. The adjusted total of R$52,485 for assessments imposed by the INSS, is for the additional payment of 2.5% due by companies which are considered to be equivalent to financial institutions. In respect of these assessments, the Company was ordered on April 30, 2010, to pay into court the amounts under discussion at the time (R$23,291), and subsequently, on May 28, 2010, the deposit was increased by the amount of legal charges (R$4,666). The current adjusted value of court deposits for INSS issues is R$52,485. In March 2016 the Federal Supreme Court (STF) ruled on the leading case (RE 598,572/SP), relating to the constitutionality of article 22, paragraph 1, of Law 8,212/1991, which imposes the additional 2.5% of social security contributions on financial institutions and other defined entities. It was unanimously held that the collection of the additional 2.5% in question is constitutional. However, the court ruled that this precedent should be subject to a time limit, and be applicable only to taxable events which occurred after Constitutional Amendment No. 20, of December 15, 1998, came into force; and that events prior to this would be analyzed under another appeal (RE 599,309/SP). Accordingly, the STF ruled as follows: "The legal provision for differentiating between the rates for social security contributions on the payrolls of financial institutions and similar entities, after the enactment of Constitutional Amendment 20/1998, is constitutional". Under Writ of Mandamus 99,0023782-0 referred to above, IRB Brasil RE questions the collection of the additional 2.5%, both before and after the enactment of EC 20/1998. This EC 20/1998 legitimized the use of different rates and calculation bases, depending on the type of business activity, by adding this provision to article 195 of the Federal Constitution. Thus, a time limit having been expressly defined by this ruling, it is argued that the ruling does not apply to the full amount covered by Writ of Mandamus 99.0023782-0, since the debits listed in NFLD 32.711.075-9 refer to a period (from January 1993 to September 1998) preceding the enactment of Constitutional Amendment 20/1998 (December 1998). The proceedings were suspended until November 29, 2016, when the judgment in RE No. 598,572/SP (1st. leading case) was ruled declaring the constitutionality of the additional charge of 2.5% in cases of collection of generating events occurring after EC No. 20/1998, hence the previous period will be analyzed by means of RE No. 599,309/SP. On June 9, 2017, after the writs were reactivated by virtue of the judgment of the paradigm case, the Company submitted a petition for dismissal of the case until the ruling on RE No. 599,309 / SP (2nd. leading case), which deals with the additional of 2.5% in the periods prior to the effective date of EC No. 20/1998. The vice-president of the Federal Regional Court (TRF) 2nd approved this request. Region and the records were held until the final judgment of RE No. 599.309/SP (2nd. leading case). However, on June 6, 2018, the Federal Supreme Court concluded the judgment of said Extraordinary Appeal (RE) No. 599,309, confirming the favorable outcome to the Union, in which the constitutionality of the additional contribution requirement of 2.5% over wages of financial institutions, established before EC No. 20/1998.

2016 AdditionsMonetary

restatement

Write-

offs2017

Tax 389,427 - 28,781 - 418,208

Social contribution (22.3.3) 389,427 - 28,781 - 418,208

Labor and civil 58,173 3,606 7,878 (10,383) 59,274

Labor claims (22.3.2) 51,442 3,606 7,165 (5,942) 56,271

Civil 2,290 - 713 - 3,003

Fees 4,441 - - (4,441) -

Balance at the end of the year 447,600 3,606 36,659 (10,383) 477,482

2017 AdditionsMonetary

restatement

Write-

offs2018

Tax 418,208 - 17,056 - 435,264

Social contribution (22.3.3) 418,208 - 17,056 - 435,264

Labor and civil 59,274 8,361 3,511 (12,501) 58,645

Labor claims (22.3.2) 56,271 7,878 3,403 (9,339) 58,213

Civil 3,003 483 108 (3,162) 432

Balance at the end of the year 477,482 8,361 20,567 (12,501) 493,909




85 of 126

Nevertheless, the judgment of RE No. 599.309/SP (Leading Case), on the question constitutionality of the additional contribution of 2.5% on the payroll established for financial and similar institutions, does not apply fully to the Company but to the subsidiary defense thesis of the IRB Brasil RE. The Company's main argument that the IRB Brasil RE, from September 1989 to September 1998, was not treated as a private insurance company, since at that time the Company was an Institute with its own legal personality and having as main functions regulate and supervise the Brazilian reinsurance market. IRB Brasil RE's internal and external legal counsel understand that the probability of loss should remain "Possible", since the Writ of Mandamus No. 0023782-04.1999.4.02.5101 as the Company's thesis' main issue not analyzed or addressed in this Leading Case, namely that during the 9-year period IRB Brasil RE could not be equated to a private insurance company and, therefore, would not be subject to the additional contribution of 2.5%. In respect of the ISS Tax Execution action and taking into account the significant conclusion in the November 2012 expert report that upheld the Company's arguments, the advice of legal counsel handling the case is that the likelihood of loss is possible. The Company has therefore classified both case as possible losses outcomes. 22.3.2 Labor/civil cases

The Company is a party to labor claims filed by active, retired and dismissed employees. Among other claims of similar magnitude, the plaintiffs are asking for uniform plans for salaries and positions, with the consequent payment of salary differences, and also claiming salary equivalence and readmission. Management, after analyzing each case individually, has set up provisions for those where a loss is considered probable and where the proceedings are at the stage of settlement and enforcement of judgment. The Company's external legal counsel estimate the adjusted value of these proceedings, where losses are classified as probable, to be R$58,645. Labor cases where a loss is possible amount to R$67,501. The 75th Labor Court of Rio de Janeiro is hearing a public civil action filed by the National Reinsurance Workers' Union (SINTRES) and the National Federation of Insurance Professionals (FENESPIC) against the Company, claiming the reinstatement of all the benefits and use of costing methods under the previous health plan, operated by self-management, based on the argument that unilateral changes were allegedly introduced prejudicial to the Company's employees and pensioners. In addition to reinstating the original conditions, they are claiming moral damages to the employees concerned and to the unions. In 2014, the proceeding was suspended, since attempts to reach an agreement had failed. In November 2016, it was again placed on the court agenda and a hearing scheduled for November 2017. At this hearing, the National Federation of Insurance Professionals was excluded as a plaintiff, and the court ordered a letter to be sent to ANS requesting information as to whether or not the PCAM had been definitively canceled. After the documentation was gathered by the ANS, the parties were notified to manifest themselves, within 10 days. Subsequently, there was a notification to the Labor's Prosecution Officer for manifestation in the records, as costs legis. Currently, the said process is concluded with the Judge responsible for rendering a judgment of merit. The Company's legal advisors estimate that a sum of R$16,891 is at risk and regard a loss as possible.



86 of 126

22.3.3 Social Contribution on Income

Following the publication of Provisional Measure 413/2008, converted into Law 11,727, of June 23, 2008, the CSLL rate was increased from 9% to 15% for private insurance companies, financial institutions and similar entities, with effect from May 2008. In June 2008, the Company filed a Writ of Mandamus questioning the constitutionality of this rate increase, provisioning the amounts in question and paying them into court. The adjusted amount of the court deposit for payment of the CSLL as at December 30, 2018, totaled R$451,404 (Note 22). Writ of Mandamus filed on October 30, 2015 (CSLL Rate increase from 15% to 20%):

On October 30, 2015, the Company filed another Writ of Mandamus questioning Provisional Measure 675, of May 21, 2015, converted into Law 13,169 of October 7, 2015, which amended the provisions of article 3, section I, of Law 7,689, of December 15, 1988, and with effect from September 2015 increased the rate of social contribution on net income for private insurance companies, financial institutions and similar, from 15% to 20%. In November 2015, a ruling was handed down refusing the application for an injunction, arguing that the discussion about increases in the rate of CSLL for financial institutions and similar was not new, in view of the previous enactment of Provisional Measure 413/2008, subsequently converted into Law 11,727/2008, which was awaiting judgment by the STF (ADI 4101). A Motion for Clarification was filed against this ruling, on the basis that arguments presented in the complaint as to the unequivocal difference between the economic capacity of financial institutions and insurance companies had been omitted. Although the motion was rejected, on June 15, 2016, a decision was published ruling the Interlocutory Appeal filed by the Company to be groundless. On July 1, 2016, the Company appealed. On February 14, 2017, the Company's appeal was rejected, and IRB Brasil RE filed again for a Motion for Clarification, which is pending judgment. In October of the same year, the Company's allegations on which the motion for clarification was based were rejected, and an extraordinary appeal was filed against the decision. The Company opted not to make any further court deposits for the amounts under dispute as from September 2015 but has made a monthly payment of the full amount of contribution payable (20%), i.e. both the undisputed portion (9%) and the disputed portion (11%). As for the the Writ of Mandamus No. 0134273-19.2015.4.02.5101, the 4th Panel of the Federal Regional Court (TRF) 2nd. Region rendered judgments dismissing the appeal filed by the IRB Brasil RE, and did accept the counter appeals by the Company, thus, the decision that denied the security was filed. The Company is currently awaiting a decision on an extraordinary appeal. 23 Labor provisions

2018 2017

Provision for vacation pay and 13th salary 8,981 8,188

Provision for bonus leave and private pension 3 3

8,984 8,191

Parent Company

Consolidated

2018 2017

Provision for vacation pay and 13th salary 9,089 8,188

Provision for bonus leave and private pension 3 3

9,092 8,191



87 of 126

24 Shareholders' equity

24.1 Capital

At the December 29, 2014, 47th Extraordinary General Meeting, the shareholders agreed to a share split of IRB Brasil RE's shares in the ratio of 300 common shares for each existing common share, without altering the amount of capital stock, based on terms approved by the Board of Directors on October 24, 2014. The capital stock was then represented by 312,000,000 common shares and one special class preferred share belonging to the federal government.

As at December 31, 2018, the shareholding structure of IRB Brasil RE was as follows:

24.2 Treasury shares

The Company holds 1,584,600 shares in treasury, carried at R$12,956.

24.3 Profit reserves

The legal reserve is set up based on 5% of net income for the year, limited to 20% of capital stock, pursuant to the corporate law, Law 6,404 of December 15, 1976. The purpose of the legal reserve is to preserve capital. It may only be used to absorb losses or increase capital.

Pursuant to Law 6,404/1976, article 199, the balance of profit reserves, except for catastrophic contingencies, tax incentives and unrealized income reserves, cannot exceed the amount of capital stock.

24.4 Equity valuation adjustment

The flux is as follows:

(i) Currency differences arising from the translation of the Company's offshore net assets from their functional currencies to the Company's presentation currency, are recognized in shareholders' equity as cumulative translation adjustments.

