Porto Seguro S.A.

 (Convenience Translation into English from the
Original Previously Issued in Portuguese)
Porto Seguro S.A.
Individual and Consolidated Financial
Statements for the Year Ended
December 31, 2014 and
Independent Auditor´s Report
Deloitte Touche Tohmatsu Auditores Independentes
MANAGEMENT REPORT To our Shareholders, We submit to your examination the Management Report and the financial statements, accompanied by the independent auditor’s report thereon, for the years ended December 31, 2014 and 2013. 2014 was marked by the economic slowdown, in particular the gradual, but steady decline in consumption and, in spite of such scenario, by the maintenance of inflation at levels close to the inflation target ceiling. On the other hand, for over a decade, the insurance sector has been growing faster than the GDP. Total insurance premiums grew by 10.8% in the year (figures through December 2014), ratifying the industry´s potential for expansion, which still shows a low penetration in Brazil. Thus, Porto Seguro maintained its segmentation and differentiation strategy, through its brands (Porto Seguro, Itaú Seguros de Auto and Residência e Azul Seguros) and operates in the insurance, service and financial solutions segments. We have been reporting consistent results of operations over the years, by seizing the opportunities in the market (average revenue growth by 16.7% over the past 10 years). Our performance derives from the focus on service quality, services to and relationship with customers, insurance brokers and partners, in addition to sophisticated risk underwriting and management models. In 2014, even in an adverse economic scenario, we posted a positive performance mainly due to a satisfactory result of operations and higher finance income in the period. Total revenues reached R$ 15.3 billion and premiums reached R$ 12.7 billion, both corresponding to a growth over 12% compared to the prior year. In the insurance segment, the auto insurance line reached 5 million vehicles insured through its three brands, an annual growth of 363 thousand items. Such growth reflects mainly the Company’s geographic expansion strategy, which resulted in a significant growth in various regions outside our operating area, that is, the State of São Paulo. Consolidated auto premiums grew by 11.7% in the year; Azul posted a growth in premiums by 22.1%, and Porto Seguro and Itaú Auto e Residência grew by 10.1% and 5.4%, respectively. We should also mention the growth in property insurance which became our second biggest portfolio in 2014, primarily due to the performance of residential and corporate products. The number of insured households reached 2.2 million and the growth of property products was 19.1% compared to 2013. The combined insurance ratio, which determines operating efficiency, reached 96.5%, a growth by 0.5 p.p. compared to 2013, basically as a result of the growth in the claim ratio of the auto segment, primarily affected by higher theft and robbery rates in the country, particularly in the first half of the year. However, in the health insurance segment, the claim ratio was reduced by 3.7 p.p., as a result of the measures adopted to balance the portfolio margin. In relation to administrative expenses, the administrative expense ratio remained stable compared to the prior year. With respect to financial and service companies, the growth in annual revenues was 27.9%, totaling R$ 1.6 billion, and ROAE reached 19.6%, basically due to lending operations (credit card and financing). The number of cards reached 1.6 million, a 18% growth. The share of “non‐
insurance” business in the Company’s total profit reached 16.9%. The gain or loss on short‐term investments grew by 83.5%. Despite the performance below the benchmark rate of fixed‐ and variable‐income strategies, the increase in average CDI contributed to a better finance income, which reached R$ 905.9 million in the year. Excluding social security amounts, the nominal yield in the year was 10.36%, corresponding to 96% of the CDI. Within such context, recurring annual profit (without “Business Combination”) reached R$ 883.4 million, a growth by 24.2%, and ROAE was 18.5%, a growth by 2.0 p.p. compared to 2013. Based on marketing campaigns, we developed an important project for Porto Seguro. The project is called “Trânsito + Gentil”, which is intended to inspire good manners in transit, encouraging drivers to adopt attitudes to live with respect and safety. We started to offer again a 5% discount to drivers without traffic fines inside the City of São Paulo. The benefit is valid to new insurance policies, related renewals, Porto Seguro renewals and item inclusion endorsements. Additionally, from the product standpoint, we restructured Porto Seguro Auto Jovem, an insurance for people between 18 and 24 years old, through a relationship program that encourages the good driver; and we repositioned the product Porto Seguro Faz, previously called Porto Seguro Serviços Avulsos, by offering an extensive convenience service portfolio to insureds and non‐insureds. We received for the 12th time, in the insurer segment, the Empresas Mais Admiradas do Brasil (“Brazil´s most admired companies”) award, offered by Carta Capital magazine. We were also recognized for the 11th consecutive year as the preferred company within the “auto insurer” category of the Os Eleitos (“products and services of choice”) award, promoted by Quatro Rodas magazine. Therefore, we would like to thank the insurance brokers, employees, service providers and partners who showed dedication and commitment and supported us during 2014, contributing to the attainment of such results. Economic and Financial Performance Total revenue (i) - millions of reais
9.176,0
2010
10.307,9
2011
11,749.0
13,172.3
2012
2013(*)
13,636.8
2013
15,331.5
2014
(i) Refers to total revenue not including ceded reinsurance premiums and other operating income, plus finance income. (*) Not including nonrecurring adjustments. Premiums earned - millions of reais
9.662,4
8.589,7
7.879,8
2010
11.267,3
2011
2012
2013
12.675,4
2014
Total assets - million of reais
15.092,6
16.577,6
2010
2011
18.872,0
20.409,3
22.420,4
2012
2013
2014
Net profit (i) - million of reais
1.405,2
875,8
623,1
2010
580,1
2011
703,5
682,6
2012
2013(*)
(i) Not including noncontrolling interests. (*) Not including nonrecurring adjustments. 2013
2014
Shareholder's equity (i) - million of reais
4.441,7
4.700,0
2010
2011
5.067,1
2012
5.187,4
2013(*)
5.889,2
2013
5.998,0
2014
(i) Not including noncontrolling interests. (*) Not including nonrecurring adjustments. In the topics below, the expressions "in 2014" and "in 2013" refer to the balances and indices calculated by Porto Seguro for the periods from January 1 to December 31, 2014 and January 1 to December 31, 2013, respectively.
Total revenue Our total revenue, including net finance income and income from rental properties, totaled R$ 15,331.5 million in 2014, up R$ 1,694.7 million or 12.4 percent over the R$ 13,636.8 million in 2013. Excluding nonrecurring adjustments, our total revenue, including net finance income and income from rental properties, totaled R$ 15,331.5 million in 2014, up R$ 2,159.2 million or 16.4 percent over the R$ 13,172.3 million in 2013. Insurance premiums earned (*) Net Finance income Lending operations – Portoseg Service revenues – Porto Consórcio Service revenues – Serviços Médicos Pension plan contributions Service revenues – Porto Atendimento Service revenues – Proteção e Monitoramento Other revenues – Portopar and Porto Investimentos Service revenues – Porto Serviços e Comércio Service revenues – Porto Telecomunicações Service revenues – Porto Serviços Uruguai Income from properties Net revenue – capitalization Service revenues – Crediporto Service revenues – Porto Gerenciamento Service revenues – Porto Renova Risk in force but not issued – RVNE Total revenue Non‐current adjustments Total revenue – net of non‐current adjustments (*) Premiums net of RVNE. 2014 12,672.0
905.9
863.7
206.3
184.5
169.3
118.5
85.0 38.1
21.8 14.4 13.8
11.2
11.0
8.7
2.3
1.6
3.4
Total Revenue – millions of reais Increase ‐ % 2013 2013 – 2014 11,263.0 12.5
958.1 (5.4)
636.8 35.6
184.3 11.9
148.6 24.2
178.2 (5.0)
97.0 22.2
73.8 15.2 29.3 30.0
24.7 (11.7) 1.9 ‐ 11.6 19.0
10.0 12.0
4.4 150.0
9.1 (4.4)
1.5 53.3
0.2 ‐
4.3 (20.9)
15,331.5
13,636.8 12.4
‐
(464.5) ‐
15,331.5
13,172.3 16.4
Insurance premiums earned Premiums earned totaled R$ 12,489.7 million in 2014, up R$ 1,390.5 million or 12.5 percent from R$ 11,099.2 million in 2013, not including the VGBL plans. Premiums by segment Insurance premiums earned – millions of reais
Increase ‐ %
2014
2013
2013 – 2014
Porto Cia Auto 4,445.8 4,036.6 10.1 Itaú Auto e Residência Auto 2,032.0 1,927.3 5.4 Azul Seguros Auto 2,157.9 1,767.7 22.1 Total Auto 8,635.7 7,731.6 11.7 Porto Cia Patrimonial 619.7 495.6 25.0 Itaú Auto e Residência Patrimonial 467.1 416.1 12.3 1.9 2.5 (24.0) 1,088.7 914.2 19.1 DPVAT 427.6 295.1 44.9 Health 1,066.9 1,007.1 5.9 Personal lines 499.7 460.6 8.5 Financial risks 376.5 346.0 8.8 Transportation 131.3 130.9 0.3 Casualty 15.0 14.5 3.4 Portomed 49.0 14.8 231.1 Other 35.8 40.8 (12.3) 163.5 143.6 13.9 12,489.7 11,099.2 12.5 185.7 168.1 10.5 12,675.4 11,267.3 12.5 Azul Seguros Patrimonial Total Property Porto Seguro Uruguai Total insurance premiums earned less VGBL VGBL premiums Total premiums earned  Auto Insurance Line – Porto Cia: premiums earned in the auto insurance line totaled R$ 4,445.8 million in 2014, up R$ 409.2 million or 10.1 percent from R$ 4,036.6 million in 2013, as a result of the 4.6 percent increase in the insured fleet to 2,252.3 vehicles in 2014 from 2,152.9 in 2013 and the 1.1 percent increase in the average annual premium.  Auto Insurance Line – Itaú Auto e Residência: premiums earned in the auto insurance line totaled R$ 2,032.0 million in 2014, up R$ 104.7 million or 5.4 percent from R$ 1,927.3 million in 2013, as a result of the 2.9 percent increase in the insured fleet to 1,247.7 vehicles in 2014 from 1,239.3 in 2013.  Auto Insurance Line – Azul Seguros: premiums earned in the auto insurance line totaled R$ 2,157.9 million in 2014, up R$ 390.2 million or 22.1 percent from R$ 1,767.7 million in 2013, as a result of the 18.0 percent increase in the insured fleet to 1,499.3 vehicles in 2014 from 1,271.0 in 2013 and the 3.5 percent increase in the average annual premium.  Health Insurance Line: premiums earned in the health insurance line totaled R$ 1,066.9 million in 2014, up R$ 59.8 million or 5.9 percent from R$ 1,007.1 million in 2013, as a result of the 6.7 percent increase in the lives insured to 661.0 thousands in 2014 from 619.6 thousands in 2013, partially offset by the 1.1 percent decrease in the average annual premium. Pension plan contributions and VGBL premiums The revenue from contributions to pension plans and VGBL (cash value life insurance) premiums totaled R$ 355.0 million in 2014, up R$ 8.7 million or 2.5 percent from R$ 346.3 million in 2013. Service revenues – Proteção e monitoramento Revenues from electronic monitoring services totaled R$ 85.0 million in 2014, up R$ 11.2 million or 15.2 percent over the R$ 73.8 million posted in 2013. The number of contracts increased 12.5 percent to 22.9 in 2014 from 20.4 in 2013. The average annual service revenue increased 2.6 percent to R$ 4,064.0 in 2014 from R$ 3,959.8 in 2013. Service revenues – Porto consórcio Revenues from consortiums management totaled R$ 206.3 million in 2014, up R$ 22.0 million or 11.9 percent from R$ 184.3 million in 2013. The number of purchase club units increased 6.7 percent to 117.9 in 2014 from 110.5 in 2013. Lending operations Revenues from loans totaled R$ 863.7 million in 2014, up R$ 225.3 million or 35.3 percent from R$ 638.4 million in 2013. The portfolio of managed loan transactions increased 29.4 percent to R$ 4,328.8 million in 2014 from R$ 3,346.2 million in 2013. Service revenues – Portopar and Porto Investimentos Portopar revenues from financial management totaled R$ 38.1 million in 2014, up R$ 8.8 million or 30.0 percent from R$ 29.3 million in 2013. Expenses incurred on retained claims and awarded benefits, net The expenses incurred on retained claims and awarded benefits, net, totaled R$ 6,602.0 million in 2014, up R$ 942.5 million or 16.7 percent over the R$ 5,659.5 million posted in 2013. Millions of reais Portfolio 2014 2013 Porto Cia Auto 2,298.9 Itaú Auto e Residência Auto Claims ratio % Var.% 2014 1,935.6 18.8 53.9 50.5 1,224.2 1,115.3 9.8 61.4 60.9 Azul Seguros Auto 1,200.1 952.9 25.9 61.8 60.4 Total Auto 4,723.2 4,003.8 18.0 57.6 55.3 Porto Cia Patrimonial 162.6 154.3 5.4 30.3 34.5 Itaú Auto e Residência Patrimonial 125.2 108.2 15.7 28.7 28.3 1.5 1.6 (6.3) 68.2 50.0 Total Property 289.3 264.1 9.5 29.7 31.7 DPVAT 373.8 258.3 44.7 87.6 87.5 Health 796.8 789.6 0.9 74.7 78.4 Personal lines 132.6 128.2 3.4 28.3 32.1 Transportation 55.8 49.3 13.2 40.9 37.7 Financial Risks 79.4 62.0 28.1 22.4 19.7 Portomed 44.7 11.3 295.6 91.2 76.4 Casualty 3.9 4.6 (15.2) 31.0 31.5 Other 4.3 3.2 34.4 35.3 27.7 Porto Seguro Uruguai 83.3 73.3 13.6 53.6 56.0 Private pension plan benefits 14.9 11.8 26.3 ‐ ‐ 6,602.0 5,659.5 16.7 55.5 54.3 Azul Seguros Patrimonial Total 2013 Amortization of deferred acquisition costs ‐ insurance Expenses on the amortization of deferred acquisition costs totaled R$ 2,323.6 million in 2014, up R$ 290.6 million or 14.3 percent over the R$ 2,033.0 million posted in 2013. The percentage on earned premiums was 19.6 percent in 2014 and 19.5 percent in 2013, a 0.1 percentage point increase. Administrative expenses Administrative and tax expenses Administrative expenses 2014 2013 Var.% 2.237,5 1.953,6 14.5 Publicity 144,5 137,2 5.3 Profit sharing 212,8 308,5 (31.0) 2.594,8 2.399,3 8.1 ‐ (162.0) ‐ 2.594,8 2.237.3 16.0 Miscellaneous Total administrative expenses Non‐current adjustments Total administrative expenses, net of non‐current adjustments In 2014 insurance‐related administrative expenses ratio was 15.8 p.p., an increase of approximately 0.1 p.p compared to prior year. The cost management model adopted by the Company and investments made to streamline processes and systems are contributing to improve operational efficiency. This is part of our strategy aimed at achieving continuing productivity gains without adversely affecting the level of service for customers and brokers. Tax expenses totaled R$ 255.6 million in 2014, up R$ 854.0 million or 142.7 percent from ‐R$ 598.4 million in 2013. Excluding nonrecurring adjustments, tax expenses totaled R$ 344.6 million in 2013, down R$ 89.0 million or 25.8 percent compared to prior year. The insurance companies’ tax and administrative expense‐to‐earned premiums ratio was 17,1% in 2014 against 9.6 percent in 2013, a increase of 7.5 percentage points. Excluding 2013’s nonrecurring adjustments, the insurance companies’ tax and administrative expense‐to‐earned premiums ratio was 18.2 percent compared to 2014, a decrease of 1.1 percentage point. Profit sharing Porto Seguro and its subsidiaries share a part of the profits with their personnel and officers. Employee profit sharing is subject to achieving operating targets and specific objectives established and agreed at the beginning of each fiscal year. Profit sharing totaled R$ 212.8 million in 2014, down R$ 95.7 million or 31.0 percent over the R$ 308.5 million awarded last year. Excluding nonrecurring adjustments, profit sharing totaled R$ 212.8 million in 2014, up R$ 25.9 million or 13.9 percent over the R$ 186.9 million awarded last year. Profit sharing is included in administrative expenses. Finance income Finance income totaled R$ 1,290.5 million in 2014, up R$ 549.6 million or 74.2 percent from R$ 740.9 million in 2013. This increase was mainly due to the following: (i) Income from short‐term investments totaled R$ 867.8 million in 2014, up R$ 467.3 million or 116.7 percent over the R$ 400.5 million posted in 2013, which results from the 11.67 percent increase, in 2014, in the effective interest rate compared to 4.39 percent of 2013, offset by the 18.5 percent decrease in average short‐term investments to R$ 7,436.2 million in 2014, as compared to the R$ 9,123.0 million invested in 2013. Income from short‐term investments (except Porto Seguro Vida e Previdência – Third parties) totaled R$ 654.3 million in 2014, up R$ 247.9 million or 61.0 percent over the R$ 406.4 million in 2013, which results from the increase in the effective interest rate to 10.36 percent in 2014 against the 6.33 percent in 2013, offset by the 1.6 percent decrease in average short‐term investments to R$ 6,315.6 million in 2014 over the R$ 6,420.2 million in 2013. (ii) Other finance income totaled R$ 422.7 million in 2014, up R$ 82.3 million or 24.2 percent over the R$ 340.4 million posted in 2013, which results mainly from the increase of R$ 31.1 million in income from monetary variations of judicial deposits to R$ 66.4 million in 2014 from R$ 35.3 million in 2013. Finance costs totaled R$ 384.6 million in 2014, up R$ 601.8 million or 277.1 percent from ‐R$ 217.2 million in 2013. Excluding nonrecurring adjustments, finance costs totaled R$ 384.6 million in 2014, up R$ 137.4 million or 55.6 percent from R$ 247.2 million in 2013. Other operating income and expenses Other operating income totaled R$ 95.8 million in 2014, down R$ 18.7 million or 16.3 percent over the R$ 114.5 million earned in 2013. Other operating expenses totaled R$ 1,106.9 million in 2014, up R$ 252.4 million or 29.5 percent over the R$ 854.5 million incurred in 2013. This change was mainly due to the R$ 97.1 million increase in credit card expenses. The insurance companies’ other operating income‐to‐expenses ratio was 4.3 percent in 2014 against 4.0 percent in 2013, an increase of 0.3 percentage points. IRPJ (corporate income tax) and CSLL (social contribution on net income) IRPJ and CSLL expenses totaled R$ 456.4 million in 2014, down R$ 372.7 million or 45.0 percent over the R$ 829.1 million incurred in 2013. Excluding nonrecurring adjustments, IRPJ and CSLL expenses totaled R$ 456.4 million in 2014, up R$ 173.1 million or 61.1 percent over the R$ 283.3 million incurred in 2013. The combined statutory IRPJ and CSLL tax rates are 40 percent for insurers and financial companies, and 34.0 percent for the other companies, and the effective IRPJ and CSLL tax rates in 2014 and 2013 were 34.2 percent and 37.2 percent, respectively. Excluding nonrecurring adjustments, the effective IRPJ and CSLL tax rates in 2014 and 2013 were 34.2 percent and 28.9 percent, respectively. Profit or loss and equity Profit for the year Profit for 2014 totaled R$ 876.2 million (R$ 875.8 million, not including noncontrolling interests), down R$ 521.1 million or 37.3 percent over the R$ 1,397.3 million (R$ 1,405.2 million, not including noncontrolling interests) earned in 2013. Excluding nonrecurring adjustments, profit for 2014 totaled R$ 876.2 million (R$ 875.8 million, not including noncontrolling interests), up R$ 180.6 million or 26.0% over the R$ 695.6 million earned in 2013 (R$ 703.5 million, not including noncontrolling interests). Combined ratio ‐ insurance The combined ratio (retained claims, selling expenses, administrative expenses, tax expenses and other operating income (expenses) to premium earned) in 2014 was 96.5 percent, an 9.1 percentage point increase over the 87.4 percent of 2013. This change is due to the 7.4 percentage point increase in the administrative and tax expenses ratio; the 1.3 percentage point increase in claims ratio, 0.3 percentage point increase in other operating income/expenses and the 0.1 percentage point increase in commission ratio. The expanded combined ratio, which also includes finance income or costs, was 90.1 percent in 2014, or a 9.8 percentage point increase as compared to the 2013 ratio, which was 80.3 percent. Combined ratio – insurance – not including nonrecurring adjustments The combined ratio (retained claims, selling expenses, administrative expenses, tax expenses and other operating income (expenses) to premium earned) in 2014 was 96.5 percent, a 0.5 percentage point increase over the 96.0 percent of 2013. This change is due to the 1.3 percentage point increase in the claims ratio; the 0.3 percentage point increase in in other operating income/expenses, and the 0.1 percentage point increase in comission, offset by the 1.2 percentage point increase in administrative and tax expenses ratio. The expanded combined ratio, which also includes finance income or costs, was 90.1 percent in 2014, or a 2.0 percentage point decrease as compared to the 2013 ratio, which was 92.1 percent. Equity Our equity in 2014 totaled R$ 5,999.4 million (R$ 5,998.0 million, not including noncontrolling interests), up R$ 105.9 million or 1.8 percent over the R$ 5,893.5 million in 2013 (R$ 5,889.2 million, not including noncontrolling interests). Excluding nonrecurring adjustments, our equity in 2014 totaled R$ 5,999.4 million (R$ 5,998.0 million, not including noncontrolling interests), up R$ 807.6 million or 15.6 percent over the R$ 5,191.8 million (R$ 5,187.4 million, not including noncontrolling interests) in 2013. Dividends and interest on capital Under our bylaws, shareholders are entitled to minimum mandatory dividends of 25 percent of adjusted profit for the year. These are calculated at the yearend. The dividend proposal will be 50 percent of the adjusted profit. Investments The Company invested R$ 653.6 million in 2014. Of the total amount invested, R$ 403.2 million were allocated to land, construction, and buildings, and R$ 250.4 million were allocated to IT hardware and systems, trackers, furniture, vehicles, and other investments. PRODUCT AND SERVICE INNOVATION In 2014, we expanded and introduced new product and service lines, of which we highlight the following: Insurance and pension plan: Porto Seguro Auto – Auto Jovem: when contracting the Auto product together with the Relacionamento Auto Jovem program, the young driver between 18 and 24 years old receives a 30% discount on the insurance and deductibles. In order to reward such young driver for