Brazil Reinsurer IRB Resseguros Replaces CEO, CFO on Governance Concerns

By Paula Laier | March 5, 2020

Brazilian reinsurer IRB Brasil Resseguros SA replaced its chief executive and chief financial officer after its shares plunged nearly 32% on Wednesday after the company said that Berkshire Hathaway is not an investor.

Werner Suffert will serve as interim CEO and has also been appointed CFO, following the resignations of CEO Jose Cardoso and CFO Fernando Passos. IRB announced late on Wednesday that it would investigate the false reports on Berkshire Hathaway’s ownership of a stake.

Late on Tuesday, Berkshire, the investment company controlled by billionaire Warren Buffett, denied recent Brazilian media stories, and said Berkshire has never been and does not intend to become a shareholder in IRB.

Brazilian newspaper O Estado de S. Paulo reported a week ago that Berkshire had tripled its stake in IRB and would appoint a board member.

In notes to clients, analysts criticized IRB management for having confirmed on Monday that Berkshire Hathaway International Insurance Ltd was an investor in the company and had recently increased its stake.

Citigroup analysts downgraded IRB to a “neutral” rating, saying that their previous investment thesis no longer held and that the company’s explanations of return on equity needed to be investigated further.

Analysts at Bank of America decided to review their previous “buy” recommendation. “We are no longer confident that we have a reasonable basis for valuing IRB. Investors should no longer rely on our previous recommendation and estimates,” Bank of America said in a note.

On Monday, Bank of America analysts’ raised the target price for IRB to 44 reais from 41 reais, saying the company could outperform if the 2020 goals were met.

“Such a mess is negative for the shares,” analysts at Eleven Financial Research said in a note. “It raises an important flag in terms of governance.”

Short seller asset manager Squadra Investimentos had questioned IRB’s accounting. Shares in the reinsurer have fallen 50% this year.

IRB has among its main shareholders Brazil’s two biggest private lenders, Itau Unibanco Holding SA and Banco Bradesco SA.

(Reporting by Paula Laier; writing by Carolina Mandl; editing by Jonathan Oatis and Leslie Adler)

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