ShareholderCommon

shares% interest in free float

Ministry of Finance 36,458,237 11.7%

BB Seguros 47,520,213 15.3%

Bradesco Seguros 47,520,213 15.3%

Itaú Seguros S.A. 34,761,581 11.2%

FIP - Caixa Barcelona 9,360,000 3.1%

Education Credit Fund 27,656,408 8.9%

Others 107,138,748 34.5%

310,415,400 100.0%

2018 2017

Balance at the beginning of the year (76,161) (65,289)

Gain from the fair value of financial assets available for sale in the year 16,118 34,817

Unrealized gains (losses) from securities - Subsidiaries (22,506) 11,771

Remeasurement of post-employment benefit liabilities 1,595 (82,287)

Income and social contribution taxes on the variation of the evaluation of financial assets

available for sale at fair value (8,428) (15,668)

Income and social contribution taxes on the variation of the remeasurement of post-employment

benefit liabilities (1,982) 40,211

Exchange rate differences arising from asset translation in transactions abroad (i) (22,017) 284

Balance at the end of the year (113,381) (76,161)




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24.5 Earnings per share - basic and diluted

As per Technical Pronouncement CPC 41 - Earnings per Share, the table below presents a reconciliation between net income for the year and the amounts used to calculate basic and diluted earnings per share. Basic earnings per share are calculated by dividing net income for the year by the weighted average number of shares in circulation during the year. Basic earnings per share are calculated as follows:

The Reinsurer has not issued or granted equity instruments which affect the calculation of diluted earnings per share, as defined in CPC 41. Accordingly, diluted earnings per share are the same as the basic earnings per share. 24.6 Dividends and interest on equity

2018 2017

Numerator


Denominator (number of shares in units) 310,415,400 310,415,400

Weighted average number of the outstanding common shares

Earnings per share 3.93 2.98



I - Calculation 2018 2017


Creation of legal reserve (5.0%) (60,940) (46,252)

Dividend calculation base 1,157,856 878,798

Minimum mandatory dividend (25.0%) (289,464) (219,700)

Additional proposed dividend payable (578,928) (439,399)

(868,392) (659,099)

Percentage on the dividend calculation base 75.0% 75.0%

(-) Interest on equity to be considered in dividend calculation 220,933 217,829

Gross 245,951 241,780

Income tax (25,018) (23,951)

Minimum mandatory dividend 68,531 1,871

Additional proposed dividend

2018 - R$1.87 (2017 - R$1.42) for common shares and Golden Share578,928 439,399

Profit retention - article 196 of Law 6,404/76 510,397 437,528


II - Shareholders' Compensation 2018

GrossWithholding

income taxNet

Paid/paid in advance

Interest on equity 180,483 (18,406) 162,077

Accrued (recorded under other liabilities - social and statutory)

Interest on equity 65,468 (6,612) 58,856

Minimum mandatory dividend - remaining balance 68,531 - 68,531

Additional proposed dividend R$1.87 per share (R$1.87 for common shares,

common Golden Share and Golden Share)578,928 - 578,928

Total shareholders' compensation in 2018 893,410 (25,018) 868,392

Total shareholders' compensation in 2017 683,050 (23,951) 659,099



89 of 126

25 Analysis of the statement of income accounts

As at December 31, 2018 and 2017, premiums earned, loss ratio and commissions paid for the main types of insurance were as follows: 25.1 Premiums earned - principal insurance groups


2018

Gross

premiums

written

Reinsurance

commission

Changes in

technical

provisions -

Premium

Changes in

technical

provisions -

Commission

Other

technical

provisions

Premiums

earned

% Claims % Commission

Aviation 74,711 (6,465) 15,655 (311) (295) 83,295 141.6% 32.4%

Car 17,355 965 15 (409) 142 18,068 370.8% -4.8%

Home 54,993 (3,690) (4,873) 683 (5,552) 41,561 34.5% 8.9%

Maritime 101,291 (600) (913) (1,502) (114) 98,162 22.0% 12.0%

Nuclear 17,140 21 (633) - (211) 16,317 -0.3% 227.4%

Property 1,256,655 (69,864) (7,856) 5,832 (4,159) 1,180,608 1.5% 10.8%

People 294,662 (29,681) 825 (5,415) 3,507 263,898 59.0% 12.6%

Oil 537,021 (1,720) 3,555 (500) 226 538,582 11.4% 8.6%

Liabilities 150,845 (14,482) (17,256) 2,401 (143) 121,365 82.5% -2.1%

Financial risks 309,586 (123,388) (32,863) 12,430 (13,828) 151,937 0.1% 45.2%

Rural 1,162,711 (296,153) (92,160) 21,695 (76,497) 719,596 41.0% 28.6%

Transport 240,261 (32,615) (29,520) 4,400 2,907 185,433 18.1% 17.8%

Acceptances from abroad 2,584,137 (315,286) (48,711) 9,789 823 2,230,752 77.4% 15.5%

Offshore branches 159,972 (32,870) (15,704) 3,666 115,064 62.9% 23.0%

Total 6,961,340 (925,828) (230,439) 52,759 (93,194) 5,764,638 56.0% 18.9%


2017

Gross

premiums

written

Reinsurance

commission

Changes in

technical

provisions -

Premium

Changes in

technical

provisions -

Commission

Other

technical

provisions

Premiums

earned

% Claims % Commission

Aviation 53,473 (2,577) 37,534 (2,138) (1,188) 85,104 359.0% 41.5%

Car 24,117 (3,952) (1,961) 300 (147) 18,357 94.5% 24.9%

Home 63,878 (7,761) 1,070 (576) (2,101) 54,510 11.5% 14.4%

Maritime 57,972 (2,955) 16,250 (271) (3) 70,993 124.6% 11.5%

Nuclear 16,397 1 (2,366) (1) - 14,031 45.5% -190.4%

Property 1,300,521 (63,337) (47,996) 6,690 1,108 1,196,986 56.7% 3.4%

People 291,942 3,751 1,925 (31,184) (17,659) 248,775 71.7% 8.8%

Oil 232,992 2,780 15,576 (5,542) (15) 245,791 -5.2% 17.3%

Liabilities 148,060 (12,025) (13,723) 1,905 97 124,314 86.4% 2.4%

Financial risks 277,456 (115,823) (19,150) 17,128 (5,748) 153,863 17.0% 42.8%

Rural 1,057,367 (263,593) (46,540) 11,219 (34,834) 723,619 50.8% 26.3%

Transport 186,279 (16,730) (21,477) 4,090 (3,589) 148,573 91.5% 16.3%

Acceptances from abroad 1,939,174 (216,236) (160,496) (1,323) (19,022) 1,542,097 61.3% 16.7%

Offshore branches 133,666 (23,986) 1,187 (108) - 110,759 72.1% 18.7%

Total 5,783,294 (722,443) (240,167) 189 (83,101) 4,737,772 59.0% 17.9%



90 of 126

25.2 Claims incurred - principal insurance groups


Direct claimsSalvages and

reimbursementsChanges in IBNR Claims incurred

Aviation 28,927 13,373 99,003 141,303

Car (32,055) 74 (18,554) (50,535)

Home (16,611) - 1,125 (15,486)

Maritime (27,073) 112 4,804 (22,157)

Nuclear (2) - - (2)

Property (463,017) 193,378 117,392 (152,247)

People (147,242) 6 (15,470) (162,706)

Oil (19,944) - 9,056 (10,888)

Liabilities (54,727) 387 (59,999) (114,339)

Financial risks 277 10,534 34,837 45,648

Rural (384,502) 1,813 (23,312) (406,001)

Transport (108,002) 35,703 (12,879) (85,178)

Acceptances from abroad (1,594,230) 12,065 (325,489) (1,907,654)

Offshore branches (76,650) 138 (3,893) (80,405)

(2,894,851) 267,583 (193,379) (2,820,647)

2018


Direct claimsSalvages and

reimbursementsChanges in IBNR Claims incurred

Aviation (117,960) 2,209 72,248 (43,503)

Car (20,178) 564 1,870 (17,744)

Home (15,986) - 8,986 (7,000)

Maritime (87,322) 44 461 (86,817)

Property (507,990) 26,875 42,549 (438,566)

People (176,007) - (18,313) (194,320)

Oil (11,631) - 229 (11,402)

Liabilities (65,755) 17 25,644 (40,094)

Financial risks (39,852) 30,400 70,547 61,095

Rural (484,978) 933 (10,021) (494,066)

Transport (121,712) 37,112 16,917 (67,683)

Acceptances from abroad (725,962) 7,230 (319,503) (1,038,235)

Offshore branches (99,276) 124 (6,587) (105,739)

(2,474,609) 105,508 (114,973) (2,484,074)

2017



91 of 126

25.3 Acquisition costs

25.4 Income from retrocession

25.4.1 Retrocession fees received


2018 2017

Acquisition costChanges in deferred

acquisition costTotal Acquisition cost

Changes in deferred

acquisition costTotal

Aviation (3,237) (1,072) (4,309) (4,458) 129 (4,329)

Car (293) (3) (296) (481) 3 (478)

Home (1,033) 54 (979) (806) (16) (822)

Maritime (6,131) 888 (5,243) (3,429) (697) (4,126)

Property (17,375) 993 (16,382) (19,358) (543) (19,901)

People (2,887) 106 (2,781) (3,388) (39) (3,427)

Oil (20,860) (175) (21,035) (14,763) (4,103) (18,866)

Liabilities (2,496) 390 (2,106) (2,145) (1,091) (3,236)

Financial risks (1,510) 221 (1,289) (1,126) (103) (1,229)

Rural (2,101) 465 (1,636) (1,783) (24) (1,807)

Transport (10,199) 1,697 (8,502) (9,336) 1,421 (7,915)

Acceptances from abroad (66,729) (3,471) (70,200) (72,752) 10,612 (62,140)

Offshore branches (6,605) 643 (5,962) (6,439) 1,586 (4,853)

(141,456) 736 (140,720) (140,264) 7,135 (133,129)


2018 2017

Revenue from retrocession 288,505 252,761

Recovery of claims incurred 449,248 437,397

IBNR recovery (160,743) (184,636)

Expenses from retrocession (1,736,473) (1,401,615)

Premiums assigned in retrocession (1,868,931) (1,732,243)

Commission on premiums assigned in retrocession 105,999 147,343

Changes in technical provisions - premiums assigned 26,879 178,296

Changes in technical provisions - commissions assigned (420) 4,989

Salvages and reimbursements to retrocessionaire (26,659) (52,092)

Other retrocession fees received 23,704 12,217

Total retrocession loss (1,450,923) (1,188,729)

Recovery of sundry

claims Changes in IBNR

Recovery of claims

incurred

Aviation (76,115) (112,710) (188,825)

Car 5,651 10,258 15,909

Home (6) (38) (44)

Maritime 15,372 (1,196) 14,176

Property 312,856 (88,668) 224,188

People 14,464 (2,458) 12,006

Oil 6,370 (3,918) 2,452

Liabilities 43,068 47,053 90,121

Financial risks (9,331) (28,973) (38,304)

Rural 28,791 (5,170) 23,621

Transport 53,189 21,363 74,552

Acceptances from abroad 53,314 (1,813) 51,501

Offshore branches 1,625 5,527 7,152

Total 449,248 (160,743) 288,505

2018




92 of 126

25.4.1 Retrocession fees received

25.4.2 Retrocession fees paid

Recovery of sundry

claims Changes in IBNR

Recovery of claims

incurred

Aviation 45,008 (65,946) (20,938)

Car 4,070 54 4,124

Home (8) (187) (195)

Maritime 14,893 625 15,518

Nuclear (136) (106) (242)

Property 198,566 (50,982) 147,584

People 30,054 1,309 31,363

Oil 14,619 1,119 15,738

Liabilities 26,990 (10,049) 16,941

Financial risks (35,626) (54,429) (90,055)

Rural 61,819 702 62,521

Transport 35,379 (17,143) 18,236

Acceptances from abroad 33,665 9,496 43,161

Offshore branches 8,104 901 9,005

Total 437,397 (184,636) 252,761

2017


Premiums

assigned in

retrocession

Commission on

premiums

assigned in

retrocession

Changes in

technical

provisions -

Premium

assigned

Changes in

technical

provisions -

Commission

assigned

Retrocession

fees paid

Aviation (40,615) (403) (14,148) 64 (55,102)

Car (8,639) 115 593 77 (7,854)

Home (26) (2) 27 1 -

Maritime (55,931) 2,500 1,052 (617) (52,996)

Nuclear (17,619) 1,321 759 (57) (15,596)

Property (751,596) 27,952 (10,261) 404 (733,501)

People (42,487) 7,187 (2,035) (1,335) (38,670)

Oil (471,991) 17,306 5,526 (408) (449,567)

Liabilities (118,729) 14,992 14,351 (200) (89,586)

Financial risks (23,429) 598 7,098 151 (15,582)

Rural (53,728) 5,858 (10,494) 3,924 (54,440)

Transport (99,324) 17,323 9,405 (2,579) (75,175)

Acceptances from abroad (156,401) 3,064 15,937 1,958 (135,442)

Offshore branches (28,416) 8,188 9,069 (1,803) (12,962)

Total (1,868,931) 105,999 26,879 (420) (1,736,473)

2018




93 of 126

25.4.2 Retrocession fees paid

25.5 Other operating revenues and expenses

25.6 Administrative expenses

25.7 Tax expenses

(*) Includes PIS and COFINS on financial revenue.