his/her good driving, those drivers who maintain a good driving performance, in accordance with the rules stipulated by the product such as speed control and cell phone use, the discount can also be maintained upon renewal. Action valid for São Paulo only. Motorista da Vez: with a new coverage in the metropolitan region of São Paulo, the service is provided using pick‐ups, depending on the number of passengers in the vehicle. Itaú Seguro Auto Empresa: the product is designed for companies with up to four vehicles. The differentials in coverage include providing a rented car similar to the damaged car and a substitute driver, if the company’s employee is absent for any reason. Porto Seguro Previdência: segmented its plans into various categories, according to the monthly or initial contribution amount. Moreover, the load fee is charged only in case of redemption or portability of the amount invested. That is, the higher the time of permanence in the plan and the amount invested, the lower the load fee charged upon withdrawal will be, which can even reach zero. The new pension plans available are Rubi and Diamante. Life and pension plan simulator: in order to assist customers and brokers, Porto Seguro Vida e Previdência launched a new simulator (www.construindoofuturo.com.br). Based on such simulation, the customer completes a simple form including monthly expenses, family situation and future projects. After completion, a list of basic explanations on the plans appropriate to customer’s interests is generated. For the broker, the simulator works as a data collection data, used by broker to provide consulting services. Other business and applications: Porto Seguro Cartões: the Porto Seguro Mastercard Black credit card was launched, combining convenience items and benefits for upper income customers. Protection and monitoring: the “Monitoramento entre Guaritas” program was launched, which enables creating a monitoring network between doormen of different observation posts together with Porto Seguro Monitoring Center. After a risk situation is identified, any network observation post can contact the Monitoring Center. Porto Seguro Alerta: Porto Seguro Proteção e Monitoramento’s product was designed so as to quickly contact the person responsible for an elderly who is alone. Through a wireless device, the elderly can press the button in case of emergency and a 24‐hour center is contacted notifying the contact person immediately. Corretor Online application: focused on mobility, Porto Seguro launched the Corretor Online application for mobiles. A system used to maintain the broker connected to the main tools of the “Portal do Corretor Online”, including: consultation of insurance policies, proposals and auto claims, authorized health and dental care network, in addition to the commissions paid over the last seven days and useful phone numbers. The application is exclusive for brokers and is available for Android and iOS platforms. CORPORATE GOVERNANCE AND CAPITAL MARKET We comply with the best Corporate Governance practices by strengthening the principles of transparency, fairness, and respect for our shareholders, and create the conditions for the development and maintenance of a long‐term relationship with our investors. By constantly striving to improve our Investor Relations actions, we aim to further enhance the permanent communication channel between the Company and all other stakeholders in the business: shareholders, regulators, brokers, staff, and the community, among others. Our shares are traded in the New Market (ticker code PSSA3), a special segment of the São Paulo Stock Exchange (BM&FBovespa) exclusively for companies that comply with specific minimum corporate government prerequisites and regulations. Among the corporate governance practices required by the New Market and recommended by the Brazilian Institute of Corporate Governance (IBGC), we have the following policies:  Division of capital exclusively into common shares;  Free‐float of shares representing at least 25 percent of capital (cannot be held by the controlling shareholder);  When control is sold, even if through successive sales, the transaction must be contingent on extending to the noncontrolling shareholders the same terms and conditions offered to the controlling shareholder, including the same price (tag‐along 100 percent);  Board of Directors with at least 5 members, with 20% of the directors being independent and with unified terms of up to two years;  Statement of cash flows in the quarterly reporting (ITRs) and the annual financial statements;  Disclosure of corporate events calendar containing the main corporate acts and events and the dates of public meetings with analysts and the date of disclosure of the Company’s financial information;  Exit from the New Market is contingent on holding a public tender offer, at fair value;  Adhesion to the Market Arbitration Chamber;  "One share one vote" policy.  The Company, its subsidiaries, and its parent company policy for contracting services not related to the external audit by our independent auditor, is grounded on the applicable regulation and on internationally accepted principles that preserve the auditor’s independence. These principles consist in: (a) the auditor must not audit his/her own work; (b) the auditor must not exercise managerial functions at the client; and (c) the auditor must not advocate the interests of his/her client;  Clear bylaws regarding: (i) the manner general meeting is called; (ii) the duties of the Board of Directors and of the Executive Committee; and (iii) the voting system, the election, the dismissal and the terms of office of the Members of the Board of Directors and of the Executive Committee;  Disclosure of a Meeting Manual to facilitate and encourage the participation of the shareholders in the meetings; 
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Transparency in the Management Report disclosures; Calling of meetings and making related documentation available as from the date of the first call, detailing the meeting’s agenda, without including an ‘other matters’ item, always aiming at holding meetings at times and in venues that allow the presence of the greatest possible number of shareholders; Prohibition of insider trading and having a policy for the disclosure of material information and security trading; Monthly disclosure of trading of Company securities by officers, executives and controlling shareholders; Disclosure of financial information in accordance with IFRS; Disclosure of Reference Form (FR) – periodic and occasional document that is submitted by the listed companies to CVM and BOVESPA and made available to the public, containing corporate information such as the number and characteristics of securities issued by the Company and held by the controlling shareholders groups, members of the Board of Directors, officers and members of the Supervisory Board, as well as changes in these positions; At least one Public meeting with Analysts and Investors per year. 
Audit Committee The main responsibilities of the Audit Committee of Porto Seguro S.A., a statutory body comprised of independent members, are to independently evaluate, monitor and recommend: (i) full compliance with the legal and regulatory requirements applicable to Porto Seguro S.A. and its subsidiaries, with due regard for the specific nature of each company, in addition to internal policies and regulations; (ii) the internal control systems of Porto Seguro S.A. and its subsidiaries; (iii) the financial statements of Porto Seguro S.A. and its subsidiaries; (iv) the work performed by the internal and external auditors; and (v) the rectification or enhancement of policies, practices and procedures identified within the limits of their activities. Arbitration Chamber The Company is subject to Market Arbitration Chamber rulings, in accordance with the Arbitration Clause included in the Company's Bylaws. MARKETING “Auto Jovem” campaign: launched in February under the name Você Merece Mais Reconhecimento (“you deserve more recognition”), the campaign covered the metropolitan region of São Paulo only. It used online and offline media, guerrilla marketing and launching events for the broker. The product also sponsored the Prêmio Jovem Brasileiro (“Brazilian youth award”) event. “Auto+Cartão” campaign: the second part of the nationwide campaign was launched in 2014. It was designed to evidence the benefits from the Porto Seguro credit card and the advantages of contracting Porto Seguro Auto. Trading points for mileage, discounts upon contracting of renewal of the Auto insurance and first annuity were the main advantages advertised in the campaign. “Itaú Auto Roubo” campaign: The campaign was designed to advertise the Itaú Seguro Auto product, seeking to show to persons without auto insurance a different alternative: a low‐cost, exclusive theft coverage insurance. The campaign is focused on the main fears of those uninsured: the vehicle being stolen and the car owner being required to pay the monthly insurance installments, even though he/she no longer owns the asset. The advertising in local radio stations, brokers magazines, outdoors and also at the canvas of tow trucks in the cities covered by the campaign (São Paulo capital, ABCD and São Paulo shore, Espírito Santo and Paraíba). Porto Seguro FAZ: the campaign, launched in June, was designed to reposition the product based on the concept: “Você não é do ramo”. Focused on online media, a film was produced featuring celebrities: Hortência, Julia Petit and Claude Troisgros. “O Plano é Ser Feliz” campaign ‐ Porto Seguro Consórcio: change in the communication line that advertises the consortium as a dream fulfillment tool, showing the advantages of the product, such as: interest‐free and use of the FGTS (severance pay fund). The media was segmented by regions. “Carro de Som” campaign ‐ Porto Seguro Aluguel: the campaign was created to evidence the benefits to the tenant when contracting the Porto Seguro Aluguel. Discount in moving companies, hydraulic and electric repairs, white goods repair, locksmith and glazier services, among others. The campaign was advertised in São Paulo State capital and Rio de Janeiro State in public TV networks. It was advertised in cable channels throughout Brazil such as: Globosat, Discovery, ESPN, Sony and Fox. MAIN AWARDS IN 2014 • “Empresas mais Hospitaleiras de 2013” award, according to the Corporate Hospitality Survey conducted by IBHE. • Brands that decide – 2nd place in the insurance category and 1st place in brand recognition. • 17th “Top of Mind de RH” award (Fênix publishing company): Bioqualynet – Best occupational health company; • Most admired Brazilian companies (Carta Capital magazine): elected for the 12th time, in the insurer segment; • “Os Eleitos” (Quatro Rodas magazine): elected for the 11th consecutive year as the preferred company in the “insurer” category; • “Líderes do Brasil 2014” award (Corporate Leader Group (LIDE)) – Tribute to Jayme Garfinkel. VALUE ADDED In 2014, the value added generated by the Company totaled R$ 3,143.9 million, up 13.3 percent over the R$ 2,774.0 million generated in 2013. Excluding nonrecurring adjustments, the value added generated by the Company totaled R$ 3,143.9 million, down 9.7 percent over the R$ 3,481.8 million generated in 2013, distributed as follows: HUMAN RESOURCES Porto Seguro closed 2014 with 13,614 employees. Development/Training By recognizing the importance of education and professional training, in this period we have invested approximately R$ 5.2 million in scholarship to college undergraduate and graduate degrees, and language course grants, awarded to an average of 1,959 staff members, representing close to 14 percent of total personnel. We also invested in development programs, covering courses, lectures, and meetings with market institutions. We dedicated 134,051 hours, with trainings and development, with 8,679 attendances and close to R$ 2.7 million to employee training, considering in‐class and distance learning. Diversity and Inclusion Program The objective of the diversity and inclusion program is to create a diversity appreciation environment and prepare the organization to the cultural transformation brought by such inclusion, by adding value in the product chain and in the relationship with all Porto Seguro’s audience. Offering the same development opportunity to everyone is show that Porto Seguro appreciates the potential and talent, strengthening the connection with those persons Porto Seguro has a relationship. This program is oriented to two types of audience: Apprentice Since 2003 Porto Seguro offers opportunities to young students who wish to enter the labor market. The “Jovem Aprendiz” program results from the practical application of Law 10,097 of December 2000 and Decree 5,598 of December 2005, which changed the Labor Code, enabling the hiring of young people between 14 and incomplete 24 years old. We have 338 apprentices throughout Brazil, of whom 282 hired in 2014. Over the past five years, 382 apprentices were hired as employees and of these, 102 in the last year only. We believe that supporting the growth of such young staff is in line with our vision and mission and contributes to the growth of our business and development of the community. Disabled persons Porto Seguro is dedicated to create an inclusive environment oriented to personal and professional development, and promote the insertion of disabled persons in our staff is the first step of this journey. In 2014 we hired 216 disabled professionals to work in various areas and functions in Porto Seguro group companies and we had a total of 500 employees by yearend. Preparing the Company’s leaders is another critical stage of such process. This year, more than 400 leaders attended informative workshops about management and the benefits of inclusive teams. In order to promote and accelerate professional qualification and directly contribute to the development of such audience, 44 new disabled employees attended a 120‐hour special qualification course addressing institutional and technical matters. After such period, the employees were assigned to various functions and areas in Porto Seguro. Organizational Climate Survey The organizational climate survey was conducted to know employees’ perception of the work environment and relationships. The results are used as a management and planning tool by the organization, its leaders and the HR area. We believe that employees who are committed to the company and who are effective in work are more productive and better satisfy customers, which attracts more talents and inspires the loyalty of every audience with which we have a relationship. In 2014 91% of the employees invited participated in such project; 78% had a positive perception of the matters researched. Such result represents a growth by 8% compared to the 2012 survey. The aspects that received a better grade were the company's image (90%), commitment (85%) and work tools (82%). All managers had access to the results and are preparing, together with their teams, actions to develop the topics to be addressed so that employees’ satisfaction grow even more. Internship program The Company’s internship program was launched in 2009 to attract, develop and retain young talents aligned with Porto Seguro’s culture and who, through their experiences, can build a career and promote the continuing growth of business. The program features are as follows: ‐ Participation of college students from colleges accredited by the Ministry of Education (MEC), linked to public or private education institutions defined by applicants during the selection process; ‐ It is also extended to those employees who satisfy the program requirements and participate the selection process under equal conditions in relation to external candidates; ‐ The student is monitored by the area coordinator and manager with the support of the HR consultant; ‐ Students interested in Porto Seguro’s internship program are evaluated in a selection process comprised of English tests, logical and analytical tests, group dynamics, interviews with the HR area and managers; The program assumption is the development so that Porto Seguro can analyze the possibility of hiring the intern at the end of the internship plan. Accordingly, the program assumes that the intern will receive tasks that enable him/her not only learning but also giving a significant contribution to Porto Seguro. The intern is evaluated semiannually based on performance and receives a feedback from his/her manager about his/her strengths and opportunities for improvement, considering the performance/internship plan and Porto Seguro’s capabilities. Since the beginning, the program had 130 interns, of which 60% was hired. In 2014 we hired 13 interns and another 28 persons who currently participates in the program were also hired. Home Office In 2012 we launched the Home Office project which enables employee to work from his/her home. The initiative is intended to optimize the physical space in our buildings, besides improving the life quality of employees and increasing satisfaction, motivation and commitment. Currently, the Home Office is a new work system recognized and encouraged by Porto Seguro. By the end of 2014 more than 600 persons, from various areas, participated in the home office program. The goal is to reach 3,000 home office employees through 2017. Performance management The performance management process has the following objectives: ‐ Contribute to the establishment of an effective, constant dialogue between managers and employees, ensuring the alignment between the area objectives and individual activities on a clear, transparent and coherent manner, translating the organization's strategy into individual and collective actions; ‐ Support the development of employees by stimulating self‐learning and generating inputs for the following topics: career, compensation, recruitment and selection, among others. In 2014 the process was conducted together for leaders and teams, considering the same schedule and flow. Benefits The Company’s Benefits area, oriented to constantly identify the employees' needs and manage the compliance with the provisions set forth in collective bargaining agreements and related legislation, currently plays an important role in the employee retention process through the study of new benefits, in addition to the maintenance of those existing, so as to ensure compliance in conformity with the rules established. Quality of Life Porto Seguro believes that employee satisfaction is also a product of our incentive to a better quality of life. Accordingly, we encourage and support habits and life styles that promote the health and wellbeing. In 2014, the Quality of Life Program involved 12,963 people in the following events: Road Races In 2014 the road races team participated in thirteen road races (including the São Paulo São Silvestre Race), with a total of 1,265 participants, including employees and service providers. Ballroom Dance: 59 participants (divided into 02 modules every four months). Partnership with Macunaíma Theater: 12 participants (divided into 02 modules for a duration of 4 months). Quick massage: 914 participants. Zumba classes: 56 participants (divided into three shifts: morning, afternoon and evening). Bio Ritmo sports center: 1,124 participants (divided into three shifts: morning, afternoon and evening). Visiting Porto: 932 participants (divided into two days). Tribute Festival: homage to the employees who complete 10, 15, 20, 25, 30, 35 and 40 years of service at the organization. Company Gathering: This year, 8,601 employees attended the gathering. On‐Site Physical Fitness Program: a period in the daily work routine when employees can enjoy physical activities. Depending on the availability of each employee, classes are provided during 10 to 15 minutes, two or three times per week. The Porto Seguro Cultural and Leisure Center The objective of this area is to promote integration, experience sharing, leisure, and culture, in addition to access to the library and its structure, to enable its users to actively enjoy the whole area, and also join its physical fitness, yoga and dancing classes. The Library Collection Aims at providing employees and service providers educational and cultural enrichment opportunities, professional development, and entertainment in various knowledge areas. Social Service With a though in employee well‐being, Porto Seguro has a Social Service intended to help employees in more critical situations, such as hospital treatment, death in the family, financial hardship, sick leaves, etc. We aim at offering the employees alternatives to solve their problems, and facilitating and expediting documentation processing. Occupational Health and Safety This area’s objective is to prevent diseases and promote the employees’ health through risk prevention and medical occupational health control programs. The continuous monitoring of employee health by means of periodic occupational medical examinations, in addition to complying with legal formalities, allows the early detection of diseases and defines the appropriate treatments. Changes in health mapping steer the future prevention campaigns, aimed at general well‐being and reducing absenteeism. The Occupational Safety team is responsible for analyzing the occupational risks and training, and together with Occupational Medicine, sets the actions aimed at continuous improvement of working conditions. SOCIAL AND ENVIRONMENTAL RESPONSIBILITY The concepts and principles underlying the social and environmental responsibility have always been considered in the corporate and business strategies of Porto Seguro. Over the last years the social and environmental initiatives of the Company have consistently expanded, as evidenced by the inclusion of this commitment in the Company’s mission statement. With this achievement and visibility, employees and other stakeholders of Porto Seguro began to see their activities and businesses from the point of view of sustainability. With this new operating model, sustainability in the company begins to be integrated and systemic, directed at each one of the various products and services, enhancing the lightness and kindness with which the Company seeks to serve its stakeholders. Noticing the importance of this movement, the insurance market has also moved to consolidate the culture of sustainability. In June 2012 was launched the Principles for Sustainability in Insurance (PSI), an initiative from the United Nations Environment Program/Financial Initiative (UNEP/FI) in partnership with CNseg (National Confederation of General Insurance, Private Pension and Life, Supplementary Health and Capitalization Companies). Porto Seguro, believing that the movement would contribute to the development of a new awareness among the sector companies, joined the PSI in 2012 and adopted measures in synergy with the program, as follows: ‐ social and environmental responsibility guideline to support the decision‐making process; ‐ inclusion of a social and environmental clause in service agreements; ‐ qualification and discussions with employees and service providers about environmental, social and governance matters; ‐ integration of these matters with the competition and selection process relating to part of the supplier chain. SOCIAL PROJECTS Porto Seguro’s social projects are based principally on professional education and training to contribute to the development of a society with equality and citizenship values. In 2014, the highlights were the following: Volunteer program Offer to employees, service providers and brokers the opportunity to engage in volunteer work. We believe that we have to encourage, build awareness and provide a favorable environment for people to find a way to serve as volunteer. Our strategy is to promote various volunteer activities, either individual or collective, inside or outside the working hours, with children, adults and senior citizens. About 1,300 volunteer activities in this year that benefited, through timely actions such as social and educational workshops, educational lectures, leisure and life quality activities, approximately 13,138 persons in social organizations throughout Brazil. Collection campaigns Collection campaigns are held during the year throughout Brazil. In 2014 79,050 items were collected including clothes, shoes, toys, school materials, personal hygiene products and food. In total, 54,381 persons from 113 Brazilian institutions accredited Porto Seguro were benefited. Porto Seguro Institute Established 2005, Casa Campos Elísios Melhor has the purpose of promoting education, professional training and job and income creation exclusively for the low‐income community. In 2014 Casa Campos Elíseos Melhor became Porto Seguro Institute. The change was made to maximize the development of social, environmental and cultural projects in the region. The Institute works with projects that can inspire and involve the audience with whom Porto Seguro has a relationship, such as employees, service providers, brokers, shareholders, suppliers, companies and the community. The structure is comprised of two fronts: cultural and social and environmental. The first contemplates cultural sponsorship actions consisting of shows, exhibits, the Brazilian photography award, the theater and Porto Seguro Cultural Space. The second is comprised of the expansion of social and environmental development actions such as: professional qualification courses, income generation and environmental workshops, educational projects through incentive laws and volunteer work. Professional Qualification Courses The objective of the professional qualification courses is to provide an improved social and economic condition through individual appreciation and access to jobs. The target group consists of people in risk and social vulnerability situations, aged between 16 and 60. When they have graduate the course, Porto Seguro sends students who have performed satisfactorily into the job market. In 2014, 431 persons attended the following professional qualification courses: basic administrative insurance technician, mechanics, bodywork and painting assistant, auto budget assistant, monitored alarm device assistant, electrical and hydraulic assistant, doormen, auto receptionist and expert. Generating Income and Initial Education The job and income creation courses are directly related to qualitative aspects of information, independent and entrepreneur employability. The initial education, in turn, is not related to employability, but it supplements the student education. In 2014, 680 people participated in hair styling and professional hair styling, manicure, computer assembly and maintenance courses, IT, office assistant and workmanship courses (Patchwork, fabric painting, box coating /Decoupage and Biscuit). The income generation rate, that is, the percentage rate of students who can generate income as a result of the course attended, is around 78%. Educate Action ‐ Children The Educate Action aims at supplementing official school activities, in pedagogical workshops that cover cross‐cutting themes. The idea is to make learning more appealing based on sports, thus stirring up children’s interest to the basic concepts of cooperation and citizenship. The project is aimed at children and teenagers from 6 to 15 living in and near the Campos Eliseos district. The program is divided in classes, according to their ages. The programs consisting of simultaneous workshops, such as: education and citizenship, collaborative sports, Capoeira, Dance, Music, Incentive to Reading and Writing, Arts and Crafts, IT, and Futsal. In 2014, 101 children participated in this initiative. A Casa é Nossa Casa é Nossa is the Porto Seguro Institute relationship program that provides integration between students and education professionals, and local community and social organizations in the region. Casa é Nossa is composed of programs focused on culture, citizenship, health prevention and environment. In 2014, 2,553 people participated in activities as follow: capoeira, futsal and ballroom dance Associação Crescer Sempre Associação Crescer Sempre was started in 1998, with the program “Parceria Empresa Escola”, supported by Porto Seguro. Conducted in the state public schools located in the district of Paraisópolis since 1991, where it was identified that the students started the elementary school without ever attending preschool as at that time there was none in Paraisópolis. In view of this need, this institution for the teaching of children was established. During this process, there was time for reflection, since the child cannot be seen as an isolated member but as a member of the family, with social, economic and cultural difficulties. The conclusion was that serving the children was not enough, it was important to create alternatives to strengthen the family and, thus, professional qualification and middle school courses were developed. 446 children from elementary school and 100 youngsters from high school were served in 2014. In 2014, the “Educação em Parceria” project served three public schools, totaling: ‐ 2,450 students in the “Informática Educativa” project; ‐ 95 psychological and psychopedagogical consultations; ‐ 42 participations in reading and writing workshops; ‐ 460 professional education students; ‐ 118 student participations in the “Apoio ao 8º e 9º ano” project; ‐ 74 teachers in continuing Portuguese and Math education; ‐ participation of 145 teachers in human development workshops; ‐ 120 persons graduated in professional education courses related to administrative techniques, doormen, reception, IT and manicure. ENVIRONMENTAL PROJECTS The area’s environmental segment is divided in two related action lines: Environmental Education and Environmental Management System. Environmental Education aims at raising the awareness of our stakeholders (employees, brokers, service providers, suppliers, customers, and the community) about the importance of the social and environmental issues, and engaging them in a change of attitude in their daily actions. The Porto Seguro Environmental Management System (SGA) aims at eliminating environmental risks, complying with relevant legislation, and improving the organization’s and our partners’ environmental performance, as well as cutting costs. It develops and implements preventive and corrective actions in the organization and makes recommendation to our partners, by setting procedures, conducts, standards, and techniques for the management of the environmental aspects of and impacts caused by their activities. Environmental Education Projects Dom Bosco Shelter project Support to the DOM BOSCO SHELTER, maintained by the SALESIANOS – Liceu Coração de Jesus network. Place of residence of recyclable material gatherers, who aim at social reintegration by gathering recyclable material in downtown São Paulo. We try, this way, to balance environmental preservation actions (by ensuring that these materials return to the production cycle through recycling), social inclusion (by encouraging citizen involvement and fighting exclusion from the benefits of living in society), and generating income (by allowing the group to generate financial returns through selective collection). In 2014, we held 15 meetings with a group of ten shelter dwellers for the establishment of a cooperative to boost material gathering and encourage communication between group members, a sense cooperative work and organization, and the management of collected waste. Additionally, this work also includes the partnership with the businesses in downtown São Paulo to expand the chain of sties that supply recyclable materials to the Group. Social and environmental meetings Presential social and environmental action that stimulates the professional/personal involvement and development of employees. These meetings discuss business sustainability, climate changes, citizenship, among other social and environmental matters. 15 social and environmental meetings were held in 2014, gathering 647 participants. “Portal Ecoambiental” and “Talento Voluntário” Online environment accessible by employees and service providers that compiles updated articles about environmental education, eco‐efficiency, volunteer work and citizenship, and actions conducted inside and outside Porto. In 2014, 40 articles discussing the following topics were published: water (4), energy (3), mobility (4), climate changes (2), residues (7) and diverse topics (21) welfare, food and sustainability‐
related themes. ENVIRONMENTAL MANAGEMENT SYSTEM Earth Hour Since 2008, our buildings switch off their lights from 11:30 a.m. to 1:30 p.m. to build the awareness about conscientious electricity consumption. The idea behind this action is to help saving Earth’s resources and to use less energy. In 2014, we saved 208 MWh, equivalent to savings of R$ 65,048.56. This corresponds to the average consumption of 95 São Paulo families during a month. This program also results in large cost cuts. Cooking oil recycling campaigns We started the Cooking Oil Recycling Campaign in 2008 with the main purpose of calling the population’s attention to the consequences of the incorrect disposal of waste oil and show that it can also be reused through recycling, including to produce biodiesel, a renewable fuel, cleaner than regular diesel oil, which is indirectly used in our tow trucks. “ In 2014, we expanded the collection 8 new points and collect 1,346 liters of cooking oil. Card, cell and battery recycling campaigns When disposed in the common trash, plastic and magnetic cards, cells and batteries end up in landfills or open‐air dumps, where they start to decompose, contaminating the environment. Cards are harmful because they contain non‐biodegradable substances, such as chips, inks and magnetic strips. As for cells and batteries, they contain heavy metals such as mercury, lead, cadmium, nickel, etc. These elements are highly toxic and contaminate the soil, the water, and wildlife. This campaign aims at offering customers and non‐customers the reverse logistics of magnetic cards, which complies with the National Solid Waste Policy. In 2014, were collected 2,571 kg of waste electronics between batteries, batteries and plastic cards. Selective waste collection It aims at sending the recyclable materials generated at the organization for recycling, through social projects and cooperatives dedicated to the sale of these materials directly to manufacturers, in order to create jobs, generate income, and foster social inclusion and transformation. In the Head Office Complex and the Greater São Paulo Branches, recyclable and organic waste is collected by a waste carrier. Organic waste is sent to landfills and recyclable waste is sent to a cooperative that separates and sells it to recycling companies. In other branches and regional are carried out local partnerships with cooperatives, municipalities and companies specialized in waste management in order to deploy the complete process of selective collection. In 2014, only in Greater Sao Paulo (Matrix, Branches and Regional), ran the collection of 627 tons of organic waste, and 266 tons of recyclable waste, which were intended for recycling through the Coopercicla Cooperative. With the implementation of recycling, we generated income of approximately R$ 136,684.00 to the cooperative. Emissions Inventory Porto Seguro prepares the Greenhouse Gas Inventory since 2008; however, it started to publish such inventory in the GHG Protocol Brasil’s online platform in 2011 only. The Greenhouse Gas Inventory is a report where all the Company's gas emission sources, including the emissions from power consumption and the consumption generated by customer services (Porto Socorro) provided by the Company's service providers, are described. The report containing such information is published in the GHG Protocol Brasil’s online platform. Home Office Program This project, launched in 2013, was designed for employees to improve the life quality of
participants by reducing the time spent in the commuting to/from the workplace. By
working from home (telework), the employee has enough time to dedicate to other
activities such as, sports and leisure. We conducted a pilot analysis of 329 employees,
out of the 600 employees working in Home Office system, taking into consideration the
various environmental benefits from this project with respect to the five fronts considered
as the most significant in light of the scenario in the City of São Paulo, as shown below:

Greenhouse Gas Emission Reduction: in 2014 the issuance of 2,422.94 TCO2 equivalents. Such result corresponds to the volume of CO2 that would require 4,584 trees to absorb. 
NOx gas reduction in the atmosphere: in 2014 in avoiding the commuting of employees, we prevented the emission of 60,017.13 grams of such gas. 
Commuting avoided: in 2014 we avoided employees working in the Home Office system from travelling 2,592,920.52 Km, thus contributing to the reduction of the excess number of vehicles in the streets and persons in public transportation. For comparison purposes, such amount is equivalent to more than 67 trips around the Earth. 
Fuel liters saved: we reduced fuel consumption by 113,235.85 liters. 
Square meters avoided in commuting to/from work (back and forth): We avoided the occupancy of 1,212,319.00 m² of streets, which corresponds to an area of approximately 147 soccer fields. SOCIAL AND ENVIRONMENTAL REGULATION Social and Environmental Risk Policy | UNEP FI | PSI As a result of the adhesion to the Principles for Sustainable Insurance of the United Nations Environment Programme Finance Initiative (UNEP | FI), insurers associated with CNseg undertake to develop control and management mechanisms for each commitment assumed. One of the actions was the repudiation of child and forced labor. Accordingly, we developed the Social and Environmental Risk Policy together with the Internal Control area. The objective is to ensure that the group companies (Porto Seguro, Itaú Seguros e Residência e Azul Seguros) do not indirectly promote forced or child labor. Each company undertakes to create mechanisms to identify customers that are included in the “black list” of the Ministry of Labor and Employment. Customers in the list will be evaluated by a specific committee or a responsible Officer. REVERSE LOGISTICS | SAVAGES RE In 2014 we strived to determine an appropriate flow of disposal of Porto Seguro’s residues by the Reverse Logistics area. Due to the important relationship between the Savages RE and Reverse Logistics areas, we focused on the disposal of residues of the Savages area. We conducted an in‐depth study, based on technical visits to claim regulators, as well as extensive work meetings with the area analysts. SUSTAINABLE PRODUCTS In the Sustainable Products segment, we have been working in 11 different areas, by identifying social and environmental risks and opportunities. Consequently, during the year, we intend to add value to the product, decrease the reduction of administrative expenses/claim ratio, through the creation of relationship actions and programs, review of processes, differentiated underwriting of risks or performance of a new activity. In 2014 sustainability actions and projects were implemented in the following business lines: Consortium, Auto Product, Conecta, Porto Faz, Dental, Renova Ecopeças, Cards, CAPS and Services, Health, RE and Human Resources. CVM Instruction 381/03 In the period from January to December 2014, the independent auditor and its related parties did not provide non‐audit services at a level higher than 5 percent of total fees related to the external audit services. Prospects After a disappointing first quarter, generated on a large scale by atypical climate conditions, the U.S. economy showed robust performance in the remainder of 2014, growing above the level perceived as its potential for long‐term. Similar results were not observed in the other major economies of the world, be they developed or emerging. Europe continued unable to overcome the crisis and, to some extent, additionally some of their problems are worse, even circumstantially. Geopolitical Problems involving Russia and the return of fears about a possible output of Greece in the Euro‐Zone have affected the confidence of entrepreneurs and consumers in the region, despite the followed efforts promoted by the European Central Bank to encourage the resumption of activity in the region. In China, at the same time that the fears of a drop more abrupt and sharp growth in activity were allayed, consolidated a path of gradual but apparently clear deceleration in the pace of GDP growth, pointing to levels lower than 7 %, level such that until a short time ago was taken as a minimum by the authorities themselves of the country. As a result of this growing divergence between the performance of the US and the other major planetary economies, It was noted that during 2014 to a consistent process of recovery of the north American currency against the other, movement marked by the prospect of an increasingly close beginning the process of regularizing of monetary conditions American. Another relevant economic landmark of 2014 was the significant decline in commodities prices, in particular the oil, movement concentrated in the last months of the year. Domestically, surrounded by the uncertainties associated with the electoral process, the economic activity showed low growth, affected by the deterioration of family’s and entrepreneurs confidence index, which in turn generated a gradual persistent slowdown in the growth rate of consumption, as well as a significant decline in fixed investment. This scenario should not show major changes in the first months of 2015, and there may be a gradual resumption, heterogeneous among the various segments of the economy, only from second semester of this year. Despite the low GDP growth, inflation as measured by the IPCA ended the year close to the limit. This scenario has forced the Copom to resume at the end of the year, the cycle of monetary tightening interrupted at the beginning of April, movement which should extend to the beginning of 2015, especially in the perspective of maintaining a high inflation as a function of the correction of the so‐called managed prices. Executive Committee Statement In compliance with the provision of CVM Instruction 480, the Executive Committee hereby declares that it has discussed, reviewed, and endorsed the financial statements for the fiscal year ended December 31, 2014, and the opinions expressed in the independent auditor’s report. Acknowledgements We take this opportunity to thank our brokers and customers for their support and trust, and our staff and personnel for their continued dedication. We also thank the authorities connected to our activities. São Paulo, February 11, 2015. Management PORTO SEGURO S.A. and subsidiaries
Balance Sheets as at December 31, 2014 and 2013
(In thousands of Brazilian reais ‐ R$)
Note
Current assets
Cash and cash equivalents
Financial assets
Financial assets at fair value through profit or loss
Available‐for‐sale financial assets
Loans and receivables
Premiums receivable from policyholders
Lending operations
Notes and credits receivable
Receivable from services
Reinsurance assets
Taxes and contributions recoverable
Non‐financial assets held for sale
Dividends and interest receivable
Deferred acquisition costs
Other assets
Noncurrent assets
Long‐term assets
Financial assets
Financial assets at fair value through profit or loss
Available‐for‐sale financial assets
Loans and receivables
Premiums receivable from policyholders
Lending operations
Reinsurance assets
Deferred income tax and social contribution
Taxes and contributions recoverable
Deferred acquisition costs
Other assets
Investiments
Investiment properties
Investiments in subsidiaries Fixed assets
Intangibles
Total assets
The accompanying notes are an integral part of these financial statements.