Premiums

assigned in

retrocession

Commission on

premiums

assigned in

retrocession

Changes in

technical

provisions -

Premium

assigned

Changes in

technical

provisions -

Commission

assigned

Retrocession

fees paid

Aviation (52,366) 1,466 (8,994) 54 (59,840)

Car (7,689) 275 1,225 (21) (6,210)

Home (518) 140 5 (1) (374)

Maritime (27,165) 432 2,824 332 (23,577)

Nuclear (15,877) 1,191 2,377 (178) (12,487)

Property (844,911) 53,559 100,809 3,900 (686,643)

People (53,836) 11,086 3,812 (365) (39,303)

Oil (215,475) 7,390 23,163 4,008 (180,914)

Liabilities (122,646) 13,538 20,121 (970) (89,957)

Financial risks (17,622) 1,844 (15,571) 1,829 (29,520)

Rural (150,217) 32,459 23,947 (1,981) (95,792)

Transport (75,068) 9,692 11,876 (1,543) (55,043)

Acceptances from abroad (135,755) 8,731 13,483 (806) (114,347)

Offshore branches (13,098) 5,540 (781) 731 (7,608)

Total (1,732,243) 147,343 178,296 4,989 (1,401,615)

2017



2018 2017

Share in operating income (expenses) - reinsurance and retrocession (33,199) (42,081)

Reversal of provision for credit risks 51,846 7,936

Recovery of other reinsurance revenues (29,914) (1,210)

Risk inspection expenses (2,262) (2,124)

Other operating income and expenses (4,763) (3,731)

(18,292) (41,210)

2018 2017 2018 2017

Own personnel (101,408) (145,151) (106,899) (145,151)

Third-party services (24,648) (47,248) (26,308) (48,171)

Location and operation (68,057) (54,259) (76,168) (64,529)

Advertising (11,567) (11,528) (11,567) (11,528)

Legal expenses (5,006) (1,216) (5,006) (1,216)

Other expenses (10,844) (5,283) (12,398) (6,561)

(221,530) (264,685) (238,346) (277,156)


2018 2017 2018 2017

PIS/ COFINS (106,588) (*) (46,850) (108,677) (*) (51,609)

Other taxes and fees (38,228) (30,606) (40,189) (30,605)

(144,816) (77,456) (148,866) (82,214)




94 of 126

25.8 Financial result

25.9 Equity result

25.10 Income and social contribution taxes

(a) Reconciliation of income and social contribution taxes

2018 2017 2018 2017

Financial income (expenses) from investment portfolio 504,573 723,436 628,435 764,540

Financial income (expenses) other than from investment portfolio (189,842) (75,286) (180,631) (78,214)

314,731 648,150 447,804 686,326


Financial Revenues 2018 2017 2018 2017

Financial income from investment portfolio 1,037,703 1,835,775 1,161,565 1,872,556

Financial income other than from investment portfolio 83,329 120,089 93,349 121,530

1,121,032 1,955,864 1,254,914 1,994,086


Financial expenses 2018 2017 2018 2017

Financial expenses from investment portfolio (533,130) (1,112,339) (533,130) (1,108,016)

Financial expenses other than from investment portfolio (273,171) (195,375) (273,980) (199,744)

(806,301) (1,307,714) (807,110) (1,307,760)


2018 2017 2018 2017

Direct operating income (expenses) arising from investment

properties24,728 (11,361) 77,077 53,805

Equity pick-up 113,693 66,762 - -

Provision for impairment - investment 467 - 467 -

Other equity expenses (4) (400) (4) (400)

138,884 55,001 77,540 53,405


IRPJ CSLL IRPJ CSLL

Earnings before the provision for IRPJ/ CSLL 1,421,297 1,421,297 1,251,676 1,251,676

Nominal rates in force 25.0% 20.0% 25.0% 20.0%

IRPJ and CSLL - nominal rate (355,324) (284,259) (312,919) (250,335)

Permanent additions and exclusions 318,611 118,471 177,848 58,780


Tax incentives (1,098) (879) (1,810) (1,448)

Deduction of current IR - incentives/adjustments 5,426 - 6,421 -

Equity interest and offshore branches 126,597 82,700 21,240 16,992

Provision for losses (pre-68 health plan) 1,355 813 2,674 3,028

Rural insurance 123,927 - 91,257 -

Deferred CSLL rate adjustment - (12,667) - -

Other adjustments 916 (686) (2,379) (8,148)

IR and CS in the income statement (36,713) (165,788) (135,071) (191,555)

Current (100,136) (183,611) (121,136) (177,959)

Deferred 63,423 17,823 (13,935) (13,596)

Parent Company

2018 2017



95 of 126

25.10 Income and social contribution taxes

(a) Reconciliation of income and social contribution taxes

Law 13,169/2015

On October 6, 2015, Provisional Measure 675 was converted into Law 13,169/2015, raising the rate of CSLL for financial institutions and similar entities as defined in article 22, paragraph 1, of Law 8,212/1991, namely, credit, financing and investment companies, real estate credit companies, brokerage firms, securities distributors, leasing companies, credit cooperatives, private insurance and savings bond companies, independent private insurance and credit agencies and open and closed private pension plans. The CSLL rate was raised from 15% to 20% for the period from September 1, 2015 to December 31, 2018. On January 1, 2019, the rate will return to 15%.

IRPJ CSLL IRPJ CSLL

Earnings before the provision for IRPJ/ CSLL 1,472,160 1,472,160 1,271,027 1,271,027

Nominal rates in force 25.0% 20.0% 25.0% 20.0%

IRPJ and CSLL - nominal rate (368,040) (294,432) (317,757) (254,205)

Permanent additions and exclusions 293,947 115,161 168,511 57,474


Tax incentives (1,098) (879) (1,810) (1,448)

Deduction of current IR - incentives/adjustments 5,426 - 6,421 -

Equity interest and offshore branches 126,597 82,700 21,240 16,992

Provision for losses (pre-68 health plan) 1,355 813 2,674 3,028

Rural insurance 123,927 - 91,257 -

Deferred CSLL rate adjustment - (12,667) - -

Other adjustments (23,748) (3,996) (11,716) (9,454)

IR and CS in the income statement (74,093) (179,271) (149,246) (196,731)

Current (116,419) (189,499) (131,745) (181,851)

Deferred 42,326 10,228 (17,501) (14,880)

Consolidated

2018 2017



96 of 126

25.10 Income and social contribution taxes (b) Account flux - deferred IRPJ and CSLL

Balances as of

2016Additions

Write-

offs

Recorded to

profit (loss)

Recorded to

comprehensive

income

Balances as of

2017

Deferred tax assets

Labor provisions 167,755 18,158 - 18,158 - 185,913

Provision for investment devaluation 97,183 - (33,839) (33,839) - 63,344

Allowance for doubtful accounts 83,364 21,091 - 21,091 - 104,455

Provision for tax and social security contingencies 58,118 6,289 - 6,289 - 64,407

Adjustment to market value - securities available for sale 33,492 - (15,668) - (15,668) 17,824

Actuarial gains or losses - post-employment benefits (24,018) 9,266 - (30,945) 40,211 (14,752)

Provision for labor contingencies 22,610 744 - 744 - 23,354

Adjustment to market value - Investment (18,407) 1,921 - 1,921 - (16,486)

Other provisions 4,268 - (3,067) (3,067) - 1,201

Total deferred tax assets 424,365 57,469 (52,574) (19,648) 24,543 429,260

Balances as of

2016Additions

Write-

offs

Recorded to

profit (loss)

Recorded to

comprehensive

income

Balances as of

2017

Deferred tax liabilities

Restated court deposits (72,460) (7,883) - (7,883) - (80,342)

Total deferred tax liabilities (72,460) (7,883) - (7,883) - (80,342)

Total Parent Company, net 351,907 49,586 (52,574) (27,531) 24,543 348,918

Adjustment to market value - (8,299) - (4,850) - (13,148)

Total Consolidated, net 351,907 41,287 (52,574) (32,381) 24,543 335,770




97 of 126

25.10 Income tax and social contribution (b) Account flux - deferred IRPJ and CSLL

Balances as of

2017Additions

Write-

offs

Recorded to

profit (loss)

Recorded to

comprehensive

income

Balances as of

2018

Deferred tax assets

Labor provisions 185,913 - (5,160) (5,160) - 180,753

Provision for investment devaluation 63,344 - (63,344) (63,344) - -

Provision for profit sharing - 5,510 - 5,510 - 5,510

Allowance for doubtful accounts 104,455 - (22,067) (22,067) - 82,388

Provision for tax and social security contingencies 64,407 6,822 - 6,822 - 71,229

Adjustment to market value - securities available for sale 17,824 (8,428) - - (8,428) 9,396

Actuarial gains or losses - post-employment benefits (14,752) - 2,169 4,151 (1,982) (12,583)

Provision for labor contingencies 23,354 (66) - (66) - 23,288

Adjustment to market value - Investment (16,486) 18,627 - 18,627 - 2,141

Other provisions 1,201 147,590 - 147,590 - 148,791

Total deferred tax assets 429,260 170,055 (88,402) 92,063 (10,410) 510,913

Balances as of

2017Additions

Write-

offs

Recorded to

profit (loss)

Recorded to

comprehensive

income

Balances as of

2018

Deferred tax liabilities

Restated court deposits (80,342) (10,817) - (10,817) - (91,159)

Total deferred tax liabilities (80,342) (10,817) - (10,817) - (91,159)

Total Parent Company, net 348,918 159,238 (88,402) 81,246 (10,410) 419,754

Adjustment to market value (13,148) - 8,301 (28,692) - (33,539)

Total Consolidated, net 335,770 159,238 (80,101) 52,554 (10,410) 386,215




98 of 126

25.10 Income tax and social contribution (c) Estimated realization of deferred credits

The projections of future taxable profits include estimates of exchange rates and levels of transactions, among others,

which may not differ from actual amounts.

26 Retirement and pension plans and other employee benefits

The Company is a sponsor of the Brazilian Reinsurance Institute Staff Pension Foundation (PREVIRB), which provides members and their dependents with benefits to supplement the basic government pension. Defined benefit (closed) and variable contribution (open) plans are offered. The capitalization regime is adopted for actuarial valuations of retirement income. The Company offers the following benefits (Note 15.2): a. Payment of the full cost of supplementary pension benefits and death benefit. b. Contributory health plan for active and retired staff. c. Funeral allowance. d. Life insurance.