December 2014
Parent
December 2013
December 2014
Consolidated
December 2013
650.935
1.093.295
15.738.105
15.755.470
6
19.041
245.262
1.003.862
1.336.503
7.1.1
7.1.2
526.940
41.343
557.518
45.789
5.676.227
41.343
6.784.235
45.789
7.2.1
7.2.2
7.2
‐
‐
‐
‐
‐
17.783
‐
42.809
‐
3.019
‐
‐
‐
‐
‐
22.818
‐
219.862
‐
2.046
3.155.032
992.819
2.827.581
39.567
72.522
68.629
168.945
‐
1.109.880
581.698
2.737.312
806.208
2.141.010
38.215
75.961
141.074
113.202
‐
1.004.720
531.241
5.883.833
5.464.666
6.682.304
4.653.845
7.1.1
7.1.2
‐
‐
‐
‐
1.136
2.697.032
1.941
1.038.089
7.2.1
7.2.2
15.5
8.3.1
8.1
10
11
‐
‐
‐
13.678
‐
‐
5.019
‐
‐
‐
13.609
‐
‐
5.064
689
264.414
1.035
436.233
53.748
6.375
345.394
637
248.220
823
347.290
53.683
6.799
309.468
12
13
14
‐
5.865.136
‐
‐
‐
5.445.937
‐
56
8.697
‐
1.377.028
1.490.523
8.883
‐
1.213.415
1.424.597
6.534.768
6.557.961
22.420.409
20.409.315
15.5
8.1
9
14.2
10
11
December 2014
Consolidated
December 2013
355.712
‐
‐
‐
6.812
334.099
14.801
15.836.279
9.881.827
647.304
4.115.789
360.266
206.979
624.114
13.977.644
8.887.137
643.687
3.111.085
288.402
350.438
696.895
308.038
‐
‐
308.038
‐
313.086
‐
‐
313.086
‐
584.682
20.693
74.270
392.165
97.554
538.163
20.516
52.349
396.423
68.875
5.998.021
2.782.000
47.412
2.939.301
227.917
1.391
‐
5.889.163
2.782.000
47.412
2.537.560
508.855
13.336
‐
5.999.448
2.782.000
47.412
2.939.301
227.917
1.391
1.427
5.893.508
2.782.000
47.412
2.537.560
508.855
13.336
4.345
6.534.768
6.557.961
22.420.409
20.409.315
Note
December 2014
Current liabilities
Liabilities of insurance contracts
Insurance and reinsurance payables
Financial liabilities
Tax and contributions payable
Dividends and interest on capital payable Other liabilities
15
16
17
8.2
20 e
19
228.709
‐
‐
‐
7.572
206.042
15.095
Noncurrent liabilities
Liabilities of insurance contracts
Other liabilities
Deferred income tax and social contribution Judicial provisions
15
19
8.1.1
18
Shareholder´s equity Capital
Capital reserves
Earning reserves
Supplementary proposed dividends
Other comprehensive income Noncontrolling interests
Total liabilites and shareholder´s equity
20 a
20 b
20 c
20 d
Parent
December 2013
PORTO SEGURO S.A. and subsidiaries
Statements of income for the years ended December 31, 2014 and 2013
(in thousands of Brazilian reais‐ R$, except earnings per share)
Parent
Note
December 2014
December 2013
‐
‐
‐
‐
‐
‐
‐
‐
‐
880.189
Total revenues
Expenses
Change in technical reserves ‐ insurance
Change in technical reserves ‐ pension plan
Total ‐ change in technical reserves
Gross retained claims
Pension plan benefits
(‐) Recoveries of reinsurance (‐) Recoveries of salvages and reimbursements
Expenses with claims and benefits, net
Acquisition costs ‐ insurance
Acquisition costs ‐ other Administrative expenses
Tax expenses
Costs of services rendered Other operating expenses
Consolidated
December 2014
December 2013
1.460.079
12.675.415
(86.724)
12.588.691
169.271
11.042
863.733
694.964
95.777
11.217
‐
11.267.308
(71.610)
11.195.698
178.191
4.421
636.816
581.950
114.466
10.001
‐
880.189
1.460.079
14.434.695
12.721.543
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(29.931)
(17.099)
‐
(50)
(30.026)
(13.514)
‐
‐
(727.493)
(155.185)
(882.678)
(7.484.293)
(14.873)
35.894
861.320
(6.601.952)
(2.323.583)
(80.447)
(2.594.800)
(255.601)
(162.022)
(1.106.939)
(786.414)
(112.885)
(899.299)
(6.524.424)
(11.837)
48.403
828.391
(5.659.467)
(2.032.983)
(74.625)
(2.399.328)
598.393
(131.500)
(854.500)
Total expenses
(47.080)
(43.540)
(14.008.022)
(11.453.309)
Operating profit before net financial result
833.109
1.416.539
426.673
1.268.234
27.948
(563)
27.385
23.040
(13)
23.027
1.290.499
(384.619)
905.880
740.905
217.227
958.132
Operating profit
860.494
1.439.566
1.332.553
2.226.366
Profit before income tax and social contribution
860.494
1.439.566
1.332.553
2.226.366
15.335
1
15.334
(34.359)
‐
(34.359)
(456.365) (829.055)
(550.356) (369.136)
93.991 (459.919)
Net profit for the year
875.829
1.405.207
876.188
1.397.311
Profit attributable to:
‐ Shareholders of the Company
‐ Noncontrolling interests in subsidiaries
875.829
‐
1.405.207
‐
875.829
359
1.405.207
(7.896)
Revenue
Written insurance premiums (‐) Reinsurance premiums ceded
Net Premiums written Pension plan contributions
Net revenue from capitalization operations Revenue from lending operations
Revenue from services
Other operating income
Revenues from rental of properties
Equity in subsidiaries
Financial income
Financial expenses
Income tax and social contribution
Current taxes
Deferred taxes Earning per share: ‐ Basic
‐ Diluted The accompanying notes are an integral part of these financial statements.
21
21
21
22
23
24
12
25
26
27
28
29
30
31
32
8.4
34
34
2,70909
2,70909
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
4,34654
4,34654
2,71020
2,71020
4,32212
4,32212
PORTO SEGURO S.A. and subsidiaries
Statements of comprehensive income for the years ended December 31, 2014 and 2013
(In thousands of Brazilian reais ‐ R$)
Parent
Net Profit for the year
Consolidated
December 2014 December 2013 December 2014 December 2013
876.188 1.397.311
875.829
1.405.207
Other comprehensive income (11.945)
(330)
(11.945)
(330)
Items that will be reclassified subsequently to the income statament:
Adjustments to securities in subsidiaries (11.022)
(7.277)
(11.022) (7.277)
Tax effects on adjustments to securities in subsidiaries 4.409
2.911
4.409
2.911
Cumulative translation adjustments ‐ in subsidiaries
(2.613)
611
(2.613)
611
Other equity valuation adjustments ‐ in subsidiaries
Tax effects on other equity valuation adjustments ‐ in subsidiaries
(4.532)
5.708
(4.532)
5.708
1.813
(2.283)
1.813
(2.283)
863.884
1.404.877
864.243
1.396.981
863.884
‐
1.404.877
‐
863.884
359
1.404.877
(7.896)
Total comprehensive income for the year, net of tax effects Atributable to:
‐ Shareholders of the Company
‐ Noncontrolling interests
The accompanying notes are an integral part of these financial statements.
PORTO SEGURO S.A. and subsidiaries
Statements of changes in equity for the years ended December 31, 2014 and 2013
(In thousands of Brazilian reais ‐ R$)
Capital
Treasury shares
Capital reserves
Earnings reserves
Retained earnings Supplementary proposed dividends
Other comprehensive income Total Noncontrolling interest in subsidiaries
Total shareholder´s equity
2.782.000
(24.252)
47.412
2.069.758
‐
178.549
13.666
5.067.133
6.963
5.074.096
‐
‐
‐
‐
‐
24.252
‐
‐
‐
‐
‐
‐
(35.498)
(24.252)
‐
‐
‐
‐
‐
‐
(178.549)
‐
‐
‐
‐
‐
(4.366)
611
(214.047)
‐
(4.366)
611
‐
‐
‐
‐
(214.047)
‐
(4.366)
611
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
1.405.207
‐
‐
‐
3.425
‐
‐
3.425
‐
1.405.207
‐
5.278
(7.896)
3.425
5.278
1.397.311
20 d 20 d ‐
‐
‐
‐
‐
‐
70.260
457.292
(70.260)
(457.292)
‐
‐
‐
‐
‐
‐
‐
‐
(368.800)
(508.855)
‐
508.855
‐
‐
‐
‐
‐
(368.800)
‐
‐
‐
‐
‐
‐
(368.800)
‐
20 e 20 e ‐
‐
‐
‐
‐
‐
2.782.000
‐
47.412
2.537.560
‐
508.855
13.336
5.889.163
4.345
5.893.508
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(508.855)
‐
‐
‐
(6.613)
(2.613)
(508.855)
(6.613)
(2.613)
‐
‐
‐
(508.855)
(6.613)
(2.613)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
875.829
‐
‐
‐
(2.719)
‐
‐
(2.719)
‐
875.829
‐
(3.277)
359
(2.719)
(3.277)
876.188
20 d 20 d ‐
‐
‐
‐
‐
‐
43.791
357.950
(43.791)
(357.950)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
20 e 20 e ‐
‐
‐
‐
‐
‐
‐
‐
(246.171)
(227.917)
‐
227.917
‐
‐
(246.171)
‐
‐
‐
(246.171)
‐
2.782.000
‐
47.412
2.939.301
‐
227.917
1.391
5.998.021
1.427
5.999.448
Note
Closing balances ‐ December 31, 2012
Approval of supplementary dividends proposed in the previous year
Treasury shares cancelled Adjustments to securities in subsidiaries (comprehensive income)
Cumulative translations adjustments (comprehensive income) Other equity valuation adjustments ‐ in subsidiaries (comprehensive income)
Capital increase ‐ noncontrolling interest
Net profit for the year Appropriations:
Legal reserve
Statutory reserve Distribution of dividends and ICP:
Minimum mandatory dividends Supplementary proposed dividends 20 a
Closing balances ‐ December 31, 2013
Approval of supplementary dividends proposed in the previous year
Adjustments to securities in subsidiaries (comprehensive income)
Cumulative translations adjustments (comprehensive income) Other equity valuation adjustments ‐ in subsidiaries (comprehensive income)
Reduction of interest ‐ non controlling interest
Net profit for the year Appropriations:
Legal reserve
Statutory reserve Distribution of dividends:
Minimum mandatory dividends and ICP
Supplementary proposed dividends Closing balances ‐ December 31, 2014
The accompanying notes are an integral part of these financial statements.
20 e PORTO SEGURO S.A. and subsidiaries
Statements of cash flows for the years ended December 31, 2014 and 2013
(In thousands of Brazilian reais ‐ R$)
Parent
Consolidated
December 2014
December 2013
December 2014
December 2013
Cash flows from operating activities 168.033
77.048
899.903
1.358.648
Cash provided by operations Net profit for the year
Depreciation
Amortization
Equity in subsidiaries
Results on sale of fixed asets 8.268
875.829
‐
12.628
(880.189)
‐
(42.250)
1.405.207
‐
12.622
(1.460.079)
‐
1.036.449
876.188
96.053
64.084
‐
124
1.528.137
1.397.311
78.630
52.522
‐
(326)
Change in assets and liabilities
Financial assets at fair value through profit or loss
Available‐for‐sale financial assets
Premiums receivable from policyholders
Lending operations
Notes and credits receivable
Reinsurance assets
Deferred income tax and social contribution
Taxes and contributions recoverable
Taxes and contributions paid
Non‐financial assets held for sale
Other assets
Deferred acquisition costs Liabilities of insurance contracts
Insurance and reinsurance payables
Financial liabilities
Taxes and contributions payable
Provisions
Other liabilities
159.765
30.578
4.446
‐
‐
‐
‐
(5.117)
15.731
(10.696)
‐
(928)
‐
‐
‐
‐
760
‐
124.991
119.298
118.649
(8.740)
‐
‐
‐
‐
34.360
11.198
(2.680)
‐
591
‐
‐
‐
‐
137
‐
(34.217)
(14.687)
1.108.813
(1.654.497)
(417.772)
(202.805)
(686.571)
3.227
(93.201)
72.380
(483.374)
(55.743)
(87.735)
(104.736)
994.867
3.617
1.111.635
555.238
28.679
(106.709)
(114.295)
1.504.015
(1.036.629)
(358.476)
(295.502)
(690.763)
(23.519)
452.574
(52.560)
(419.179)
4.242
(6.480)
(159.713)
782.816
97.549
1.030.552
432.063
(1.584.675)
209.390
Other
Adjustments to financial instruments
Non‐controlling interests
‐
‐
‐
‐
‐
‐
(121.859) (55.194)
(11.651) (330)
(3.277) 5.278
Interest on deposits
‐
‐
(106.931) (60.142)
Cash flows from investment activities Disposal of fixed assets
Acquisition of fixed assets
Dividends and interest on capital received
Acquisition of investments
Acquistion of intangible
448.676
50
‐
817.375
(368.749)
‐
450.199
‐
‐
499.505
(49.306)
‐
(389.614)
9.922
(268.790)
‐
‐
(130.746)
Cash flows from financing activities Dividends paid
Interest on capital paid
(842.930) (341.290) (842.930) (341.290)
(638.038) (119.188) (638.038) (119.188)
(204.892) (222.102) (204.892) (222.102)
Increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
(226.221) 185.957
245.262 59.305
19.041 245.262
The accompanying notes are na integral part of these financial statements.
(364.157)
10.950
(232.838)
‐
‐
(142.269)
(332.641) 653.201
1.336.503 683.302
1.003.862 1.336.503
PORTO SEGURO S.A. and subsidiaries
Statements of value added for the years ended December 31, 2014 and 2013
(In thousands of Brazilian reais ‐ R$)
Parent
December 2014
December 2013
Consolidated
December 2014
December 2013
Revenues
Revenues from insurance operations
Revenues from pension plan
Revenues with management fees and other
Service revenues
Other
Provision for impairment of trade receivables
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
14.278.400
12.675.415
169.271
21.216
694.964
947.834
(230.300)
12.627.491
11.267.308
178.191
28.715
581.950
715.427
(144.100)
Change in technical reserves
Insurance operations
Pension plan operations
‐
‐
‐
‐
‐
‐
(882.678)
(727.493)
(155.185)
(899.299)
(786.414)
(112.885)
Net operating revenues
‐
‐
13.395.722
11.728.192
Benefits and claims Claims
Expenses with benefits
‐
‐
‐
‐
‐
‐
(6.601.952)
(6.587.079)
(14.873)
(5.659.467)
(5.647.630)
(11.837)
Inputs acquire from third parties Materials, energy and other Cost of products and goods sold and services rendered Third‐party services, net commissions
Chance in deferred acquisiton costs
Loss/recovery of assets values
(2.128)
(1.387)
‐
(691)
‐
(50)
(1.976)
(786)
‐
(1.190)
‐
‐
(4.461.341)
(1.452.490)
(162.022)
(2.937.205)
91.881
(1.505)
(3.759.602)
(1.093.752)
(131.500)
(2.687.904)
155.944
(2.390)
Gross value added
(2.128)
(1.976)
2.332.429
2.309.123
Depreciation and amortization
(12.628)
(12.622)
(160.137)
(131.152)
Net value added generated by the entity
(14.756)
(14.598)
2.172.292
2.177.971
Value added received/given through transfer
Financial revenues
Equity in subsidiaries
Other
907.589
1.483.106
971.587
596.027
27.948
880.189
(548)
23.040
1.460.079
(13)
1.301.716
‐
(330.129)
728.296
‐
(132.269)
Total value added to distribute
892.833
1.468.508
3.143.879
2.773.998
Distributions of value added
892.833
1.468.508
3.143.879
2.773.998
Personnel
Direct compensation
Benefits Government Severance Indemnity fund for employees ‐ F.G.T.S
Taxes and contributions
Federal
State
Municipal
Third‐party capital remuneration
Interests
Rentals
Shareholder´s capital remuneration
Dividends
Retained earnings
Noncontrolling interest in earnings reinvested
15.012
1.062
13.950
‐
1.992
1.992
‐
‐
‐
‐
‐
875.829
474.088
401.741
15.242
932
14.310
‐
48.059
48.059
‐
‐
‐
‐
‐
1.405.207
877.655
527.552
‐
‐
1.273.466
715.006
503.677
54.783
898.638
873.275
‐
25.363
95.587
54.475
41.112
876.188
474.088
401.741
359
1.297.565
701.059
543.771
52.735
389.793
356.758
215
32.820
(310.671)
(349.343)
38.672
1.397.311
877.655
527.552
(7.896)
The accompanying notes are na integral part of these financial statements.
Porto Seguro S.A.
Supplemental information to the financial statements
Social Responsibility Statement
Years ended December 31 - Unaudited
In thousands of Brazilian reais - R$
2013
2014
1- Computation basis
Amount
15.331.522
Net revenue - RL(*)
Operating profit/loss - RO(*)
Gross payroll - FPB
2-Internal Social Indicators
Meals
Compulsory social charges
Amount
13.171.827
875.829
703.490
1.273.466
1.297.565
Amount
151.525
% on FPB
11,90%
% on RL
0,99%
Amount
135.998
% on FPB
10,48%
% on RL
1,03%
291.366
22,88%
1,90%
260.164
20,05%
1,98%
Private pension
13.613
1,07%
0,09%
11.669
0,90%
0,09%
Healthcare
86.200
6,77%
0,56%
68.062
5,25%
0,52%
Occupational health and safety
5.424
0,43%
0,04%
4.395
0,34%
0,03%
Education
5.332
0,42%
0,03%
5.652
0,44%
0,04%
Culture
9.567
0,75%
0,06%
6.047
0,47%
0,05%
Professional qualification and growth
2.339
0,18%
0,02%
1.964
0,15%
0,01%
Childcare centers or childcare allowance
6.497
0,51%
0,04%
5.805
0,45%
0,04%
Profit sharing (*)
212.846
16,71%
1,39%
186.916
14,41%
1,42%
Total - internal social indicators
784.709
61,62%
5,12%
686.672
52,92%
5,21%
Amount
10.540
% on FPB
1,20%
% on RL
0,07%
Amount
11.841
% on FPB
1,68%
% on RL
0,09%
Culture
8.411
0,96%
0,05%
8.428
1,20%
0,06%
Sports
1.781
0,20%
0,01%
1.794
0,26%
0,01%
Total contributions to society
20.732
2,37%
0,14%
22.063
3,14%
0,17%
Taxes (excluding social charges)(*)
719.485
82,15%
4,69%
1.169.275
166,21%
8,88%
Total - external social indicators
740.217
84,52%
4,83%
1.191.338
169,35%
9,04%
3-External Social Indicators
Education
4-Environmental Indicators
Amount
% on FPB
% on RL
Amount
% on FPB
% on RL
Investments in external programs and/or projects
417
0,05%
0,00%
530
0,08%
0,00%
Total environmental investments
417
0,05%
0,00%
530
0,08%
0,00%
With respect to the establishment of "annual goals" to minimize waste and
( x ) does not have goals ( ) meets from 51 to 75% (
consumption in general in production / operation and increase effectiveness in the
) meets from 0 to 50% ( ) meets from 76 to 100%
use of of natural resources, the company
( x ) does not have goals ( ) meets from 51 to 75% (
) meets from 0 to 50% ( ) meets from 76 to 100%
2013
13.405
2014
14.285
5-Staff Indicators
Number of employees at the end of the period
Number of hires during the period
3.873
3.812
Number of outside employees
15.473
13.207
Number of interns
Number of employees above 45 years
Number of women working in the company]
% of leadership positions held by women
32
29
1.414
1.295
7.815
7.414
40,50%
39,40%
4.265
4.097
13,70%
10,30%
Number of handicapped or disabled individuals
516
393
6-Relevant information on the exercise of the corporate citizenship
Number of black individuals working in the company
% of leadership positions held by black individuals
2014
2015 Goals
Relationship between the higher and lower compensation in the company
56
55
Total number of work accidents
23
22
2014
(x)
management
and sectors
2013
(x)
management
and sectors
The social and environmental projects implemented by the company were defined
by:
( ) management
Occupational safety and health standards in the work environment were defined
by:
( ) management
( ) all employees
and sectors
With respect to union freedom, the right of collective bargaining agreement and
internal representation of all workers, the company:
( x ) encourages
( ) does not get ( ) abides by OIT
and abides by
involved
standards
OIT
Private pension comprises:
( ) management
( ) management
and sectors
( x ) all
employees
( ) management
( ) management
and sectors
( x ) all
employees
Profit sharing comprises:
( ) management
( ) management
and sectors
( x ) all
employees
( ) management
( ) management
and sectors
( x ) all
employees
In selecting suppliers, the same ethical and social and environmental responsibility
standards adopted by the company:
( ) are not taken
into
consideration
( x ) are
recommended
( ) are required
( ) are not taken
into
consideration
( x ) are
recommended
( ) are required
With respect to the participation of employees in voluntary work programs, the
company:
( ) does not get
involved
( ) supports
( x ) organizes
and encourages
( ) does not get
involved
( ) supports
( x ) organizes
and encourages
Total number of complaints and criticisms from consumers:
in the company
92,393
in Procon
1,686
in the court
7,252
in the company
88,371
in Procon
1,725
in the court
6,008
% of complaints and criticisms answered or solved:
in the company
100%
in Procon
73.72%
in the court
34.18%
in the company
100%
in Procon
65.43%
in the court
36.22%
Total wealth for distribution - in thousands of R$(*):
In 2014: 3,143,879
Wealth distributed - DVA(*):
( ) all employees
( x )all + Cipa
28,6% government
40.5% employees
15.1% shareholders 3.0% third parties 12.8%
withheld
( ) management
( ) management
( ) all employees
and sectors
In 2013: 3,514,658
38.3% government
37.2% employees
11.0% shareholders 4.4% third parties 9.1%
withheld
7-Other information
- Porto Seguro S.A. - CNPJ. 02.149.205/0001-69. Details, comments and projects are separately disclosed in the Company's Management Report,
published together with the financial statements.
- For explanation on the information furnished, please contact Celso Damadi - Telephone: (11) 2393-5199 -e-mail: celso.damadi@portoseguro.com.br
and is not involved in corrupt activities.
- Our company appreciates and respects internal and external diversity.
( x )all + Cipa
( x ) encourages
( ) does not get ( ) abides by OIT
and abides by
standards
involved
OIT
(*) Not considering nonrecurring adjustments.
- This company does not employ child or slave labor, has no involvement with prostitution or sexual exploration of children or adolescents
( ) all employees
Porto Seguro S.A. and Subsidiaries Management's notes to the financial statements December 31, 2014 and 2013 (in thousands of Brazilian reais, unless otherwise stated) 1.
Operations and general information Porto Seguro S.A. (the "Company") is a publicly‐held corporation with headquarters in Alameda Barão de Piracicaba, 618/634 – Torre B 11st floor, in the city and State of São Paulo ‐ SP, Brazil. The Company’s shares are traded in the New Market (code PSSA3), a special section of the Brazilian Stock, Commodities and Futures Exchange (BM&FBOVESPA). The Company’s objective is to participate, as a shareholder or partner, in other domestic or foreign companies (denominated “Porto Seguro” or “Company”), that operate in: (a) All lines of insurance. (b) Activities restricted to financial institutions and equivalent companies, including, consortium management. (c) Provision of services and sale of equipment for electronic surveillance of asset protection systems. (d) Services related, connected or supplementary to insurance and the other aforementioned activities. The activities of the Company's subsidiaries are as follows: Insurance, private pension plan and capitalization (i) Porto Seguro Companhia de Seguros Gerais ("Porto Seguro") ‐ A direct subsidiary of the Company (99.99%). Its objective is to operate in casualty and personal insurance. (ii) Porto Seguro Vida e Previdência S.A. ("Porto Seguro Vida") ‐ Controlled by Porto Seguro (99.97%) to operate in personal insurance and annuity and lump‐sum pension plans. (iii) Porto Seguro ‐ Seguros del Uruguay S.A. ("Porto Seguro Uruguay") ‐ Porto Seguro’s subisidiary which operates mainly in automobile insurance. (iv) Porto Seguro ‐ Seguro Saúde S.A. ("Porto Seguro Saúde") ‐ Controlled by Porto Seguro (99.98%) to operate as a specialized insurer in the health insurance line. (v) Azul Companhia de Seguros Gerais ("Azul Seguros") ‐ A direct subsidiary of the Company (69.14%) which operates in the casualty and personal insurance lines. In December 18, 2014, Porto Cia joined as shareholder, owning participation of 30.66 %. (vi) Itaú Seguros de Auto e Residência S.A. ("Itaú Auto e Residência") ‐ A direct subsidiary of the Company (99.99%). Its objective is to operate in the casualty insurance line. Porto Seguro S.A. and Subsidiaries (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv) (xvi) (xvii) Porto Seguro Capitalização S.A. ("Porto Capitalização"), controlled by Porto Cia (99.99%) to manage and sell capitalization certificates. Finance companies and consortiums Porto Seguro Administradora de Consórcios Ltda. ("Porto Consórcio") ‐ A direct subsidiary of the Company (99.99%) to manage consortiums for the acquisition of assets and properties. Portoseg S.A. ‐ Crédito, Financiamento e Investimento ("Portoseg") ‐ A direct subsidiary of the Company (99.99%). Its main objective is to finance the acquisition of assets, services, working capital and credit card operations. Portopar Distribuidora de Títulos e Valores Mobiliários Ltda. ("Portopar") ‐ A direct subsidiary of the Company (99.99%)to manage investment funds and financial assets. Services and commerce Porto Seguro Proteção e Monitoramento Ltda. ("Proteção e Monitoramento") ‐ A direct subsidiary of the Company (99.98%), with the purpose of rendering services related to electronic protection and surveillance. Porto Seguro Renova – Serviços e Comércio Ltda. (“Renova”)‐ A direct subsidiary of the Company (98%) primarily engaged in sale and distribution of spare parts. Crediporto Promotora de Serviços Ltda. ("Crediporto") ‐ A direct subsidiary of the Company (99.80%) with the purpose of providing loans and financing for consumption. Franco Corretagem de Seguros Ltda. (previously called Franco S.A. Corretagem de Seguros ("Franco") ‐ A subsidiary controlled by Azul Seguros (99.99%), with the purpose of providing technical services related to brokerage and insurance management. Porto Seguro Serviços Médicos Ltda. ("Serviços Médicos") ‐ A direct subsidiary of the Company (99.99%), with the purpose of providing health medical control programs, emergency care and administrative advisory services to doctors and health operators. Portomed ‐ Porto Seguro Serviços de Saúde Ltda. (previously called Portomed – Porto Seguro Serviços de Saúde S.A. ("Portomed") ‐ A direct subsidiary of the Company (99.80%) whose main purpose is to operate private healthcare plans. Porto Seguro Serviços Odontológicos Ltda. (previously called Porto Seguro Serviços Odontológicos S.A. ("Porto Odonto") ‐ A direct subsidiary of the Company (99.48%) whose main purpose is to operate private dental plans. Porto Seguro S.A. and Subsidiaries (xviii) Porto Seguro Serviços e Comércio S.A. ("Porto Seguro Serviços e Comércio") ‐ A direct subsidiary of the Company (99.99%) to provide services related, supplementary or connected to insurance activities. (xix) Porto Seguro Atendimento Ltda. (previously called Porto Seguro Atendimento S.A. ("Porto Seguro Atendimento") ‐ A subsidiary of Porto Seguro Serviços e Comércio (99.94%) to provide telemarketing, call center and general customer services. (xx) Porto Seguro Telecomunicações S.A. ("Porto Conecta") ‐ A subsidiary of Porto Seguro Serviços e Comércio which provides telecommunication and related services that enable the promotion and expansion of activities related, connected and supplementary to insurance and surveillance and financial activities. (xxi) Porto Seguro Serviços de Gerenciamento de Informações S.A. ("Conecta Serviços"), controlled by Porto Conecta (99.99%) to provide information management, information technology, added value and software development services. (xxii) Porto Servicios S.A. (“Porto Serviços Uruguai”), a subsidiary of Porto Serviços e Comércio primarily engaged in insurance services, either related or supplementary, in Uruguay. (xxiii) Bioqualynet Saúde Ocupacional Ltda. (“Bioqualynet”), controlled by Serviços Médicos (99.99%) engaged in the provision of occupational health, safety and hygiene consulting and advisory and ergonomics services and of ambulatory health services. (xxiv) Bioqualynet Sul Saúde Ocupacional e Segurança do Trabalho Ltda. (“Bioqualynet Sul”), controlled by Serviços Médicos (99.99%) engaged in the provision of occupational health, safety and hygiene consulting and advisory, ergonomics, phonoaudiology and physiotherapy services and the provision of ambulatory health services. (xxv) Porto Seguro Investimentos Ltda. (“Porto Investimentos”), a direct subsidiary (99.75%) to manage and administer securities portfolios, investment funds and other third‐party funds. 2. Summary of significant accounting policies The relevant accounting policies used in the preparation of these financial statements are set out below. These policies were consistently applied to all periods presented, unless otherwise stated. In 2014 there was no relevant changes in accounting policies. Porto Seguro S.A. and Subsidiaries 2.1.
Basis of preparation The preparation of financial statements requires management to make use of judgment to determine and record accounting estimates. Significant assets and liabilities subject to these estimates and assumptions include, among others, the determination of: (i) the fair value of financial assets, (ii) technical reserves; (iii) the adjustments to the provision for impairment, (iv) realization of deferred income tax and social contribution and (v) provisions for judicial process. Actual results may differ from these estimates. The Company reviews these estimates and assumptions on a periodical basis. (See note 3.) These financial statements have been prepared on the assumption that the Company will continue as a going concern. The Company’s financial statements were authorized for issuance by the Board of Directors on February 11, 2015. 2.1.1 Consolidated financial statements The consolidated financial statements have been prepared and are being presented in accordance with accounting practices adopted in Brazil and in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). 2.1.2 Individual financial statements The individual financial statements of the parent company have been prepared in accordance with accounting practices adopted in Brazil issued by the Brazilian Accounting Pronouncements Committee ‐ CPC in compliance with Brazilian Corporate Law and are disclosed together with the consolidated financial statements. Actually, the accounting practices adopted in Brazil, applied to the individual financial statements, not differ from IFRSs applicable to the separate financial statements, since IAS 27 (IASB ‐ BV 2012) – Separeted Financial Statements, incorporated the equity method as acceptable method for evaluation of investments in subsidiaries and affiliates. 2.1.3 Standards, amendments and interpretations to existing standards that are not effective and have not been early adopted by the Company  IFRS 9 “Financial instruments”. The IFRS 9 introduces new requirements for classifying and measuring financial assets. The Company has no financial instruments held to maturity (category extinct by the new standard), for this reason does not expect significant impacts in the classification of securities. As to the model of "impairment" (of loss incurred for expected loss), the Company evaluates the impacts to be caused. In force from 1 January 2015. Porto Seguro S.A. and Subsidiaries 

IFRS 15 – Revenue from contracts with customers. The new standard establishes criteria for the recognition of revenue with customers, but it is not applicable to insurance premiums and revenue of credit operations (financial instruments), which are the main revenue of Porto Seguro. The Company does not expect significant impacts with the adoption of the standard. In force from 1 January 2017. Lei 12.973/14: promoted changes to the IRPJ, CSLL, PIS and COFINS, effective in 1/1/2015. The aforementioned law has specifically: (i) to standardized tax laws based on the accounting criteria and procedures introduced by Laws 11.638/07 and 11.941/09; (ii) eliminated the Transitional Tax Regime (RTT); (iii) changes in the goodwill application method. The Company evaluate that this law will not have significant impacts on the financial statements, except to Porto Cia and Porto Vida, which will no longer collect this contribution in 2014 (see note 18 (a) (iii)) due to the favorable outcome from COFINS lawsuit, these subsidiaries will collect such contributions in 2015, according to the new calculation basis established by law. 2.1.4 Adjustments and reclassification The Income Statement and Statements of value added as at December 31, 2014 were adjusted by the following items: Originaly reported 12/31/2013
Reclasification
Adjusted 12/31/2013
Income Statement
Written Insurance premiums (i)
11,575,205
Changes in technical reserves ‐ insurance ‐ (i)
(1,094,311)
(307,897)
11,267,308
307,897 (786,414)
Revenue from services (ii)
Tax expenses (ii)
(32,897)
32,897 581,950
598,393
614,847
565,496
Statement of Value Added
Written Insurance premiums (i)
11,575,205
Changes in technical reserves ‐ insurance ‐ (i)
(1,094,311)
(307,897)
11,267,308
307,897 (786,414)
Revenue from services (ii)
Tax expenses (ii)
(32,897)
(32,897)
581,950
356,758 614,847
389,655
(i) Reclassification in order that the changes of PPNG is presented net of the initial cost of acquisition. (ii) Reclassification in order to present revenue net of taxes. Porto Seguro S.A. and Subsidiaries 2.1.5 Statement of Value Added ‐ DVA This statement has by empasizing the wealth created by the Company and its distribution for a given period and is presented as part of their individual financial statements (Parent) and as supplementary information to the consolidated financial statements, as it is not a statement provided by IFRS. The DVA was prepared on the basis of information obtained from the accounting records and following the provisions contained in CPC 09 ‐ "Statement of Value Added". 2.2.
Control and Consolidation Subsidiaries are entities in which the Company, directly or through other subsidiaries, is entitled to shareholder rights, which ensure, permanently, the majority of voting capital and the power to elect most of the directors or shareholders that you ensure the power and the ability to direct the activities of relevant societies, affecting, inclusive, their returns on these, and when there is a right on the returns variables of companies. Subsidiaries are consolidated from the date on which control is transferred to the Company and deconsolidated from the date that control ceases. In this sense, all entities listed in Note 1 are subsidiaries (either direct or indirect) and are consolidated in the financial statements of Porto Seguro. When necessary, the subsidiaries' accounting policies were altered to be consistent with the policies adopted by the Company in the preparation of the financial statements, in conformity with IFRS and the new CPCs. The consolidation process includes the following eliminations: (i) participations in equity between the companies; (ii) current account balances and other assets and/or liabilities between consolidated companies; (iii) income and expenses arising from intercompany transactions – when applicable. Subsequently it is detached the value of non‐controlling interests are shown separately in the financial statements. 2.3.
Segment reporting Operating segments are grouped and reported in a manner consistent with the internal reporting provided to the chief operating decision‐maker, which is the main decision‐maker, responsible for allocating resources and assessing performance of the operating segments, including makes the Company's strategic decisions. The detailed information on segments is disclosed in Note 5. Porto Seguro S.A. and Subsidiaries 2.4.