2018


Provision for Deferred

Taxes and Contributions%

Provision for Deferred

Taxes and Contributions%

2019 45,509 11% 18,677 5%

2020 94,070 22% 90,716 23%

2021 73,901 18% 70,548 18%

2022 29,524 7% 29,524 8%

2023 29,570 7% 29,570 8%

2023 onwards 147,180 35% 147,180 38%

Total 419,754 100% 386,215 100%



99 of 126

The following key actuarial assumptions are used:

(*) The discount rate is calculated according to CVM Instruction 695, using the rate for Brazilian Federal Government bonds (NTN-B) as a base, indexed over expected post-employment benefits obligations periods. Medical costs are expected to continue to rise in line with the experience of the plan over the last four years. The HCCTR (Health Care Cost Trend Rate) was 4.9% p.a., in addition to an Aging Factor of 2% p.a. and overall inflation 4% p.a. This rate is applied uniformly over the first nine years. As from year ten the rate reduces to 1% p.a.

Economic hypotheses 2018 2017 2018 2017

Actual discount rate (*) 4.5% 5.0% 4.5% 5.0%

Nominal rate of return expected from assets INPC + 4.5% p.a. INPC + 5.0% p.a. INPC + 4.5% p.a. INPC + 5.0% p.a.

Estimated real wage growthPlan A: not

adopted

Plan A: not

adopted

Health

insurance: not

applicable

Health

insurance: not

applicable

Plan B: 1% Plan B: 1% Other plans: not

applicable

Other plans: not

applicable

Estimated real growth of the highest wage received by INSS beneficiaries Zero Zero Not applicable Not applicable

Estimated real growth of the plan benefits Zero Zero Not applicable Not applicable

Hypothesis on future generation of new participants Not adopted Not adopted Not applicable Not applicable

Plan A: not

adopted

Plan A: not

adopted

Health

insurance: 3%

Health

insurance: 2.5%

Plan B: 3% Plan B: 2.5% Other plans: not

applicable

Other plans: not

applicable

Drivers determining the real value through time, INSS benefits and plan

benefitsNot adopted Not adopted Not applicable Not applicable

Demographic hypotheses

Life table: Pre-68 Plan Not applicable Not applicableAT-2000 diluted

by 10%

AT-2000 diluted

by 10%

Life table: Other Plans

PLANO A: AT-

2000 diluted by

10% / PLANO B:

AT-2000 M&F

(diluted by 10%)

(D10)

BR-EMSsb

(segregated by

gender)

AT-2000 diluted

by 10%

BR-EMSsb

(segregated by

gender)

Disability table MI 85 MI 85 MI 85 MI 85

Disability table ÁLVARO VINDAS ÁLVARO VINDAS ÁLVARO VINDAS ÁLVARO VINDAS

Hypothesis on turnover

Post-employment benefits plan Post-employment benefits plan

managed by PREVIRB managed by IRB



100 of 126

26.1 Variable contribution plans

Since 2004, the Company has sponsored Pension Plan B (a variable contribution plan). The plan assets are held separately from the Company's in funds controlled by trustees. The amount of contributions paid by the Company in 2018 was R$10,286 (2017: R$5,966) as per the terms in the plan regulations. The actuarial valuation identified a technical surplus at December 31, 2018 of R$51,777 (R$37,132 as at December 31, 2017) in PREVIRB. In accordance with the Brazilian GAAP and the IFRS, this surplus is not shown in the books of the sponsor. As at December 31, 2018, PREVIRB set up a special reserve of R$1,780 representing the surplus to be repaid to the sponsor of the defined benefit plans. The Company accordingly recognized this sum in its financial statements, having met all the requirements of Private Pension Management Council (CGPC) Resolution No. 26, which deals with the conditions and procedures for the disposal and use of surpluses by private pension companies. Changes in the present value of actuarial liabilities of Plan B during the year are as follows:

Changes in the fair value of assets of Plan B during the year are as follows:

The amount recognized in the statement of financial position for the company's liabilities under this defined benefit plan is shown below:

2018 2017

Present value of actuarial obligations at the beginning of the year 87,032 65,653

Cost of current services 80 123

Cost of interest 4,068 2,089

Actuarial loss 29,280 22,784

Benefits paid (6,948) (3,617)

Present value of actuarial obligations 113,512 87,032

2018 2017

Initial fair value of the plan's assets 124,164 103,524

Return on investments 11,449 9,109

Employer contributions 10,286 5,966

Contributions from participants 10,286 5,966

Benefits paid (6,948) (3,617)

Return on assets 16,052 3,216

Final fair value of the plan's assets 165,289 124,164

2018 2017

Fair value of the defined benefit obligations paid (113,512) (87,032)

Fair value of the plan's assets 165,289 124,164

Financial situation 51,777 37,132

Effect from assets ceiling (51,777) (37,132)

Net assets arising from defined benefits obligations - -



101 of 126

26.2 Defined benefit plans

The Company provides defined benefit pension plans (Benefits Plan A and Pre-68 Plan) for eligible employees. Under these plans staff are entitled to supplementary benefits based on their monthly salary on retirement date. Plan A

The amount of contributions paid by the Company in this period was R$32 (R$19 as at December 31, 2017) at the rates specified in the plan regulations.

The actuarial valuation identified a technical surplus of R$823,680 (R$564,132 as at December 31, 2017). In accordance with the accounting practices adopted in Brazil and IFRS, this surplus is not presented in the books of the sponsor. As at December 31, 2018, PREVIRB set up a special reserve of R$159,208 representing the surplus to be repaid to the sponsor of the defined benefit plans. The Company recognized this sum in its financial statements, having met all the requirements of Private Pension Management Council (CGPC) Resolution No. 26, which deals with the conditions and procedures for the disposal and use of surpluses by private pension companies. Changes in the present value of actuarial liabilities of Plan A during the year were as follows:

Changes in the fair value of assets of Plan A during the year were as follows:

The amount recognized in the statement of financial position as liabilities under this defined benefit plan is as below:

2018 2017

Present value of actuarial obligations at the beginning of the year 1,401,904 1,326,917


Actuarial (gain) / loss (44,369) 56,852

Benefits paid (110,436) (114,034)

Present value of actuarial obligations 1,371,117 1,401,904

2018 2017

Initial fair value of the plan's assets 1,966,036 1,939,573

Return on investments 181,288 204,103

Employer contributions 32 19

Contributions from participants 55 82

Benefits paid (110,436) (114,034)

Return on assets 157,822 (63,707)

Final fair value of the plan's assets 2,194,797 1,966,036

2018 2017

Fair value of the defined benefit obligations paid 1,371,117 1,401,904

Fair value of the plan's assets (2,194,797) (1,966,036)

Financial situation (823,680) (564,132)

Effect from assets ceiling 823,680 564,132

Net assets arising from defined benefits obligations - -



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Details of the securities in guarantee of the PREVIRB Plan A Reserves are as below:

Pre-68 Plan The Company has a technical provision to cover liabilities under the above-mentioned benefits, which applied to 224

members as at December 31, 2018 (240 as at December 31, 2017), consisting of 213 retirees with an average age of

84.62 years (83.97 years as at December 31, 2017) and 11 pensioners with an average age of 84.36 years (84.17 years

as at December 31, 2017).

The benefits paid to these participants/beneficiaries during the year, under the plan regulations, was R$20,715 (R$19,256

as at December 31, 2017).

The actuarial valuation established the balance of provisions as R$137,867 (R$138,770 as at December 31, 2017), in line

with the BR GAAP.

The adjusted amount of the debt agreement signed between IRB Brasil RE and PREVIRB in December 2015, transferring

administrative responsibility for payment of pension benefits under the pre-68 Plan, is R$149,951 (R$154,270 as at

December 31, 2017).

Since this group of participants are members of the Foundation's Plan A, the results of the Pre-68 Plan were included with the results of Plan A. The are detailed are provided herein simply to facilitate understanding the methodology.

2018 2017

Cash 52 40

Receivables from investments

Government securities 1,545,597 1,392,241

Private credits and deposits 266,803 356,505

Shares 200,804 47,866

Investments funds 170,295 182,300

Real estate investment 84,718 85,387

Loan and financing 5,863 5,569

2,274,132 2,069,908

Investment operating liabilities

Other liabilities (IOF) / rents and earnings (1) (1)

(1) (1)

Investment contingent liabilities (26,291) (25,883)

Funds used for guarantee 2,247,840 2,044,024



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Changes in the present value of actuarial liabilities of the defined benefit plan during the year are as follows:

Changes in the fair value of assets of plan during the year are as follows:

The amounts shown in income for September 2018 and forecast for 2019 are as follows:

The amount recognized in the statement of financial position as liabilities under this plan are shown below:

2018 2017



Actuarial loss 7,889 1,892

Benefits paid (20,715) (19,256)


2018 2017


Benefits paid (20,715) (19,256)

Final fair value of the plan's assets - -

2019 2018


Expenses at the end of the year 11,180 11,923

2018 2017

Present value of the defined benefit obligation 137,867 138,770

Fair value of the plan's assets - -

Financial situation 137,867 138,770

Restriction on contracted deficit 12,084 15,500

Net value of defined benefit obligations 149,951 154,270



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26.3 Other staff benefits Medical and dental assistance

Changes in the present value of liabilities for the medical plan during the year are as follows:

Changes in the fair value of assets of medical plan during the year are as follows:

The amounts shown in income for December 2018 and forecast for 2019 are as follows:

The amount recognized in the statement of financial position for the company's liabilities under this plan is as below:

2018 2017




Actuarial (gain) / loss (9,408) 97,618

Benefits paid (19,049) (22,564)

Present value of the actuarial obligations 297,745 300,100

2018 2017


Contributions from participants 6,192 5,636

Benefits paid (19,049) (22,564)


2019 2018



Estimated value from employer contributions (25,387) (5,636)

Expenses at the end of the year (995) 17,387

2018 2017

Present value of the defined benefit obligations paid (297,745) (300,100)

Net value of defined benefit obligations (297,745) (300,100)



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Funeral allowance

Changes in the present value of liabilities for the funeral allowance during the year are as follows:

Changes in the fair value of assets of the funeral allowance during the year are as follows:


The amount recognized in the statement of financial position as liabilities under this plan (funeral allowance) are shown below:

2018 2017


Cost of interest 147 149

Actuarial loss 163 83

Benefits paid (14) (49)


2018 2017




2019 2018


Expenses at the end of the year 164 147

2018 2017


Net asset arising from defined benefit obligations (1,943) (1,647)



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Group life insurance

Changes in the present value of liabilities for life insurance during the year are as follows:

Changes in the fair value of assets of life insurance during the year are as follows:


The amount recognized in the statement of financial position as liabilities under this plan is shown below:

2018 2017



Actuarial loss 475 295



2018 2017




2019 2018


Expenses at the end of the year 154 141

2018 2017


Net asset arising from defined benefit obligations (1,879) (1,556)



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26.4 Total obligations of IRB Brasil RE

Details of provisions for post-employment benefits, for which IRB Brasil RE is liable, divided into current and non-current, are as below:

26.5 Consolidation of effects - Post-employment benefit

Consolidated totals of employee benefits and respective basis of accounting are shown below. The following amounts were recognized in income for the period and in shareholders' equity as Other comprehensive income: Total amount recognized in income for the year:

Total recognized in the statement of comprehensive income:

2018 2017

Current

Retirement and pensions supplement 19,593 20,500

Medical and dental assistance 18,679 17,623

Medical and dental assistance- provision for events

incurred and not reported365 271

Group life insurance 215 176

Funeral allowance 111 85

38,963 38,655

Non current

Retirement and pensions supplement 130,358 133,770

Medical and dental assistance 279,066 282,477

Group life insurance 1,664 1,381

Funeral allowance 1,832 1,561

412,920 419,189

2018 2017 2018 2017 2018 2017 2018 2017

Cost of service - - 117 442 - - 117 442

Cost of interest 11,923 13,525 26,267 22,098 - - 38,190 35,623

Contributions paid 32 19 10,286 5,966 - - 10,318 5,985

Other changes - - - - 92 (151) 92 (151)

Total recorded 11,955 13,544 36,670 28,506 92 (151) 48,717 41,899

Defined benefit Other benefits Other provisions (PEONA) Total

2018 2017 2018 2017 2018 2017 2018 2017

Actuarial (gains)/ losses 7,889 1,892 (8,770) 97,996 - - (881) 99,888

Other changes (3,416) (17,586) - - - - (3,416) (17,586)

Total recorded 4,473 (15,694) (8,770) 97,996 - - (4,297) 82,302

Defined benefit Other benefits Other provisions (PEONA) Total



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26.6 Sensitivity analysis

As per CPC33 - Employee Benefits, Management's sensitivity analysis for the financial and actuarial assumptions considered critical are as follows: Sensitivity to discount rate

PLAN A Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%

Defined benefit obligation 1,594,658 1,439,536 1,307,983 1,195,529

Impact from main scenario 223,538 68,417 (63,136) (175,590)

PLAN B Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%

Defined benefit obligation 118,085 114,892 112,254 110,049


PRE 68 Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%



Health Plan Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%



Funeral allowance Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%


Impact from main scenario 422 266 - (115)

Life insurance Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%


Impact from main scenario 217 68 (64) (180)



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Sensitivity to mortality table - BR-EMS 2015

(*)Considers inflation.

PLAN A Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%

Defined benefit obligation 1,666,710 1,498,111 1,356,022 1,235,260


PLAN B Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%



PRE 68 Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%


Impact from main scenario 23,259 12,480 2,893 (5,672)

Health Plan Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%


Impact from main scenario 74,560 34,598 1,155 (27,098)

Funeral allowance Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%


Impact from main scenario 352 193 (80) (196)

Life insurance Actual rate 3.0% 4.0% 5.0% 6.0%

Nominal rate (*) 7.1% 8.2% 9.2% 10.3%


Impact from main scenario 319 158 16 (110)



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Section F - Accounting policies

27 Significant accounting policies

The significant accounting policies applied in preparing these financial statements are shown below. These policies have been applied consistently for the periods shown, except as otherwise indicated.

27.1 Translation of foreign currency

(a) Functional currency and presentation currency

The items shown in the parent company and consolidated financial statements are measured in the currency of our main economic operating environment ("functional currency"). The consolidated financial statements are presented in Brazilian Reais (Real), the Company's functional currency.

(b) Transactions and balance

In preparing the parent company and consolidated financial statements, transactions in foreign currency, i.e. any currency other than the functional currency of each Company, are recorded at the exchange rate ruling on the transaction date. At the end of each year, monetary items in foreign currency are reconverted at the current rates. Non-monetary items in foreign currency registered at fair value are reconverted at the rates in force on the date when fair value is determined. Non-monetary items measured at historic cost in foreign currency are converted at the rate ruling on the transaction date.

For the purposes of presentation of the parent company and consolidated financial statements, the Company's operating assets and liabilities abroad are converted into Reais at the exchange rates ruling at the end of the period. Income is converted at the average exchange rate for the period, unless exchange rates have fluctuated significantly, in which case the rates ruling on the transaction date are used. Any exchange rate changes resulting from these translations are classified as comprehensive income and accumulated in shareholders' equity.

(c) Subsidiaries with a different functional currency

The results and financial position of entities consolidated which have a functional currency different from the presentation currency, are converted into the presentation currency as follows:

(i) Assets and liabilities in the statement of financial position presented are converted at the rate on the closing date.

(ii) Revenues and expenses of each statement of income are converted at the average rate of exchange (unless this does not give a reasonable approximation of the cumulative effect of the rates in force on the dates of the transactions, in which case revenues and expenses are converted at the rate ruling on the date of the transactions).

(iii) All resulting exchange differences are recognized as a separate component of shareholders' equity, in the "cumulative translation adjustments" account.

27.2 Cash and cash equivalents

Cash and cash equivalents include cash and bank deposits with an insignificant risk of change in value. The balance is shown in the cash flow statements net of the balance of overdrawn accounts, if any. Overdraft balances, if any, are shown in the statement of financial position as "loans", in current liabilities.



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27.3 Financial assets

27.3.1 Classification

The Company classifies its financial assets on initial recognition in the following categories: measured at fair value through income, loans and receivables, available for sale and held to maturity. The classification depends on the purpose for which the financial assets were acquired.

(a) Financial assets measured at fair value through profit or loss

Financial assets measured at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it was acquired, principally, for sale in the short term. Assets in this category are classified as current assets.

Derivatives, when used, are also categorized as held for trading, unless they are designated as hedging instruments.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable maturities, not quoted on an active market. Loans and receivables (including credits and debits for reinsurance and retrocession operations, securities and credits receivable, court and tax deposits and similar) are measured at amortized cost using the effective interest rate method less any impairment losses. They are presented as current assets, except those maturing more than 12 months after the date of issuance of the statement of financial position (these are classified as non-current assets).

Premiums payable in installments are booked as premiums receivable, in current assets, and written off as each installment is paid.

(c) Financial assets available for sale

Financial assets available for sale are non-derivatives designated in this category or not classified in any of the previous categories. They are shown as non-current assets, unless Management intends to dispose of them within 12 months from the statement of financial position date.

(d) Investments held to maturity

Investments held to maturity are non-derivative financial assets, with fixed or determinable payments and fixed maturity dates, which the Company has the intention and the capacity to hold to maturity.

27.3.2 Recognition and measurement

Purchases and sales of financial assets are normally recognized on the trading date. The investments are initially recognized at fair value plus transaction costs, in the case of all financial assets not classified as being at fair value through income. Financial assets at fair value through income are initially recognized at fair value, and the transaction costs are debited to the statement of income. Financial assets are written off when the rights to receive cash flows have expired or have been transferred, in the latter case provided that the Company has transferred substantially all the risks and benefits of ownership. Financial assets available for sale or measured at fair value through income are subsequently recognized in the books at fair value. Loans and receivables are booked at amortized cost, using the effective interest rate method.

Gains and losses arising from changes in the fair value of financial assets measured at fair value through income are shown in the statement of income as "Financial revenues and expenses" in the year in which they occur.

Changes in the fair value of monetary securities denominated in foreign currency and classified as available for sale are divided between translation differences arising from changes in the amortized cost of the security and other changes in its book value. Exchange gains/losses on monetary securities are recognized in income. Exchange rate changes on non-monetary securities are recognized in shareholders' equity. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognized in shareholders' equity.

When securities classified as available for sale are sold or suffer impairment, the aggregate fair value adjustments recognized in shareholders' equity are included in the statement of income as "financial revenues and expenses". Interest on securities available for sale, calculated according to the effective interest rate method, are recognized in the statement of income as "other revenues".

Dividends on financial assets measured at fair value through income and equity instruments available for sale, such as shares, are recognized in the statement of income as "other revenues", when the Company has an established right to receive dividends.



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Fair value of quoted investments is based on current purchase prices. If there is no active market for a financial asset (including unlisted securities), the Company uses valuation techniques to determine fair value. These techniques include the use of recent transactions with third parties for other instruments which are substantially similar, analysis of discounted cash flows and options pricing models which use market information as far as possible, and with as little input from the Company's Management as possible.

27.3.3 Offsetting of financial Instruments

Financial assets and liabilities are offset and the net figure shown in the statement of financial position when there is a legal right to do so and it is intended to settle them on a net basis or to realize the asset and settle the liabilities simultaneously.

27.3.4 Impairment of financial assets

(a) Assets measured at amortized cost

As at the date of each statement of financial position, the Company determines whether there is objective evidence of impairment of a financial asset or group of financial assets. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events occurring since the initial recognition of the assets (a "loss event") and if this loss event (or events) has an effect on estimated future cash flows from the financial asset or group of financial assets, which can be reliably estimated.

The criteria which the Company uses to determine whether there is objective evidence of impairment include:

(i) significant financial difficulties of the issuer or debtor;

(ii) a breach of contract, such as default or delay in payment of interest or principal;

(iii) the Company, for economic or legal reasons involving the financial difficulties of a borrower, grants concessions which a creditor would normally not consider;

(iv) it is likely that the borrower will declare bankruptcy or other financial reorganization;

(v) the disappearance of an active market for the financial asset due to financial difficulties; or

(vi) observable data indicating that there is a measurable reduction in estimated future cash flows from a portfolio of financial assets since their initial recognition, even though the decrease may not yet have been identified for individual financial assets in the portfolio, including national or local economic conditions affecting repayment of the portfolio assets.

The amount of the impairment loss is measured as being the difference between the book value of an asset and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the original interest rate applying to the financial asset. The book value of the asset is reduced and the amount of the loss is recognized in the statement of income. If a loan or investment held to maturity has a variable interest rate, the discount rate used to measure an impairment loss is the current effective interest rate according to the contract. As a practical expedient, the Company may measure impairment on the basis of the fair value of an instrument using an observable market price.

If in a subsequent period the amount of the impairment loss diminishes, and the decrease can be objectively related to an event which has taken place since the impairment was recognized (such as an upgrade in the debtor's credit rating), the loss previously recognized will be reversed and recognized in the statement of income.



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(b) Assets classified as available for sale

As at the date of each statement of financial position, the Company determines whether there is objective evidence of impairment of a financial asset or group of financial assets. For debt securities, the Company applies the criteria mentioned in item (a) above. In the case of investments in equity instruments classified as available for sale, a significant or prolonged fall in fair value to below cost is also evidence of impairment. If any evidence of this type exists for financial assets available for sale, the aggregate loss - measured as the difference between cost price and current fair value, less any impairment previously recognized in income - will be deducted from equity and recognized in the statement of income. Impairment losses on equity instruments recognized in the statement of income are reversed to the statement of income. In the case of debt instruments classified as available for sale, if in a subsequent period the fair value rises, and the rise can be objectively related to an event occurring since the impairment loss was recognized in income, the loss is reversed to the statement of income.

27.4 Classification of reinsurance contracts

The Reinsurer's contracts are classified for booking as reinsurance contracts when risk coverage starts. A contract classified as a reinsurance contract will remain classified as such until all rights and obligations have been extinguished or have expired. A reinsurance contract is a contract whereby the reinsurer accepts a material insurance risk from another party (reinsurer or insurer), and undertakes to indemnify the other party if a specific event occurring in the future (the event insured) adversely affects the latter.

Thus a reinsurance contract is classified as an insurance contract because it is defined as a transaction where the issuer accepts a material insurance risk from the other party and undertakes to compensate the latter if an uncertain, specific event occurs in the future which may have an adverse effect on it.