Functional and presentation currency The Company's financial statements are presented in Reais (R$), which is the functional and presentation currency of the Company. The functional currency is the currency of the main economic environment where each Porto Seguro company operates. (a) Translation and balances denominated in foreign currency Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Gains or losses on translation resulting from the settlement of such transactions are recognized in the statement of income, except when recognized in equity as results from foreign operation qualified as foreign investment. The statement of income and balance sheet of Porto Seguro Uruguay and Porto Serviços Uruguai (whose functional currency is the Uruguayan peso) are translated into the Company's presentation currency as follows: (i) assets and liabilities are translated at the closing exchange rate at the reporting date or by historic rate, according to the characteristic of the item; (ii) income and expenses are translated at the average exchange rate of the year (unless this average is not a reasonable approximation for such purpose); and (iii) all balance sheet translation differences are recognized as a separate component of equity. Cash and cash equivalents 2.5 Cash and cash equivalents include bank deposits and other short‐term highly liquid investments with original maturities of three months or less, with immaterial risk of change in value. 2.6
Financial assets
(a) Measurement and classification
Company´s management determines the classification of financial assets at initial recognition. The classification depends on the purpose for which the financial assets were acquired, that are classified in the following categories: (i) Measured at fair value through profit or loss – securities held for trade
The Company classifies in this category the financial assets for active and frequent trading. Gains or losses arising from changes in the fair value of these assets are immediately recognized in the statement of income within "Financial result" in the period in which they occur. (ii) Available‐for‐sale securities Non‐derivative financial instruments recognized at fair value. The interest of these securities, calculated under the effective interest method, are recognized as “Finance income (costs)” in the income statement. The corresponding portion of the adjustment to fair value (unrealized Porto Seguro S.A. and Subsidiaries gains or losses) is accounted for in equity, in “Other comprehensive income (loss)”, and any effective gain/loss is recognized in profit or loss upon effective settlement or permanent (“impairment”). (iii) Loans and receivables (clients)
These include loans granted and receivables (premiums receivable from policyholders, loans to customers, receivables, providing services receivables) that are non‐derivative financial assets with fixed or determinable payments not quoted in an active market. These loans and receivables are carried at amortized cost using the effective interest method (when applicable) and assessed for impairment at each reporting date (see Note 2.9.1). (b) Determination of financial asset and liability fair value The fair values of quoted investments are based on bid prices. For financial assets without an active market or public quotation, the Company establishes the fair value through valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same, making maximum use of market inputs and relying as little as possible on management inputs. The fair value estimate measurement of assets classified as “Held for trading” and “Available for sale” is based on the following hierarchy: 
Level 1: quoted prices and unadjusted in active markets for identical assets or liabilities. 
Level 2: classified in this category when discounted cash flow or another methodology is used to determine the asset price based on market data and when all this data can be observed in the open market. 
Level 3: asset which is not based on data observed in the market, when the Company uses internal assumptions to determine its methodology and classification. The market value of government securities is based on the "unit market price" disclosed by the Brazilian Association of Financial and Capital Markets Entities – ANBIMA. Investment fund quotas are valued based on the price of the quota disclosed by the fund's manager. Private securities are valued at market through the same pricing methodology adopted by the manager of investment funds. 2.7
Derivative financial instruments and embedded derivatives
The Company issues pension plan contracts in which the participants have interest rate guarantee and options for redemption of their reserve. These embedded guarantees comply with the definition of an embedded derivative; however, the Company uses the exemption established in IFRS 4, which states that, if the embedded derivative complies with the definition of an insurance contract, the Company does not separate the derivative embedded Porto Seguro S.A. and Subsidiaries in this contract. These embedded guarantees are considered in the Liability Adequacy Test (LAT), because they modify estimated cash flows of contracts. 2.8
Reinsurance assets
Reinsurance assets are receivables from reinsurers and amounts in current and noncurrent reinsurance reserves (assets), valued in a manner consistent with the balances associated with insurance liabilities subject to reinsurance. Liabilities payable to reinsurance companies comprise premiums payable in reinsurance agreements. Any gains or losses on initial reinsurance contracting are amortized during the term of the contract risks. Impairment losses, when applicable, are evaluated using a methodology similar to that used for financial assets (see Note 2.9). This methodology also takes into consideration disputes and specific cases which are analyzed by management as to the documentation and progress of the recovery process with reinsurance companies. 2.9 Analysis of impairment
2.9.1
Loans and receivables (clients)
The Company evaluates, continuously, whether there is evidence that a certain asset or group of assets classified as loans or receivables (recognized at amortized cost) is impaired. If a financial asset is deemed impaired, the Company recognizes a loss in the statement of income only when there is objective evidence of impairment resulting from one or more events after the initial recognition of the financial asset in this category, and when the amount can be reliably measured. Losses are recorded and controlled in an adjustment account of the asset. The Company uses several observable factors for impairment analysis, including:  Previous losses and default.  Significant financial difficulty of the customer/policyholder or borrower due to unemployment.  A breach of contract, such as a default or delinquency in interest or principal payments.  The probability that the borrower will enter bankruptcy or creditor protection status due to an economic crisis that may affect their business segment.  Evidential that there is a measurable decrease in future cash flows of a group of assets (for collective impairment), although this decrease cannot be attributed to individually insignificant assets. For evaluation of impairment of financial assets classified in this category, the Company uses the incurred loss model, which considers whether there is objective evidence of impairment for individually significant assets. If there is no evidence of impairment, the Company will include this asset in a group of assets according to their credit risk characteristics (industry or types of insurance contracts, and category of the credit transaction, internal ratings, etc) and test on a collective basis. For this collective impairment calculation, the Company uses the Porto Seguro S.A. and Subsidiaries methodology named “Roll Rate Model”. Individually significant assets evaluated for impairment on an individual basis are not included in the collective impairment calculation basis. The financial assets that are provisioned for as a loss are usually written off when Management does not expect to recover them, noting specific rules of the regulators of each Company's business. 2.9.2
Securities available-for-sale
The Company evaluates at each reporting date if there is objective evidence that an asset classified as available for sale is individually impaired. If such evidence exists, the cumulative loss (being the difference between the acquisition cost and the current market value, less any impairment loss previously recognized) is removed from equity and immediately recognized in the statement of income. Losses on impairment of equity instruments recorded in the statement of income cannot be reversed in subsequent periods. 2.9.3
Non-financial assets
Assets that are subject to amortization, such as intangible assets with finite useful life and fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash‐generating units ‐ CGUs). The UGCs are determined and grouped by the Administration based on the geographic distribution of your business and on the basis of the services and products offered, in which cash flows are identified specific. Non‐financial assets that suffered an impairment are subsequently reviewed for possible reversal of the impairment. 2.10
Non-financial assets held for sale
The Company holds assets that are held for sale, such as inventories of salvages recovered after the payment of claims to policyholders and goods coming from the resume of guarantees offered on credit operations. These assets are valued at realizable value, net of the costs which are the responsibility of the buyer, such as expenditure on auction as well. 2.11
Deferred acquisition costs
Commissions and direct acquisition costs are deferred and amortized over the life of the insurance policy, and are reflected in the "Deferred acquisition costs" account. The Company does not differ from indirect costs of acquisition. Porto Seguro S.A. and Subsidiaries 2.12
Intangible assets
(a) “Softwares”
Software and systems purchase and implementation costs are recognized as assets when there is evidence that they will generate future economic benefits, based on their economic viability. Software maintenance costs are recognized in profit or loss for the year when incurred. (b) Goodwill and intangible asset with indefinite useful lives – Business combination
Goodwill on acquisition of companies comprises the excess of the acquisition cost over the fair value of net assets acquired at each business combination date. Goodwill is tested annually for impairment and recorded at cost less any loss for impairment identified in this test. Any losses recorded cannot be reversed. Porto Seguro also owns the trademark “Itaú Seguros de Auto e Residência”, recorded in a business combination and carried at fair value on acquisition date, as an asset with indefinite useful life, since there is no estimated time limit for the generation of future benefits arising from such a trademark to the Company (based on a market survey), which is evaluated according to the “Relief from Royalties” method. (c) Intangible assets with finite useful lives – Business combination
Other intangible assets acquired and identified in a business combination are recognized at fair value on the business combination date and amortized based on the estimated useful life of the assets.
Intangible assets with finite useful lives are amortized on a straight‐line basis based on the estimated useful life of the assets. The amortization rates applied by the Company are disclosed in Note 14.
2.13
Fixed assets for own use
Fixed assets for own use comprise properties for own use, equipment, furniture, machinery, fittings and vehicles used in the Company's business. Fixed assets for own use are stated at historical cost reduced by accumulated depreciation of the asset (except for land, which is not depreciated). The historical cost of fixed assets includes costs directly attributable to the acquisition of capitalized items and to bringing them into use. Subsequent costs are capitalized only when it is probable that future economic benefits associated with the item will flow to the Company and cost of the item can be measured reliably. All other repair or maintenance costs are recognized in the statement of income as incurred. Porto Seguro S.A. and Subsidiaries Depreciation of other fixed assets is calculated using the straight‐line method over their estimated useful lives (land is not depreciated). Depreciation rates used by the Company are disclosed in Note 13. 2.14
Insurance contracts and investment contracts - classification
The Company issues several types of general insurance contracts and benefit products (open pension plans) which transfer insurance and/or financial risks. The Company defines significant insurance risk as the possibility of paying significant benefits to policyholders if an insured event occurs (with commercial significance). Reinsurance contracts are also classified according to the insurance risk transfer principles. Contracts in which the Company engages outsourced employees or allocates its own employees to provide services related to, for example, automobiles and residences, 24‐ hour support, windows, among other risks, are also evaluated for classification purposes, and are classified as insurance contracts under IFRS when a significant portion of insurance risk is transferred between the counterparties of the contract. In the health insurance contracts the policyholder (exclusively corporate) has the option to cancel a contract effective for at least twelve months upon 60 days' notice without the obligation of paying any penalty to the Company; accordingly, this is a probable scenario with commercial substance for retention of significant insurance risk. Investment contracts are those which do not transfer insurance risk or transfer insignificant insurance risk. The capitalization certificates issued by Porto Seguro are classified as investment contracts and booked as financial instruments pursuant to IAS 39. 2.15
Liabilities arising from insurance contracts and open pension plan
2.15.1
Evaluation liabilities of insurance contracts
The Company uses IFRS 4 guidelines to evaluate insurance contracts and applied the minimum procedure standards for evaluation of insurance contracts, such as: liability adequacy test, review of prudence level considered in evaluation of insurance contracts, among other applicable policies. The Company did not use the Shadow Accounting principles, since it does not have contracts for which the evaluation of liabilities, or benefits to policyholders, are impacted by unrealized gains or losses on available‐for‐sale securities. Technical reserves are constituted according to determinations of National Private Insurance Council (CNSP), of SUSEP and National Supplementary Health Agency (ANS), whose criteria, parameters and formulas are documented in technical actuarial notes, described as follows: Porto Seguro S.A. and Subsidiaries Casualty (automobile, transportation, property, etc.), life without a surviving beneficiary clause and health insurance lines (a) The unearned premium reserve (PPNG) is calculated on a daily pro rata basis, for casualty and personal insurance, based on issued premiums, calculated net of the portion of the premium defined as revenue for recovery of initial contracting costs and is intended to provide for the portion of the latter corresponding to the unexpired risk period, starting on the calculation base date. (b)
The unearned premium reserve for risks in effect but not issued (PPNG ‐ RVNE) is intended to estimate the portion of unearned premiums related to risks assumed by the Company, which are already effective and in the process of being issued, in accordance with the methodology provided for in the technical actuarial notes in the casualty, group life and personal accidents insurance lines. (c)
The reserve for unsettled claims ‐ PSL (administrative and judicial) is based on estimates of indemnities payable, made upon the receipt of notices of claims or judicial notification, gross of reinsurance and net of coinsurance adjustments. An additional reserve for unsettled claims (IBNER) is recorded to cover reported claims whose amounts are subject to changes during the claim analysis process. This reserve is calculated using statistical and actuarial techniques based on the historical behavior of claims, in accordance with the methodology provided for in the technical actuarial notes in the life and casualty insurance lines. (d)
The reserve for claims incurred but not reported (IBNR) is set up for the payment of claims incurred but that had not been reported by the end of the reporting period, and is calculated using statistical and actuarial techniques based on the historical behavior observed between the occurrence of claims and their being reported, in accordance with a technical actuarial note in the life and casualty insurance lines. The IBNR reserve for the DPVAT (mandatory insurance against personal injury caused by automotive vehicles) line is recognized pursuant to CNSP Resolution. (e)
The Reserve for Related Expenses (PDR) is recognized to cover the expected amounts relating to claim‐related expenses. The reserve should cover allocable and non‐
allocable expenses relating to the settlement of indemnities or benefits. (f)
Mathematical reserves for vested benefits (PMBC) for the health insurance line are recognized based on the estimate of future medical and hospital expenses of the beneficiaries who are receiving a remission benefit (death of policyholder with maintenance of insurance of dependents without payment of premiums). This reserve is calculated in accordance with the methodology provided for in the technical actuarial notes, based on the present value of the related estimated expenses. Porto Seguro S.A. and Subsidiaries Pension plan and life insurance with a surviving beneficiary clause (g)
The mathematical reserves for unvested benefits (PMBaC) and vested benefits (PMBC) represent the amount of obligations assumed with the participants of annuity and lump‐sum pension plans, structured under the capitalization and allocation of coverage capitals financial methods, and of life insurance with a surviving beneficiary clause. These reserves are calculated based on technical actuarial notes. (h)
The Unearned Premium Reserve (PPNG) is calculated on a pro rata basis, with respect to plans organized under the simple distribution and funding capital distribution financial regimes (benefits and pensions), based on the contributions received in the month, and which is intended to accrue the part of the contribution correspond to the unexpired risk period, counted from the calculation base date. (i)
The Unearned Premium Reserve on Unissued Current Risks (PPNG‐RVNE) is calculated, with respect to plans organized under the simple distribution and funding capital distribution financial regimes (benefits and pensions), based on the specific methodology described in the NTA and is intended to estimate the potion of unexpired risks relating to the risks assumed by the insurance company whose terms have already started and which are being issued. (j)
Supplementary Coverage Reserve (PCC) is calculated in accordance with the methodology provided for in technical actuarial notes, considering the difference between the application of contractual technical bases and estimated technical bases, such as the mortality table BR‐EMS, in its most current version, plus an estimation of longevity, and the cash flows are discounted at a discount rate disclosed by the SUSEP (risk‐free interest rate forward structure). (k)
The reserve for related expenses (PDR) is recognized to cover expenses related to claims and benefits are paid to participants. This reserve is also recorded for plans which are still in the contribution stage, assuming a certain rate of conversion into future income. The reserve is calculated in accordance with the methodology provided for in technical actuarial notes, taking into account the present value of estimated future expenses and a realistic assumption of the participants’ survival. (l)
The reserve for claims incurred but not reported (IBNR) is calculated on estimated claims not yet reported to the Company, and is calculated using the criteria set forth by SUSEP Circular 448/12. The for Claims Incurred But not Reported of the DPVAT (compulsory insurance) line is set up as established by CNSP Resolution. (m)
The reserve for unsettled claims (PSL) is recorded due to the report of an event and is based on pending lump‐sum and annuity amounts, as provided for in the participant’s contract. Porto Seguro S.A. and Subsidiaries The reserve for financial surplus (PEF) is calculated using the criteria established in the participant’s contract and covers the accrued financial surplus amounts to be used in accordance with the pension plan's regulations. 2.15.2 Liability Adequacy Test (LAT)
At each reporting date, prepares the Liability Adequacy Test (LAT) of all contracts in effect on the test date, except for DPVAT. This test is prepared based on the net carrying amount of all liabilities arising from insurance contracts, less deferred acquisition costs (assets), accordingly IFRS 4 and SUSEP criteria. For this test, the Company prepared a methodology based on its best estimate of all future cash flows, which also include additional and claim settlement expenses, using current assumptions for the test. For the lines of elapsed risk, are taken into account the premiums earned observed to make the best estimate of revenue from premiums in the period subsequent to the date of calculation. For determination of estimated future cash flows, the contracts are grouped together based on similar features (or risk characteristics). Cash flows are brought to present value, based on assumptions of risk‐free interest rates. Should any deficiency be identified in the LAT, the Company immediately records the loss in the statement of income, and sets up additional reserves in PCC. Some contracts allow the Company to acquire ownership of the asset or the right to sell a damaged asset that has been recovered (such as salvages). The Company also has the contractual right to seek or collect reimbursements from third parties, such as subrogation of rights, for payment of partial or total damages covered by an insurance contract. Consequently, estimates of recoveries are included as a deduction in the evaluation and, as a result, in liability adequacy tests. For products of benefits pension plan, the Company uses a methodology based on elements that directly impact the cash flow of these contracts, such as the periods participants remain in the plan, rates of conversion into income, return on assets guaranteed to the participants during the accumulation phase and concession of benefits (financial surplus), options of guaranteed interest rates (General Market Price Index (IGPM) inflation rate or realized assets gains above this rate for traditional products) and redemption options. 2.16
Financial liabilities
2.16.1
Borrowings
Borrowing liabilities, from the funding operations and values to pay for operations of credit card are initially recognized at fair value, net of additional transaction costs directly attributable to the financial liability. These liabilities are subsequently measured by amortized cost, based on the effective interest method, including transaction costs, and the Porto Seguro S.A. and Subsidiaries interest is recorded up to the maturity of the contracts. The Company evaluates any early redemption options or special debt settlement rules with the purpose of identifying embedded derivatives in these contracts according to IFRS. For floating‐rate loans, the effective interest rate is revised periodically, when the impact of a change in the effective interest rate of the contracts is significant. 2.16.2 Capitalization plans’ liabilities