27.5 Intangible assets

(a) Intangible assets acquired separately

Intangible assets with a defined useful life and acquired separately are registered at cost, less amortization and aggregate impairment losses. Amortization is recognized on a straight-line basis over the estimated useful life of the assets. Estimated useful life and the method of amortization are reviewed at the end of each year, and the effect of any change in the estimates is booked prospectively. Intangible assets with an undefined useful life and acquired separately are registered at cost, less aggregate impairment losses, and are not amortized.

(b) Write-off of intangible assets

An intangible asset is written off when disposed of, or when there are no future economic benefits from its use or disposal. Gains or losses from the write-off of an intangible asset are measured as the difference between net revenues from disposal and the book value of the asset, and are recognized in income when the asset is written off.

27.6 Property and equipment

Property and equipment for own use

Property and equipment for own use consists of property, equipment, fittings and fixtures, vehicles, machines and utensils used in the Reinsurer's business. Property and equipment for own use is generally shown at historic cost. Properties for own use (land and buildings) are shown at historic cost revalued as at December 31, 2004, on the basis of the reports of independent experts. In accordance with CPC 01 (R1) - Impairment, no further revaluations have been undertaken.

The historic cost of property and equipment consists of expenses directly attributable to the acquisition of items which can be capitalized, and which are in a condition to be used.

Subsequent expenditure is included in the book value of the asset or recognized as a separate asset, as the case may be, only when it is likely that future financial benefits associated with the asset will accrue to the Reinsurer and the cost of the asset can be reliably estimated.



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Land is not depreciated. Depreciation of other assets is calculated on a straight-line basis, to allocate costs, less residual value, over their useful life, as follows:

Depreciation rate (p.a.) - % Years

Buildings 4.0 25 Furniture and fixture 10.0 10 IT Equipment 20.0 5 Vehicles 20.0 5

Residual values and the useful life of assets are reviewed and adjusted, if necessary, at each statement of financial position. The book value of an item of property and equipment is written down immediately, in full or in part, if its recoverable value is lower than its book value.

27.7 Investment property

The Reinsurer holds 100% of the shares of IRB Investimentos e Participações Imobiliárias S.A., which owns certain commercial properties leased to third parties under operating leases, as defined in CPC 06 (R1) - Leasing Operations. The Reinsurer uses the depreciated cost model (the cost method defined in CPC 28 - Investment Property) to value these assets.

The investment properties owned by the subsidiary are depreciated on a straight-line basis over their estimated useful lives. The majority of the lease agreements have a three-year renewal option. Rentals are adjusted in line with the IGP-M/FGV.

27.8 Impairment of non-financial assets

Non-financial assets (including intangible assets) are assessed for impairment on the occurrence of events or circumstances indicating that book value may not be recoverable. An impairment loss is recognized in income for the period for the difference between book value and recoverable value. Recoverable value is defined by CPC 01 (R1) - Impairment as the greater of value in use and the fair value of the asset (less selling costs). When testing non-financial assets for impairment, they are grouped at the lowest level for which the Reinsurer can identify individual cash flows, defined as a cash generating unit (CGU).

27.9 Provisions

(a) Technical provisions

A provision for unearned premiums on risks in force and issued (PPNG-RVE) is set up to cover premiums issued during the period for unexpired risks under the contracts. The purpose is to cover future expenses, including claims to be paid by IRB Brasil RE. The provision is calculated on the basis of anticipated exposure for each contract. To supplement this provision, a further provision is set up for risks in force but not issued (PPNG-RVNE), calculated on the basis of an actuarial estimate (as described in a technical actuarial note) of existing risks for which contracts have not yet been issued.

A provision for unsettled claims (PSL) is set up for the estimated sum to be indemnified indicated in claim reports received from the reinsurance and insurance companies. The provision is adjusted daily on the basis of analyses undertaken by the operating and legal areas. The balance of the PSL includes a provision for claims incurred but not enough reported, described below.

The provision for claims incurred but not enough reported (IBNER), relating to operations in Brazil and abroad, is set up according to actuarial assumptions defined in a technical note or reports of independent actuaries, to cover developments under claims reported but not yet paid as at the date of the calculation. These amounts may be altered over the period of the process, until it is settled.

The provision for claims incurred but not reported (IBNR), relating to operations in Brazil and abroad, is set up according to actuarial assumptions defined in a technical note or reports of independent actuaries.

A provision for technical surpluses (PET) is set up to guarantee distribution of these surpluses under existing contracts.

A provision must be set up for related expenses (PDR), to cover claims adjustment costs, and a provision for supplementary coverage (PCC), when the Company's total liabilities are tested for adequacy and found to be insufficient.



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(b) Liability adequacy test (LAT)

The liability adequacy test is an economic test of the book value of the Company's liabilities. Its aim is to identify any errors in the values of the obligations arising from reinsurance contracts, as required by CPC 11 - Insurance Contracts.

The test compares current estimates of gross cash flows from retrocession with the book value of technical provisions, as at the date of the calculation, less deferred acquisition costs and intangible assets directly related to the provisions. If the figure is found to be inadequate, this must be recognized in the Supplementary Coverage Provision (PCC).

The cash flows are aggregated by groups of similar insurance lines, separating contracts in local and foreign currency, and observing the differences between registered and future premiums and between past and future claims.

To calculate the present value of estimated cash flows a discount rate is obtained from the Svensson model for IPCA coupon, fixed-rate and currency coupon curves.

IRB Brasil RE's life products are structured under a simple distribution regime, and so life expectancy tables are not used to project cash flows.

The Svensson model is frequently used in the financial market to estimate interest rate curves. This model is an extrapolation of the Nelson and Siegel model, with the addition of a new exponential component to the forward rates curve, taking into account two additional parameters.

The loss ratio assumption used in the TAP is calculated for the period November 2015 to October 2018.

The test carried out as at December 31, 2018, found no inadequacies.

IRB Brasil RE regularly monitors its loss ratio, the combined ratio and the liability adequacy test, so as to ensure that its contracts remain technically and actuarially in balance.

(c) Legal provisions, contingent liabilities and contingent assets

Legal provisions for civil, labor, social security and tax litigation are reviewed regularly and booked according to the opinions of the Company's in-house legal department, our independent legal advisors and Management on the probable outcome of each case, as at the statement of financial position date. Legal provisions for civil proceedings of an operational nature are also calculated and booked for specific percentages, through an analysis of past experience of the outcome of similar cases, taking into account the ratio of amounts disbursed to cases closed which are won, or settled or lost, and the corresponding estimates of risk exposure. These percentages of probability of loss are applied to operational civil contingencies existing on the closing date of the consolidated financial statements.

Legal provisions for labor, social security and tax issues are booked as "other debits" in non-current liabilities. Civil contingencies are booked as "unsettled claims ", in current liabilities. Estimated losses on civil and labor contingencies are monetarily adjusted, and interest is accrued at the rates which have been charged on similar cases in the past, taking into account their nature and the court where they are being heard. Estimated losses on tax and social security contingencies are adjusted and updated at the SELIC rate. The corresponding court deposits, when required, are recorded as court and tax deposits in non-current assets, and adjusted at the SELIC rate. Contingent assets are assessed regularly to ensure that any changes are correctly reflected in the parent company and consolidated financial statements. If it is practically certain that economic benefits will accrue, the asset and the corresponding gain are recognized in the parent company and consolidated financial statements for the year in which the estimate is amended. If an inflow of economic benefits becomes likely, the Company reports the contingent asset.



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27.10 Current and deferred income and social contribution taxes

The provision for income and social contribution taxes is based on taxable income for the year. Taxable income is not the same as the figure shown in the statement of income, because it does not include revenues and expenses taxable or deductible in other periods, and it ignores permanently non-taxable and non-deductible items.

The provision for income and social contribution taxes is calculated individually, based on the rates in force at the end of the period.

Deferred income and social contribution taxes are recognized quarterly on temporary differences between the balances of assets and liabilities recognized in the consolidated financial statements and the corresponding tax bases used for calculating taxable income, including the balance of tax losses if any. Deferred tax liabilities are generally recognized on all temporary taxable differences, and deferred tax assets are recognized on all temporary deductible differences only when it is probable that the company will show taxable profits in the future in sufficient amounts for these differences to be used.

Recovery of the balance of deferred tax assets is reviewed at the close of each year, and when it is no longer likely that future taxable profits will be available to cover the entire asset balance, or part of it, the balance is adjusted to the estimated recovery value.

Deferred tax assets and liabilities are measured at the rates applicable in the period when it is expected that the liability will be settled or the asset realized, based on the rates indicated in the tax legislation in force at the end of each period, or when new legislation has been substantially approved. Currently the rates are 25% for income tax and 20% for social contribution. The measurement of deferred tax assets and liabilities reflects the tax consequences resulting from the extent to which the Company expects to recover or settle their book value at the end of each period.

27.11 Employee benefits

Each quarter an actuarial exercise is undertaken to calculate the amounts to be booked for liabilities for post-employment benefits. This exercise also determines the components necessary for calculating the portions to be recognized in income and in other comprehensive income, such as costs, actuarial gains and losses, interest etc. IRB Brasil RE's post-employment benefits include retirement benefits and others such as life insurance, healthcare plans and funeral allowances.

(a) Retirement benefits

For pension plans classified as defined benefits the projected unit credit method is used to determine the present value of the obligations and their respective current and past servicing costs, as applicable.

For the variable contribution plan administered by PREVIRB, the sponsor's liability is represented by the amounts to be contributed during the period, in additional to the actuarial risk linked to the risk benefits.

The liability for retirement benefits, when recognized in the statement of financial position, is the present value of the obligation for defined benefits, adjusted for actuarial gains and losses, the cost of services and interest costs, and benefits paid during the period.

(b) Other post-employment benefits

Healthcare plans, life insurance and funeral allowances may last for life or for a fixed period, as provided for by law.

Total liabilities under these plans is calculated actuarially in the same way as described above for defined benefits.



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27.12 Capital stock

Common and preferred shares are classified in shareholders' equity.

Incremental costs directly attributable to the issue of new shares or options are shown in shareholders' equity as a deduction from the amount raised, net of tax.

When the Company buys its own shares (treasury shares), the amount paid, including any directly attributable additional costs (net of income tax), is deducted from shareholders' equity until the shares are cancelled or reissued. If the shares are subsequently reissued, all amounts received, net of directly attributable additional costs and the effects of income and social contribution taxes, are added to the Company's shareholders' equity.

27.13 Dividends

The distribution of minimum mandatory dividends proposed by the Board of Directors is recorded as a liability under the heading of obligations payable, since this is a legal obligation under the Company's Bylaws; however, any additional dividends proposed and declared by Management after the end of the accounting period to which the consolidated financial statements refer, but not yet approved by a shareholders' meeting, are registered in shareholders' equity under the heading of proposed distribution of additional dividends.

27.14 Recognition of revenues

Revenues consist of the fair value of consideration received or receivable for the sale of products and services in the normal course of business. Revenues are shown net of cancellations.

The Reinsurer recognizes revenues when their value can be reliably measured; it is probable that future economic benefits will flow to the Company; and specific criteria have been met for each of the Company's activities, as described below. IRB Brasil RE bases its estimates on past results, taking into account the type of client, the type of transaction and the specific nature of each operation.

(a) Reinsurance premiums

Reinsurance premiums are booked as premiums issued when they have been accepted. Reinsurance premiums for current risks, but for which a contract has not yet been issued, are calculated actuarially.

In the case of optional reinsurance contracts the premium issued is taken to be the amount agreed between the parties to guarantee reinsurance cover, for the portion accepted by the reinsurer, for the period of validity of the risk.

In the case of automatic reinsurance contracts, the premium issued is calculated as follows:

Non-proportional contacts - the premium issued is taken to be the amount agreed between the parties to guarantee reinsurance cover, for the portion accepted by the reinsurer, for the period of validity of the reinsurance contract.

Proportional contracts - the premium issued is taken to be the amount estimated by the assignor for all the policies to be covered by the reinsurance contract while it is in force. This estimate is proportional to the percentage share of the reinsurer and weighted by a performance percentage determined by the reinsurer on the basis of experience. These premiums are adjusted each time the assignor renders accounts, normally on a quarterly basis.

(b) Revenue from dividends and interest

Revenue from dividends is recognized when the shareholder's right to receive them is established (provided that it is probable that future economic benefits will flow to the Reinsurer and the amount to be received can be reliably measured). Revenue from interest is recognized when it is probable that future economic benefits will flow to the Reinsurer and the amount to be received can be reliably measured. Revenue from interest is recognized on a straight-line basis over time at the effective interest rate on the amount of principal outstanding. The effective interest rate is one that discounts receipts of future estimated cash flows during the estimated life of the financial asset, in relation to the initial net book value of this asset.



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27.15 Claims expenses and commissions

Claims expenses are booked on an accrual basis and are determined using concepts and assumptions defined in a technical actuarial note, as described in Note 27.9(a).

Commissions are deferred and amortized, except in the case of past risk transactions where commission is booked directly to income for the period, based on the period of validity of the reinsurance contracts. Commissions for current risks, but for which a reinsurance contract has not yet been issued, are calculated actuarially.

27.16 Statement of comprehensive income

Statements of comprehensive income are shown in a separate table. They consist of revenue and expense items (including reclassification adjustments) which are not recognized in the statement of income as required by the CPC. An indication is given of whether or not they can be potentially reclassified to income at a future time.

27.17 New accounting standards, amendments and interpretations of standards

The following new standards and interpretations of accounting standards issued by the IASB came into force on January 1, 2018.

IFRS 9/CPC 48 - In July 2014, the IASB issued the final version of IFRS 9 - Financial Instruments, to replace IAS 39 - Financial Instruments: Recognition and Measurement and all the previous versions of IFRS 9. IFRS 9 combines the three aspects of the accounting project for financial instruments: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods starting on or after January 1, 2018. With the exception of hedge accounting, it has to be applied retrospectively, but it is not mandatory to supply comparative information. The requirements for hedge accounting are generally applied prospectively, with a few limited exceptions.

In September 2016, the IASB issued amendments to IFRS 4/CPC 11 covering issues arising from the different effective dates of IFRS 9 and the new standard for insurance contracts (IFRS 17). In December 2017, the CVM issued CVM Resolution 788, introducing similar changes to CPC 11. SUSEP has so far not expressed an opinion on IFRS 9/CPC 48.

The amendments introduce two alternative options for the application of IFRS 9/CPC48 by entities issuing contracts under IFRS 4/CPC 11: one temporary exemption and one overlapping approach. The temporary exemption permits eligible entities to postpone the date of implementation of IFRS 9/CPC 48 to a year beginning before January 1, 2021, until when they may continue to apply IAS 39/CPC 38 for financial assets and liabilities. An entity may take advantage of temporary exemption from IFRS 9/CPC 48 if: (i) it has not previously applied any version of IFRS 9/CPC 48, other than the requirement to present gains and losses on financial liabilities designated at fair value through income; and (ii) its activities were predominantly related to insurance on the date of its annual report immediately preceding April 1, 2016. The overlapping approach allows an entity that is applying IFRS 9/CPC 48 to reclassify from the statement of income to other comprehensive income the amount obtained at the end of the period of the financial statements for designated financial assets, which gives the same result as if the insurer had applied IAS 39/CPC 38 to the designated financial assets.

An entity may apply the temporary exemption of IFRS 9/CPC 48 to annual periods beginning on or after January 1, 2018. The overlapping approach can start to be applied when IFRS 9/CPC 38 is applied for the first time.

In 2017, Management assessed the effect of the amendments to IFRS 4/CPC 11 in the parent company and the consolidated accounts, and came to the conclusion that in both cases its activities were predominantly related to insurance on the date base as of December 31, 2015. There were no significant changes in the Company's activities until 2018 which would require a new assessment. Management verified that IRB Brasil RE meets the criteria for eligibility to temporary exemption under IFRS 9/CPC 48 and opted to postpone application of IFRS 9/CPC 48 until the effective date of the new standard for insurance contracts (IFRS 17). IRB Brasil RE has therefore decided to apply the temporary exemption under IFRS 9/CPC 48 and will continue to apply IAS 39/CPC 48 to its financial assets and liabilities as from January 1, 2018, until IFRS 17 comes into force.

IFRS 9/CPC 48 requires financial assets to be subject to an evaluation of the business model and a test of contractual cash flow named "Solely Payment of Principal and Interest " (SPPI), which refers to financial assets with contractual terms giving rise, on specified dates, to cash flows consisting exclusively of payment of principal and interest on the outstanding principal. The financial assets which do not pass the SPPI test will be measured at fair value through the statement of income. For assets that pass the SPPI test, the business model is tested to determine the purpose of retaining the asset. The business model for financial assets is tested as follows:

(i) Financial assets will be measured at amortized cost if they are held within a business model aimed at collecting contractual cash flows (the "Hold to collect" business model).



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(ii) Financial assets will be measured at fair value through other comprehensive income if they are held within a business model aimed both at collecting contractual cash flows and at selling the financial assets (the "Hold to collect and sell" business model).

(iii) Financial assets will be measured at fair value through income if they do not meet the criteria for either the "Hold to collect" or the "Hold to collect and sell" business model.

(iv) The entities also have the option of designating a financial asset as measured at fair value through income if this eliminates or significantly reduces an inconsistency of measurement or recognition (accounting inconsistency).

In order to create comparability between insurance companies that adopted IFRS 9/CPC 48 on January 1, 2018 and IRB Brasil RE, Management, in accordance with the requirements for additional disclosure introduced by the amendments to IFRS 4/CPC 11, has analyzed all its financial assets with a view to identifying those with contractual terms that give rise, on specified dates, to cash flows consisting solely of payments of principal and interest on outstanding principal.

The table below shows separately the fair value at the end of the year of the financial statements and the amount of the change in fair value during the year for financial assets which passed the SPPI test and for the other financial assets, i.e. those which do not give rise, on specified dates, to cash flows consisting solely of payments of principal and interest on outstanding principal, satisfying IFRS9/CPC 48's definition of held for trading, or which are managed and assessed for performance on the basis of fair value.

Fair value of financial assets at the end of the year

Fair value as of 2018

Changes in fair value

between 2017 and

2018

Financial assets - SPPIs 10,379,136 42,568

Cash and cash equivalents 43,131 -

Transactions credits

Insurers and Reinsurers 4,688,356 21,835

Credit notes receivable 277,122 -


Financial treasury bills (i) 3,717,852 (3,025)

National treasury notes 443,848 24,231

Repo transactions 414,182 -


Financial bills 25,901 (154)

Equity securities

Shares from Brazilian companies 82,986 -

Investments abroad -

Fixed income securities (HSBC) 29,875 (448)

Fixed term deposits abroad (iv) 640,404 -

U.S. Treasury Securities Obligations of U.S. 6,819 83

Obligation of U.S. Government Corporations and Agencies 2,043 11

Short-Term Investments 871 -

Sec Issued by States & Terr. 1,025 7

Corporate Securities 4,721 28

Other f inancial assets 591,335 (3,936)

Investment fund units

Exclusive fund units 148,742 43

Non-exclusive fund units 38,860 -


Debentures 39,862 (4)

Commercial papers 2,506 (1)

Real estate investment fund units

Non-exclusive real estate funds 29,094 1,866

Investments abroad

Fixed income securities - Public 248,840 (4,562)

American Deposits Receipt (ii) 6,553 (1,278)

Non-exclusive investment fund units 76,878 -

Total 10,970,471 38,632



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For all the financial assets which passed the SPPI test, Management assessed credit risk exposure, including significant credit risk concentrations. The following table shows these assets, classified by credit risk, and their respective book values, and also the fair value of those for which Management considers credit risk to be greater than "low".

Classification of the degree of credit risk

IFRS 15/ CPC 47 - "Revenue from Contracts with Customers" - This new standard contains the principles to be applied by a company to determine the measurement of this revenue, and when it is to be recognized. It came into force on January 1, 2018, and replaces IAS 11 - "Construction Contracts", IAS 18 - "Revenues" and the corresponding interpretations. The Company has completed its analysis and concluded that IFRS 15/CPC 47 had no material effect on the financial statements. The following new standards were issued by the IASB but are not yet in effect for the year 2018. Early adoption of standards, although encouraged by the IASB, is not permitted in Brazil by the CPC. IFRS 16/ CPC 06 (R2) - "Leases" - With this new standard, lessees will have to recognize a liability for future payments and the right to use the leased asset for practically all leases, including the previously classified as operating leases. Certain short-term contracts, or contracts for small amounts, may be exempted from this new standard. The criteria for recognizing and measuring leases in the financial statements of lessors are substantially unchanged. IFRS 16 will apply to years starting on or after January 1, 2019, replacing IAS 17 - "Leases" and the corresponding interpretations. The Company has analyzed the possible impacts of this pronouncement and has concluded that adoption of IFRS 16 will not have a significant impact on the financial statements. IFRS17 - "Insurance Contracts" - Issued by the IASB in May 2017. IFRS 17 defines clearly and consistently the accounting practices to be used by all insurers and reinsurers, and this is bound to increase comparability between their financial statements in different countries. The possible effects of applying IFRS 17 on financial statements and performance indicators of insurers and reinsurers are being assessed.

Credit

RiskBook value as of 2018

Finiancial assets - SPPIs

Cash and cash equivalents 43,131

Transaction credits

Insurers and reinsurers 4,434,712

moderate 253,644

Credit notes receivable 277,122


Financial treasury bills (i) low 3,717,852

National treasury notes low 443,848

Repo transactions low 414,182


Financial bills low 25,901

Equity securities 82,986

Investments abroad

Fixed income securities (HSBC) low 29,875

Fixed term deposits abroad (iv) low 640,404

U.S. Treasury Securities Obligations of U.S. low 6,819

Obligation of U.S. Government Corporations and Agencies low 2,043

Short-term investments low 871

Sec Issued by States & Terr. low 1,025

Corporate Securities low 4,721



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The basic model of IFRS 17 requires insurers and reinsurers to measure their insurance contracts initially at the total amount of estimated cash flow, adjusted by the value of money over time and by the explicit risk related to the non-financial risk, in addition to the contractual margin for the service. This estimated value is then measured again at each reference date. Unrealized earnings (corresponding to the contractual service margin) are recognized over the period of cover contracted. In addition to this general model, IFRS 17 describes how to allocate premium with a view to simplifying the process. This simplified model applies to certain insurance contracts, including those for periods not exceeding one year. In the case of direct participation insurance contracts, the variable commission approach applies. This approach is a variant of the general model. Under the variable commission approach, the insurer's share in changes in fair value of underlying items is included in the contractual service margin. Therefore, changes in fair value are not recognized in income in the period in which they arise, but over the remaining life of the contract.