The financial liabilities of the capitalization certificates are calculated at the time the company receives the related funds. These certificates are issued with bullet payment and the deposit amount made to cover certificate redemption is adjusted for inflation using the indices and criteria set forth in the related general terms and conditions. These amounts constitute the reserve for redemptions. The certificates’ beneficiaries can receive a prize by lot drawing or redeem the amount corresponding to the portion of the deposits paid intended for redemptions, adjusted as forth in the contract’s general terms and conditions. The reserves are set up according to CNSP and SUSEP guidance, whose criteria, benchmarks and formulas are documented in NTAs, described in brief below: (a) The Reverse for Redemptions (PMR) is calculated for each outstanding or suspended certificate, over the forecast effective period of the certificate’s general terms and conditions. It is also calculated at the amounts of the expired certificates and the amounts of the certificates not yet expired but with early redemption requested by the customers. The reserves are adjusted for inflation using the indices established for each certificate. (b) The reserves for lot drawings to be conducted and payable are calculated to cover the prizes awardable by future drawings (to be conducted) and also the prizes from drawings with winning customers (payable). 2.17
Employee benefits
The Company sponsors the Portoprev plan, which is classified as a defined contribution plan. The Company also offers post‐employment benefits related to health and life insurance and benefits calculated using a benefit policy that determines a certain score for its employees according to their period of service and age.The liability of these obligations was calculated in accordance with a specific actuarial methodology based on turnover rates, interest rates for determination of current cost of service and interest costs. Other dismissal benefits, such as fine or provision for Government Severance Indemnity Fund for Employees (FGTS), were also calculated following this methodology for retired employees for whom this right has been already established. Porto Seguro S.A. and Subsidiaries 2.18
Other provisions, contingent assets and liabilities
The Company records provisions to cover future disbursements that may arise from civil, tax and labor litigation. Provisions are recorded based on an individual analysis, made by the legal counsel of the Company and its subsidiaries, of lawsuits in progress and expectations of unfavorable outcomes requiring future disbursements. Taxes which are being disputed in court are recorded based on the "legal obligation" concept (tax and social security) whose legality or constitutionality is being challenged, and which, regardless of the evaluation of the likelihood of a favorable outcome, are fully recognized in the financial statements and monetarily restated in accordance with current tax legislation (Special System for Settlement and Custody (SELIC) interest rate). Escrow deposits directly associated to provisions for tax, civil and labor lawsuits, if any, such provisions are carried net of the related deposits. The other escrow deposits are disclosed in assets. Escrow deposits are also adjusted for inflation. 2.19
Share capital
Ther share capital is composed by common shares. When the Company buys back its shares (treasury shares), the amount paid, including incremental costs directly attributable to the transaction, is deducted from equity attributable to the owners of the Company until the shares are canceled or resold. When these shares are resold, any proceedings, net of any additional transaction costs, are included in equity attributable to the owners of the Company. 2.20
Revenue recognition
2.20.1 Insurance and reinsurance premiums
Revenues from premiums of insurance contracts are recognized when the issuance of policy or when the validity of the risk, whichever occurs first, on a proportional basis, over the period of policy risk coverage, by setting up/reversing the PPNG (see note 2.15.1(a)). The Tax on Financial Transactions (IOF) on premiums receivable is recorded in liabilities and is withheld and paid when the premium is received. The costs of ceded reinsurance are recognized as the related insurance premium is recognized (proportional reinsurance) and/or according to the reinsurance contract (disproportional reinsurance). Porto Seguro S.A. and Subsidiaries 2.20.2 Contributions from pension plans Contributions from participants in the pension plan segment are recognized in the statement of income at the time they are effectively received by the Company. The Company’s revenues comprise the administrative fee and the load fee charged. 2.20.3 Loans Loans (transactions with lending features) are recognized at present value, calculated on a daily pro rata basis based on the fluctuation of the agreed index and interest rate, on an accrual basis until 60 days overdue; after the 60th day, they are recognized in profit or loss when the installments are effectively received. 2.20.4 Revenue from capitalization certificates Revenue from capitalization certificates refers to the management fee charged upon the issue of the bullet payment certificates payment and is recognized in profit or loss on a daily pro rata basis, according to the certificates’ effectiveness. 2.20.5 Revenues from service rendering and sale of surveillance equipment and from
consortiums
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company's activities. Revenue is shown net of taxes, returns, rebates and discounts. 2.20.6
Interest and dividends received
Revenues from interest on financial instruments are recognized in the statement of income, in accordance with the amortized cost method and the effective rate of return. Interest charged on insurance premiums paid in installments is deferred for appropriation to the statement of income over the same term of such installments. Revenues from dividends on financial asset investments represented by equity instruments (shares) are recognized in the statement of income when the right to receive the dividend payment is established. 2.20.7 Loyalty programs
The Company issues credit cards which offer various benefit programs to its customers. These programs include bonus payments based on frequent use or other loyalty parameters. The Company estimates its obligations related to the cost of future bonus, based on the fair value of these benefits, and takes into account several current assumptions for the valuation of this component. These assumptions include the manner in which the customers use the benefits, the type of benefit and estimate of benefits not claimed by the customer. Porto Seguro S.A. and Subsidiaries 2.21
Distribution of dividends and interest on capital
Dividend and interest on capital distributions to the Company's shareholders are recognized as a liability in the financial statements at year‐end based on the Company's bylaws. Any amount that exceeds the minimum required (25%) is only provided on the date it is approved by the shareholders. The tax benefit of interest on capital is recognized in the income statement. The rate used to calculate interest on capital is the Long‐term Interest Rate (TJLP) during the applicable period, as per relevant legislation. 2.22
Income tax and social contribution
The income tax and social contribution expense for the periods presented includes current tax expenses and deferred tax effects. The Company recognizes in the income statement for the period the income tax and social contribution effects, except for tax effects of items which were directly recognized in equity; in these cases, the tax effects are also recognized in equity. Taxes are calculated based on tax laws and rules in effect on the date the balance sheet is prepared. In Brazil, current income tax is calculated at the base rate of 15% plus a 10% surtax on annual taxable income exceeding R$ 240. The provision for social contribution is calculated at the rate of 15% for insurance and financial companies and 9% for other subsidiaries and the Company (parent company). Deferred taxes are recognized based on the liability method on temporary differences between the asset and liability tax bases and the carrying amounts of these assets and liabilities in the financial statements. The Company also recognized deferred taxes on the tax losses of income tax bases and negative social contribution. Deferred tax assets are recognized to the extent it is probable that future taxable income will be available to realize the credits. 3. Accounting estimates and judgments Accounting estimates and judgments are continually reviewed and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The main items subject to estimates and judgments are: 3.1
Estimates of insurance liabilities
Management is required to make significant judgments and use estimates for the calculation of the Company's insurance liabilities. Several sources of uncertainties should be considered in the estimation of liabilities to be ultimately settled by the Company. The Company uses all available internal and external information sources for past experience and indicators that may affect the decision‐making of the Company's management and actuaries to define Porto Seguro S.A. and Subsidiaries actuarial assumptions and the best estimate of claim settlement amounts for contracts whose insured event has already occurred. Consequently, the provisions may differ from the amounts actually paid in the future. The provisions that are affected the most by judgment and uncertainties are those related to high risk insurance contracts (for example, special risks) and life insurance contracts, these same
lines represent less than 10% of written premiums of Company. In December 31, 2014 the value of the liabilities of insurance contracts was R$ 9.902.520. 3.2
Estimates of provisions for tax, civil and labor contingencies
The Company has a large number of lawsuits in progress on the date of preparation of the financial statements. Consequently, the procedure used by management to determine and record the accounting estimates takes into consideration the legal advice of experts, progress of the lawsuits and judgment status (or court) of each specific case. In addition, the Company uses its best judgment on these cases and historical information about losses, in which there is a high level of judgment used, to record the provisions in accordance with IAS 37 / CPC 25. In December 31, 2014 the value of provisions was R$ 97.554. 3.3
Estimates of impairment of financial assets
The Company applies the rules for analysis of impairment of individually significant receivables, as well as assumptions for evaluation of impairment for assets of similar risks on a group basis. In this respect, the Company uses a high level of judgment to determine the level of uncertainty about the realization of estimated contractual flows of financial assets, including premiums receivable from policyholders and credits receivable from loans granted to customers. This judgment considers the type of contract, industry, segment, location of the debtor, payment history, and other relevant factors that may affect the recording of impairment losses. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. In December 31, 2014 the value of financial assets (including cash, cash equivalents, Loans and receivables) was R$ 16.699.702, for wich R$ 259.451 was registred as provision for credit risk. 3.4
Estimates used in the calculation of tax assets
Deferred tax assets are recognized to the extent it is probable that future taxable income will be available to realize the credits. This requires a judgment by the Company's management for determination of estimates as to the expected generation and timing of future taxable income, considering projections of future results based on internal assumptions and future economic scenarios, which may, therefore, suffer changes. In December 31, 2014 the total of deffered tax was R$ 436,233 (asset) and R$ 392,165 (liabilitiy). Porto Seguro S.A. and Subsidiaries 4. Risk management Porto Seguro is exposed to a set of risks inherent in its activities and, to manage these risks, it has numerous principles, guidelines, actions, roles and responsibilities necessary to identify, assess, handle and control risks. Risk management comprises the following categories: Financial risks 
Credit risk: possibility of incurring losses due to borrower’s or counterparty’s failure to perform the respective financial obligations as agreed. 
Liquidity risk: is the potential unavailability of cash to cover future obligations. 
Market risk: is the possibility of incurring losses due to fluctuations in the market prices of the positions held in portfolio. Insurance risks 
Underwriting risk: is the possibility of occurrence of unexpected events that can substantially affect the Company’s results of operations and equity, including failures in the pricing system or accrual estimates. Non‐financial risks 
Operational risk: is the possibility of incurring losses due to failure, deficiency or ineffectiveness of internal processes, personnel and systems, or external events, including legal risks. 
Other: include strategy, image and social and environmental risks. The risk management governance relies on the involvement of all areas and is intended to hedge the Company’s results of operations and shareholders, contribute to its sustainability and value, involving transparency‐ and accountability‐related aspects. Within this context, Porto Seguro manages risk on integrated, independent manner, by preserving and appreciating a joint decision‐making environment. Decisions are based on factors that combine the return on the weighted risk, thus enabling its alignment with the definition of business objectives, and promote the cultural change of employees in all hierarchical levels, from the business areas to the Board of Directors. Porto Seguro S.A. and Subsidiaries All these initiatives enable the growth of the Company’s operating efficiency and subsequent decrease in the level of losses, besides optimizing the use of the available capital. Reflecting the Company's commitment to risk management, the Company has a Corporate Risk Management area, whose goal is to ensure that risks are effectively identified, measured, mitigated, monitored and reported on an independent manner. In order to obtain synergies from the risk management process, the Company set up a permanent Integrated Risk Committee (CRI) that operates at the senior management level. The Committee’s responsibilities include assisting senior management in approving institutional policies and risk exposure limits, assessing significant risks, as well as validating mitigation actions and strategies for the continuing development of risk management processes. 4.1 Credit risk The credit risk comprises the following: (a) Counterparty’s risk: possibility of a given counterparty’s (individual, legal entity or government) failing to perform the obligations relating to the settlement of transactions involving financial assets. In Porto Seguro, this risk is comprised of: (i)
Investment portfolio: the Company adopts monthly monitoring policies and processes to manage this risk so as to ensure that specific limits or exposure levels are not exceeded. To preset such limits, criteria that contemplate the counterparty’s financial capacity and the minimum risk rating (“rating”) of the counterparty’s investment grade (“A”) disclosed by external (S&P, Moodys e Fitch) and/or internal risk rating agencies (internal ratings) are analyzed. In the event of lack of external ratings, Management uses its market knowledge and expertise to assign these counterparties risk ratings (internal ratings), based on a governance process used to properly analyze and approve these transactions. As of December 31, 2014, 82.1% (86.6% as of December 31, 2013) of short‐term investments were made in Brazilian treasury bonds (sovereign risk) and the remainder in “AA” grade investments. The table below shows the concentration of the Company’s investment portfolio, by counterparty, as of December 31, 2014: Brazilian sovereign risk
Financial Institution
Electric Companies and telecommunications
Other
82.1%
11.5%
2.8%
3.6% Porto Seguro S.A. and Subsidiaries No transaction in the investment portfolio is in default or impaired. Of the total maximum exposure to the credit risk as of December 31, 2014 and 2013, 98.9% refer to exposures in Brazil and the remainder in Uruguay. (ii) Risk assignment: Porto Seguro adopts a specific policy based on counterparty limits supported by ratings assigned by external agencies, considering “A” as the minimum grade for risk assignment, to manage the risk assignment credit risk (reinsurance). As of December 31, 2014, the exposure to reinsurance receivable totaled R$ 73,557 (R$ 76,784 as of December 31, 2013). (b) Default of premiums receivable: possibility of incurring losses due to the non‐payment of premiums by insureds. In order to mitigate these risks, acceptance rules that include the analysis of the credit risk of insureds, based on Porto Seguro’s market and historical performance information, are established and, if the payment of premiums are not made on maturity date, the insurance coverage can be cancelled (pursuant to prevailing regulation). In general, premiums receivable from the Company’s insured do not have risk concentration (e.g., by economic sector), since they are primarily received from individuals. The table below shows the maturity dates of the Company’s premiums receivable: Not past‐due
Overdue for 1 to 30 days
Overdue for 31 to 60 days
Overdue for 61 to 90 days
Overdue for 91 to 120 days
Past‐due over 120 days
Provision for impairment
Current
Non‐current
(c)
December 2014
December 2013
2,976,888
130,159
23,122
13,127
9,095
19,261
(15,931)
2,587,709
131,827
9,983
4,087
1,930
16,185
(13,772)
3,155,721
2,737,949
3,155,032
689
2,737,312
637 Default in credit transactions: possibility of losses due to the failure to perform financial obligations based on the terms and conditions of lending operations in the retail segment, including: personal loans, such as payroll‐deductible and working capital loans; financing through CDC to individuals and legal entities; and credit card. This risk is managed using procedures and processes to continuously monitor the lending portfolio. Monitoring indicators include: default per days of delay; allowance for loan losses; recovery rate of past‐due transactions; and concentration of transactions. Porto Seguro S.A. and Subsidiaries The table below shows the lending operations and trade notes and receivables classified by ratings, less the allowance for losses, based on criteria determined by the Central Bank of Brazil (BACEN) (CMN Resolution 2.682/99): December 2014
AA
A
B
C
D ‐ E
F ‐ G
Current
Non‐current
December 2013
2,835,359
1,012,351
74,868
58,687
71,691
31,858
2,135,688
869,010
78,798
46,471
48,745
16,726
4,084,814
3,195,438
3,820,400
264,414
2,947,218
248,220 The table below shows the aging list of current and past‐due receivables. December 2014
December 2013
3,290,612
686,469
58,107
42,173
103,163
145,792
(241,502)
2,474,167
629,068
45,714
31,096
66,368
98,063
(149,038)
4,084,814
3,195,438
Current
Non‐current
3,820,400
264,414
2,947,218
248,220
Guarantees related to credit operations 535,018
480,383
Not past‐due
Overdue for 1 to 30 days
Overdue for 31 to 60 days
Overdue for 61 to 90 days
Overdue for 91 to 180 days
Past‐due over 180 days
Provision for impairment
Counterparty
Individuals
Corporate
76.0%
24.0%
77.6%
22.4% 4.2 Liquidity risk The Company adopts controls to maintain its liquidity at appropriate levels, in line with regulatory requirements, as well as to balance the correlation between rates, risk and return. Within such context, maximum maturity and counterparty’s rating rules are established. Porto Seguro S.A. and Subsidiaries Additionally, Porto Seguro determines minimum cash requirements in relation to projected cash flows. The key items addressed in the liquidity risk management are: liquidity risk limits, including minimum cash requirements and highly liquid assets; scenario simulations (stress tests); and potential contingency measures. The table below shows the liquidity risk to which Porto Seguro is exposed (i): December
2014
December
2013
Flow of assets (ii) Flow of liabilities (iii) Flow of assets (ii) Flow of liabilities (iii) Unpaid
Flow 0 to 30 days
Flow 1 to 6 months
Flow 6 to 12 months
Flow over 1 year
980,619
5,741,484
1,990,190
507,093
8,026,759
32,982
2,078,973
3,708,021
3,803,012
4,638,847
464,471
5,088,068
1,751,130
460,879
7,998,660
49,837
2,701,264
4,249,752
1,411,811
3,233,852
Total
17,246,145
14,261,835
15,763,208
11,646,516
(i) Estimated cash flows based on Management’s opinion and insured permanence studies for supplementary pension plans that offer redemption option, insurance agreement risk expiration and better expectation with respect to the estimated claim settlement date. These flows were estimated until the expected payment and/or receipt and do not consider past‐due amounts receivable. Floating financial assets and liabilities were distributed based on contractual cash flows, and the balances were projected using the interest curve, projected Interbank Deposit Certificate (CDI) rates and exchange rates disclosed for future periods in close or similar dates. (ii) The asset flow includes cash and cash equivalents, financial assets and loans and receivables (trade receivables) and transactions with reinsurers. Of total financial assets, R$ 2,670,926 (R$ 2,437,851 in December 2013) refer to assets related to supplementary pension plans (third‐party assets). (iii) The liability flow includes liabilities under insurance agreements and pension plan and financial liabilities. 4.3 Market risk Porto Seguro is exposed to the market risk, and based on the business profile, its highest exposure is related to the interest rate risk. The Company adopts policies that establish limits, processes and tools for effective market risk management. Below are the investment exposures broken down by market risk factor: Fixed‐rate
Selic/CDI
IPCA
Private securities
IGPM
Shares of publicly‐held companies
Other
December 2014
December 2013
30.7%
26.5%
19.5%
14.8%
4.3%
2.8%
1.3%
24.0%
53.0%
3.0%
17.0%
0.0%
3.0%
0.0% Porto Seguro S.A. and Subsidiaries Among the methods used to manage risks is the parametric VaR (“Value at Risk”), with confidence interval of 95% within a one‐day horizon. Additionally, supplementary monitoring procedures are implemented, such as sensitivity analyses, stress tests and tracking error and Benchmark‐VaR tools, using realistic and plausible scenarios adjusted to the portfolio profile and features. The results obtained are used to mitigate risks and understand the impact on results of operations and equity under normal and stress conditions. These tests take into consideration historical and future market condition scenarios, and their results are used in the planning and decision‐making process, as well as in the identification of specific risks arising from the financial assets and liabilities held by the Company. The table below shows the sensitivity analysis of financial instruments as of December 31, 2014, in conformity with CVM Instruction 475/08: Scenario Impact on investment Risk factor
(*)
portfolio
Fixed interest rate
± 50 b.p.