IFRS 17 applies to reporting periods beginning on or after January 1, 2021, but in November 2018, the IASB was in favor of extending the implementation of this standard to January 1, 2022. It may be applied retrospectively, according to IAS 8 - Accounting Policies, Change of Estimates and Error Rectification, but it also provides for the "modified retrospective approach" and the "fair value approach", depending on the availability of information. The Company is assessing the overall impact of adopting this standard.

There are no other IFRS standards or IFRIC interpretations still to come into force which are likely to have a significant impact on the Company's consolidated financial statements.

28 Critical accounting estimates and assumptions

Critical accounting policies are those which are important for presenting the Company's financial condition and results. Some of these policies require more subjective or complex judgment on the part of Management, often because of the need for estimates affecting issues that are inherently uncertain.

These judgments become more subjective and complex as the number of variables and assumptions increases.

In preparing the parent company and consolidated financial statements, the Reinsurer has adopted variables and assumptions based on past experience and various other factors which we believe to be reasonable and relevant. Significant items which are valued on the basis of estimates include: securities valued at market value, provisions for adjusting assets to realization or recovery value; premium revenues and the corresponding selling expenses for current risks for which policies have not yet been issued, technical provisions and provisions for amounts being argued in court. We would draw special attention to the use of estimates in valuing the reinsurance liabilities described in item (a) below, the estimates and judgments used in valuing provisions for the tax, civil and labor contingencies described in item (b), the estimates used for calculating impairment of financial assets described in item (c), the estimates of fair value of financial instruments, described in item (d), and the estimates and judgments used to determine retirement benefits, described in item (e) below.

Changes in these assumptions, or the extent to which they differ from reality, can affect current estimates and judgments. These estimates and assumptions are reviewed periodically. Revisions of accounting estimates are recognized in the period when they take place and in the future periods affected.

(a) Estimates and judgments used in valuing reinsurance liabilities

The most critical accounting estimates used in preparing the Reinsurer's consolidated statements, in compliance with the CPC, are those for calculating our reinsurance liabilities. There are several areas of uncertainty that have to be taken into account in estimating the liabilities which the Reinsurer will ultimately have to settle. A sensitivity analysis for this critical estimate is shown in Note 2.4.3.

Critical assumptions for the Liability Adequacy Test are the forward interest rate structure used to discount current estimates of cash flows to present value, and the loss ratio estimates used for future claims flows.

Based on the Company's information and experience, the actuarial team defines assumptions which provide the best estimate of the liabilities to be booked. These estimates are reviewed regularly in order to ensure that when the Reinsurer's liabilities are settled the actual amounts differ as little as possible, from a statistical/actuarial point of view, from the amounts initially booked.

(b) Estimates and judgments used in determining provisions for tax, civil and labor contingencies

The Reinsurer is a party to labor, tax and civil lawsuits outstanding on the date of preparation of the consolidated financial statements. The Reinsurer determines and registers accounting estimates on the basis of the opinions of its specialist legal counsel, the progress of the cases and the status of judgment of each individual case. The Reinsurer also uses its best judgment on these cases.



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(c) Estimates used for calculating impairment of financial assets

The Reinsurer applies the rules for calculating impairment of financial assets measured at amortized cost. The Reinsurer uses a high degree of judgment in this area to determine the level of uncertainty associated with the realization of estimated contractual flows of financial assets, principally premiums receivable.

The Reinsurer follows the guidelines of CPC 38 - "Financial Instruments: Recognition and Measurement" to determine whether a financial asset available for sale is impaired. This process requires a significant level of judgment. In making this estimate, the Reinsurer considers a number of factors including the length of time and the amount for which the fair value of an investment is lower than its cost, and the financial health and short-term outlook for the counterparty's business, bearing in mind the performance of the sector and the segment and operating and financial cash flow.

(d) Estimate of fair value of financial instruments

The fair value of quoted financial instruments is based on current trading prices (Note 2.8). For financial assets where there is no active market or public quotation, fair value is established using valuation techniques. These techniques include the use of recent deals arranged with third parties, reference to other instruments which are substantially similar, discounted cash flow analysis and pricing models which use as much market information as possible and as little input as possible from the Company's Management itself. Note 6 provides details of the key assumptions used in determining fair value of financial instruments, and of a sensitivity analysis of these assumptions.

(e) Estimates and judgments to determine retirement benefits

The cost of defined-benefit retirement plans and the present value of retirement liabilities are determined using actuarial methods of valuation. Actuarial valuations involve the use of assumptions on discount rates, expected rates of return on assets, future salary increases, mortality and disability rates, and future increases in retirement benefits and pensions. Defined benefit liabilities are highly sensitive to changes in these assumptions. All the assumptions are reviewed at the end of each reporting period. To determine the appropriate discount rate, Management takes into account risk-free interest rates. The mortality rate is based on the mortality tables published in Brazil. Future increases in salaries and retirement and pension benefits are based on the inflation rates forecast for the country. Sensitivity analyses of these critical estimates are shown in Note 26, with more details of the assumptions used.

* * *

José Carlos Cardoso CEO

Fernando Passos

Deputy CEO, Chief Financial and Investor Relations Officer

Lúcia Maria da Silva Valle

Risk and Compliance Vice President

Paulo Daniel Araújo da Rocha

Accountant CRC RJ - 095001/O-5

Rodrigo de Valnisio Actuary

MIBA 1573



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Fiscal Council's Opinion

THE FISCAL COUNCIL OF IRB-BRASIL RESSEGUROS S.A., in the exercise of its legal and statutory duties, analyzed IRB Brasil RE's parent company and consolidated financial statements for the year ended December 31, 2018. Based on this analysis and in light of the unqualified opinion issued by PricewaterhouseCoopers Auditores Independentes, the Fiscal Council believes that these documents adequately reflect the Company's equity and financial situation, as well as the operations carried out in the period. Rio de Janeiro, February 7, 2019

ALBERTO BARCELLOS MIRANDA Acting Chairman

REGINALDO JOSÉ CAMILO Fiscal Council's member

LÍSCIO FÁBIO DE BRASIL CAMARGO Fiscal Council's member



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Summary of the Audit Committee's Report on the Financial Statements for 2018

IRB-Brasil Resseguros S.A. (IRB Brasil RE), a private corporation, governed by its Bylaws and the current and applicable

legislation, has the purpose of performing reinsurance and retrocession operations in Brazil and abroad.

IRB Brasil RE's Audit Committee is a statutory and advisory body established in accordance with CNSP Resolution

321/2015, which reports directly to the Board of Directors and aims to: (i) advise the Board of Directors in its audit and

oversight roles, especially by monitoring accounting principles and standards and the Company's financial statements;

(ii) evaluate the effectiveness and sufficiency of internal control and risk management systems; and (iii) evaluate the

effectiveness of independent and internal audits, including regarding compliance with the legal and regulatory provisions

applicable to the Company, in addition to internal regulations and policies.

This report, issued in accordance with article 136 of CNSP Resolution 321/2015 and presents the monitoring activities in

2018 on the financial statements ended December 31, 2018.

The financial statements as at and for the year ended December 31, 2018 were analyzed. The analysis was based on

information received in meetings with: (i) Management; (ii) external auditors; (iii) internal audit; (iv) persons in charge of

risk management and internal controls; (v) budget accounting manager; and (vi) other administrative and operating areas.

IRB's financial statements, including the notes to the financial statements, were audited by the independent accountants

PricewaterhouseCoopers Auditores Independentes. IRB Brasil RE's Management, which is responsible for the

preparation, presentation and integrity of the Company's financial statements, provided all data, documentation,

information and required conditions for the independent auditor to effectively render its audit services. The financial

statements as at and for the year ended December 31, 2018 were prepared in accordance with the accounting practices

adopted in Brazil, introduced by the technical pronouncements issued by the Accounting Pronouncements Committee

(CPC) and approved by the Superintendence of Private Insurance (SUSEP).

The Audit Committee has regularly assessed and monitored the internal controls and risk management environment

through regular meetings with the Compliance and Corporate Risk areas, with the participation of the Risk and

Compliance Executive Vice President. IRB Brasil RE's Management has continued to enhance its internal control system

and risk management to be more effective and to meet the size and complexity of the business.

The Committee maintains a line of communication with the independent auditor to regularly discuss the audit results and

relevant accounting matters, which allowed its members to evaluate the quality of the work performed and the situations

that could affect the audit effectiveness, objectivity and independence. As a result, the Committee is fully satisfied with

the works performed.

In 2018, the Internal Audit reformulated its methodology to define the criteria to prioritize the processes to be audited,

which has been reviewed and approved by the Committee, and submitted for approval by the Board of Directors.

According to the information provided by the independent and internal audits and the accounting area, there was no

record of reported noncompliance with rules, lack of control, act or omission by the Company's Management indicating

the existence or evidence of fraud, failure or error that could jeopardize the Company's ability to continue as going concern

or the reliability of its financial statements has been found.

The Company has branches in London and Argentina, whose operations began in 2011. The balances of these branches

compose the individual balances of the IRB Brasil RE's financial statements, which have also been audited by

PricewaterhouseCoopers Auditores Independentes.

PricewaterhouseCoopers Auditores Independentes has efficiently and independently audited the financial statements for

the period ended December 31, 2018, in full compliance with the terms of the contract entered into with the Company,

and issued the auditor's report, dated February 7, 2019, which was presented in accordance with the rules issued by the

Brazilian Securities Commission.



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The Committee has reviewed IRB Brasil RE's financial statements for the year ended December 31, 2018, prepared in

accordance with the applicable laws, regulations and accounting practices adopted in Brazil, and understands that they

are eligible for approval.


NELSON MACHADO

Coordinator

ADRIANA QUEIROZ DE CARVALHO

Member

WERNER ROMERA SÜFFERT

Member

ROBERTO WESTENBERGER

Member



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Board of Directors' Opinion

The Board of Directors of IRB-Brasil Resseguros S.A., pursuant to article 142, section V, of Law 6,404 and article 31,

section V of the Company's Bylaws, and considering the reports issued by PricewaterhouseCoopers Auditores

Independentes, the Fiscal Council and the Audit Committee, issued an opinion in favor of approving the financial

statements and the Management Report of IRB Brasil RE, for the year ended December 31, 2018, pursuant to SUSEP

Circular Letter 517, of July 30, 2015 and further amendments.

As to the Allocation of Net Income for 2018, the Board of Directors also issued an opinion in favor of the dividend proposal

of R$868,392,233.20 (R$2.7975 per common and Golden shares), corresponding to 75% of adjusted net income. Of this

amount, R$162,077,322.90 (net of taxes) has already been paid, as approved on October 10, 2018, as interest on equity;

R$58,855,459.02 (net of taxes) as additional interest on equity; the remaining portion of R$68,531,296.08 as additional

mandatory minimum dividend (R$0.2208 per common and Golden shares); and R$578,928,155.20 (R$1.8650 per

common and Golden shares) as additional proposed dividends.


OTAVIO LADEIRA DE MEDEIROS

Chairman

ALEXSANDRO BROEDEL LOPES

Board member

PEDRO DUARTE GUIMARÃES

Board member

WERNER ROMERA SÜFFERT

Board member

VINICIUS JOSÉ DE ALMEIDA ALBERNAZ

Board member

HÉLIO LIMA MAGALHÃES

Board member

HERALDO GILBERTO DE OLIVEIRA

Board member

RAIMUNDO LOURENÇO MARIA CHRISTIANS

Board member

Documents

IRB-Brasil Resseguros S.A. · IRB-Brasil Resseguros S.A. 3 Why it is a Key Audit Matter How the matter was addressed in the audit Measurement and recognition of technical