± 25 b.p.
± 10 b.p.
123,954
73,381
22,169
Inflation
± 50 b.p.
± 25 b.p.
± 10 b.p.
190,346
104,014
44,060
Floating interest rate
± 50 b.p.
± 25 b.p.
± 10 b.p.
2,398
1,998
1,599
Shares
‐17%
31,121 (*) B.P. = “basis points” Note that based on the Company’s reaction capacity, the impacts outlined above can be mitigated. Additionally, the Company has derivatives that reduce its exposure to risks, as shown in Note 7.1.3. 4.4 Underwriting risk Porto Seguro segregates the underwriting risk as follows: Premium risk: arising from a possible insufficiency of premiums collected to cover financial disbursements made to settle the obligations to insureds. The Company invests in risk analysis and pricing techniques, using distinct statistical models to renew existing and enter into new insurance policies, which enables anticipating the results arising from different Porto Seguro S.A. and Subsidiaries scenarios, that combine price levels, quotation and result translation, and where decisions are made considering the scenario that generates the best margins for the product. Reserve risk: arising from a possible insufficiency of balances of reserves recognized to cover financial disbursements made to settle the obligations to insureds. Due to the uncertainties in relation to the final amount necessary to settle claims in the future, the reserve risk mitigating measures include measurement of reserves based on the historical amount of claims, from occurrence until final settlement. To analyze the compliance with the assumptions and methodologies used to measure technical reserves, adhesion tests are constantly conducted on different base dates to verify the historical sufficiency of reserves recognized. Retention risk: arising from the exposure to individual risks with high value‐at‐risk (maximum warranty limit, etc.), risk concentration or occurrence of catastrophic events. Given the significance of the retention risk, the exposures to catastrophic events and risk concentration are periodically monitored using appropriate processes and models, reinsurance being contracted according to legal limits such as, for example, retention limit per risk approved by SUSEP, as well as managerial limits, reflected in a corporate risk assignment policy. Additionally, each product department establishes, monitors and documents risk acceptance and claim practices and rules in conformity with Porto Seguro’s guidelines, including, for example, previous opinion of the Technical Department on the sale of each product and inappropriate risk acceptance procedures. Claim risk: arising from inappropriate claim regulation and settlement rules and procedures. The assumptions used in insurance risk sensitivity analyses, as well as in the liability adequacy test include: 
Claim ratio and risk premium forecasts calculated on the study’s date, based on a history of frequency and severity findings for each insurance line and/or group of lines. 
Premium assignment and claim recovery forecasts calculated on the study’s date, based on a history of findings for each insurance line and/or group of lines. The forecasts abide by the contractual clauses in effect on the date of the study of the contracts entered into with reinsurers. 
SUSEP’s benchmark interest rates informed by the market for assets and liabilities. The index used was the Extended Consumer Price Index (IPCA), which is predominantly used in the Company’s standard contracts. 
Expected interest rate for the assets, equivalent to the SELIC rate, which matches the return obtained by the investment area during the current year. Porto Seguro S.A. and Subsidiaries 
Actuarial assumptions specific for each product as a result of their impact on insurable risk pricing. The results obtained in the underwriting risk management and monitoring processes are documented and reported on a monthly basis to the senior management, enabling the adjustment of possible deviations in relation to forecasts within the shortest time possible. The operating segments include: 
Auto; 
Casualty insurance (except auto) and financial risks; 
Health; and 
Life & pension. 4.4.1 Auto The Company operates nationwide and in Uruguay, by selling auto insurance to individuals and legal entities, under individual or, in the case of fleets, group policies. Tracking devices, car locators and identification numbers in various parts of the car body are used to mitigate risks. The table below shows the exposure to the insurance risk by region: Location
São Paulo
Uruguai
Midwest Region
Rio de Janeiro
Minas Gerais
Região Sul
Others regions
December 2014
52.9%
11.9%
10.2%
9.0%
6.1%
3.4%
6.5%
December 2013
54.8%
11.4%
9.1%
9.5%
5.7%
2.9%
6.7%
100.0%
100.0% The table below shows the portfolio sensitivity to the actuarial assumptions, net of taxes: Porto Seguro S.A. and Subsidiaries Impact on profit or loss and equity
December 2014
December 2013
Actuarial assumptions
Gross of reinsurance Net of reinsurance Gross of reinsurance Net of reinsurance Increase of 5% in frequency of claims
(500,001)
(499,966) (331,374) (331,374)
Increase of 15% in administrative expenses
(4,042)
(4,042) (3,701) (3,701)
Increase of 15% in claim expenses
(11,467) (11,467) (7,778) (7,778)
Increase of 10% in percentage of recovery of salvages
Decrease of 5% in percentage of recovery of salvages and reimbursements
33,259 33,258 32,639 32,639 (17,701) (17,700)
(17,108) (17,108) 4.4.2 Casualty insurance (except auto) and financial risks The casualty (except auto) insurance line includes the sale to households, businesses, condominiums, construction works, rural, liability, equipment and transportation insurance. The financial risk insurance line includes the sale of insurance to secure contractual obligations and rent insurance. The main risk mitigating measures include, besides the contracting of reinsurance (risk assignment), the prior inspection of the insured sites. The table below shows the exposure to the insurance risk by region: December 2014
Type
São Paulo
Rio de Janeiro
South Region
Other
Residential insurance
31.3%
49.2%
31.6%
26.6%
Transport
28.3%
10.7%
34.8%
26.0%
Corporate insurance
21.5%
17.7%
15.2%
24.3%
Condominium insurance
13.9%
17.2%
14.8%
19.5%
Lessor's guarantee insurance
1.4%
2.6%
1.6%
0.5%
Other risks
3.6%
2.7%
2.0%
3.2%
100.0%
100.0%
100.0%
100.0%
December 2013
Type
São Paulo
Rio de Janeiro
South Region
Other
Residential insurance
34.1%
55.4%
34.2%
Transport
29.6%
9.8%
38.5%
30.3%
Corporate insurance
21.2%
16.8%
12.8%
22.5%
Condominium insurance
12.5%
14.9%
12.0%
14.6%
Lessor's guarantee insurance
1.4%
2.5%
1.5%
0.5%
Other risks
1.2%
0.5%
0.9%
1.5%
100.0%
100.0%
100.0%
100.0%
30.6%
Porto Seguro S.A. and Subsidiaries The tables below show the portfolio sensitivity to the actuarial assumptions, net of taxes. 
Asset insurance, rent insurance, and contractual obligations insurance: Impact on profit or loss and equity
December 2014
December 2013
Actuarial assumptions
Increase of 5% in severity of lessor's guarantee claims
Decrease of 10% in expenses with settlement and/or regulation of claims in property risks
Gross of reinsurance (6,115)
Net of reinsurance Gross of reinsurance Net of reinsurance (6,045) (5,207) (5,093)
2,186 2,125 1,538 1,486 Decrease of 5% in property risk premium
Decrease of 10% in expenses with settlement of claims in l iabi l ity risks Decrease of 5% in liability risk premium
Decrease of 10% in expenses with settlement of claims in rural risks
(23,753) (22,862)
(18,189) (17,473)
74 59 27 21 Decrease of 5% in rural risk premiums
(793)
(634)
(203) (162) 
41 38 45 34 (73) (67) (177) (135)
Transportation: Actuarial assumptions
Increase of 10% in frequency of claims
Impact on profit or loss and equity
December 2014
December 2013
Gross of Net of (12,777) (12,558)
Gross of Net of (11,799) (11,676)
Increase of 8% in claim expenses
(438)
(430)
(379) (375)
Increase of 12% in claim expenses
(656)
(645)
(568) (562)
Decrease of 15% in recovery of salvages
(136)
(133)
(214) (212)
Decrease of 9% in revenues from reimbursements
(44) (43)
3 3 4.4.3 Health The Company operates in the supplementary health market since 1992, by selling short‐term (one year) corporate plans only. Therefore, similarly to the health insurance, the Company understands that the underwriting risk can be divided into two types of risk: (a) premium risk, and (b) reserve risk, as mentioned at the beginning of the underwriting risk note (item 4. 4). Porto Seguro S.A. and Subsidiaries The main risk is related to the healthcare risk premium models arising from the potential increase in healthcare costs during the contractual period, and the risk of occurrence of extraordinary, high‐impact events (pandemics). In line with risk mitigating measures, Porto Seguro negotiates agreements with healthcare service providers so as to enable a reasonable increase in healthcare costs. The accredited network is continuously monitored through medical audits, interviews, and surveys with insureds. Highly complex procedures and hospitalizations require the analysis of the medical audit team. This team also reviews the procedures performed by each healthcare service provider to analyze the compliance and quality of the services provided. The table below shows the portfolio sensitivity to the actuarial assumptions, net of taxes: Impact on profit or loss and equity
December 2014
December 2013
Actuarial assumptions
Gross of reinsurance Net of reinsurance Increase of 2.5% in portfolio risk premium
(7,475)
Increase of 2.5% in risk premium of H+Ob plans
(12) (12)
Increase of 2.5% in risk premium of A+H+Ob plans (7,319)
Increase of 2.5% in claim expense risk
(400)
Increase of 2.5% in dental plan risk premium
(287)
Gross of reinsurance Net of reinsurance (7,475) (7,398) (7,398)
(14) (14)
(7,319) (7,263) (7,263)
(400) (369) (369)
(287) (217) (217) (*)H+Ob ‐ Hospital and Obstetric Coverage; A+H+Ob ‐ Outpatient, Hospital, and Obstetric Coverage. 4.4.4 Life insurance and pension These segments include the following products: traditional life insurance (individual and group); life insurance with survival coverage, (VGBL – cash value life insurance); pension plan (PGBL – defined contribution pension plan) and; traditional pension plans, whose sale is suspended by the Company. Traditional life insurance (individual and group) Products with death, disability or income coverage due to temporary disability. The most significant risk for this product is the biometric risk that can increase claims due to extraordinary events, such as pandemics or constant increase in disability rates. Additionally, the contracting of group insurance poses the risk of anti‐selection where the insured group is different from the quotation group, and risk of catastrophes affecting various insured lives in the same event. Porto Seguro S.A. and Subsidiaries Life insurance with survival coverage and pension plan Product with long‐term guarantee related to the participant's retirement plan. It offers survival, death, disability and pension coverage in case of death of the policyholder, while benefit and guarantee factors are defined upon contracting an cannot be changed during its term. Similarly to the traditional life insurance, which poses the biometric risk, this type of insurance is subject to the economic risk of reduction of long‐term interest rates to levels lower than those determined upon contracting. Traditional pension plan Products whose main characteristic is a guaranteed minimum rate of return on the accrual and retirement stage. These products are no longer sold by the Company; however, there are still effective agreements. Similarly to pension plans, it poses biometric and economic risks. Risk mitigation measures Contracting and age limits are established for individual life insurance, based on which specific documentation is required to analyze the individual risk. Group life insurance adopts centralized underwriting with prior analysis of insurable groups to set the premiums. Other important risk mitigation measures include the contracting of reinsurance (risk assignment) and the management of asset and liability flows (ALM ‐ “Asset Liability Management”). The tables below show the portfolio sensitivity to the actuarial assumptions, net of taxes: Porto Seguro S.A. and Subsidiaries 
Life insurance without survival coverage: Actuarial assumptions
Impact on profit or loss and equity
December 2014
December 2013
Gross of Net of Gross of Net of Increase of 5% in portfolio risk premium
Increase of 5% in death coverage risk premium
(3,752)
(2,119)
(3,106) (2,962) (2,921)
(1,747) (1,689) (1,665)
(1,280) (1,192) (1,175)
Increase of 5% in other coverage risk premium
(1,554)
Increase of 5% in claim expenses
(57) (47)
Increase of 5% in insured amount
2,084 2,030 
(167) (165)
2,384 2,325 Life insurance with survival coverage and pension plan: Impact on profit or loss and equity
December 2014
December 2013
Actuarial assumptions
Gross of reinsurance Net of reinsurance Gross of reinsurance Net of reinsurance Increase of 5% in conversion into income
Decrease of 5% in conversion into income
4,461 4,461 3,573 3,573 (4,461) (4,461) (3,573) (3,573)
Increase of 5% in discount rate
Decrease of 5% in discount rate
Increase of 0.5% in improvement by age
46,793 46,793 39,132 39,132 (49,799) (49,799) (41,582) (41,582)
890 890 895 895 Exclusion of "improvement"
4,497 4,497 3,766 3,766 4.5 Operational risk The operational risk is monitored and managed on corporate, centralized manner by the Corporate Risk Management area, by using a formal process to identify risks and opportunities, estimate the potential impact arising from such events and offer a method to address such impacts and reduce threats up to an acceptable level or seize opportunities. It includes efforts to build an operational risk internal loss database containing wide‐ranging, in‐depth information so as to identify the real extent of its impact on Porto Seguro and to improve the reliability of the tools used to manage, control and supervise the this market solvency. 4.6 Capital management The capital management strategy consists of maximizing the Company’s capital amount through the optimization of the capital level and capital sources available, ensuring the business sustainability in the long term, based on regulatory and solvency requirements. The Company’s capital management relies on a consolidated, centralized framework, whose capital is managed on active and prospective basis. The capital assessment and management process is implemented based on the business standpoint within a three‐year horizon, supported by business growth, profitability and dividend distribution assumptions, among other key business indicators. The capital Porto Seguro S.A. and Subsidiaries management framework is supported by a specific policy, which defines the roles and responsibilities, sufficiency limits, monitoring reports and capital contingency plans. Porto Seguro analyzes its capital sufficiency in conformity with the criteria set out by CNSP, SUSEP, ANS and BACEN. In this regard, capital requirements necessary to support the risks inherent in the Company are analyzed, including credit, market, operational and underwriting risk portions. The table below shows the Company’s capital requirements: Insurance
Financial
Underwriting risk‐based capital
Market risk‐based capital
Credit risk‐based capital
Operational risk‐based capital
Diversification benefit
2,344,515 ‐ 209,042 76,776 (96,931)
‐ 217 367,820 27,975 ‐ Risk capital (i)
2,533,402 396,012 Solvency margin (ii)
254,597 ‐ (i) The amounts submitted to insurers correspond to the straight‐line sum of each risk capital portion of companies regulated by SUSEP, since the concept of capital requirements consolidated by economic group is not set forth in the Brazilian regulation. (ii) Corresponds to the capital requirement of companies regulated by ANS. The chart below shows the Company’s Minimum Capital Required (CMR), Adjusted Equity (PLA) and capital sufficiency as of December 31, 2014 (in millions of R$): (*) The Parent has no CMR; therefore, the sufficiency amount recorded for the Parent corresponds to the liquidity
amount available at Porto Seguro S.A. In addition to the amounts available at the Parent, Management can, based
on the capital optimization strategy, reallocate capital sufficiency among the group companies so as to maintain
appropriate capital levels among the companies.
Porto Seguro S.A. and Subsidiaries The Company has capital levels above the level required. Such capitalization level offers security in terms of the adequacy to possible regulatory changes and additional capital requirements, such as, for example, the market risk of insurers, required as of December 31, 2016. The section below shows the sensitivity analysis of the regulatory capital of insurers and health operator compared to changes in calculation assumptions that are more relevant to the group. The capital sensitivity analyses provide important information to the senior management, enabling it to determine the impacts on regulatory capital requirements; therefore, it is possible to plan measures to mitigate the use of regulatory capital on preventive manner. Assumptions
Impact on CMR
Underwriting risk
Increase of 2 percent points in frequency of claims
and 15% of written premiums
292,250
Increase in technical reserves for pension plans
5,490
Credit risk
Increase of exposure to credit risk
22,650
Operational risk
Increase in earned premium or technical reserve
16,560
Solvency margin
Increase in written premiums and retained claims as growth in the last year
23,040
5. Operating segments ‐ Consolidated Porto Seguro offers to individuals and legal entities and governmental bodies in Brazil (primarily) and also in Uruguay an extensive product and service portfolio. The Company adopted IFRS 8 – Operating Segments and designed the segments below based on qualitative and quantitative criteria, taking into consideration the similarities between services and products offered to determine the reportable segments: 
Auto insurance: comprise auto insurance premiums written by Porto Cia, Itaú Auto e Residência e Azul Seguros, less cancellations, refunds and premium cessions. 
Health insurance and plans: comprise health and dental insurance premiums written by Porto Saúde, less cancellations and refunds and the net considerations of healthcare plans sold by Portomed. 
Life insurance and pension plan: comprise (a) life insurance premiums written by Porto Cia and Porto Vida, less cancellations, refunds and premium cessions to similar companies, and (b) revenues arising from management fees and monthly contributions made by the participants of pension plans operated by Porto Vida. Porto Seguro S.A. and Subsidiaries Insurance – other lines: comprise casualty insurance (except auto) and DPVAT premiums written by Porto Cia, Itaú Auto e Residência e Azul Seguros, less cancellations, refunds and premium cessions, in addition to insurance written in Uruguay by Porto Seguro Uruguay. 
Financial companies and consortiums: comprise revenues arising from management fees relating to consortium groups operated by Porto Consórcio; Portoseg’s revenues from credit transactions comprising interest on borrowings, financing and credit card upon the use of revolving credit facility or installment payment of the bill; in addition to the revenues from the management of investment funds and management of financial assets of Portopar and Porto Investimentos. 
Other: comprise mainly revenues from the provision of services of all other group companies (including revenues from services provided in Uruguay by Porto Serviços Uruguay) and revenues from capitalization bonds. Porto Seguro takes into consideration the internal financial performance reports of each segment and geographic region, which are used by management to conduct business. “Profit/(loss)” is the main item used by management to manage segment performance. Of total revenue of the Company, as of December 31, 2014 and 2013, 98.9% were from Brazil and the rest of the Uruguay. Porto Seguro does not have revenue concentration by customer or group of companies. Porto Seguro S.A. and Subsidiaries Automobile
insura nc e
Written insurance premiums
Changes in technical reserves for insurance and ceded
reinsurance premiums
P re mium e a rne d
8,635,728
(433,766)
8 , 2 0 1, 9 6 2
He a lth
insura nc e
1,115,858
(887)
1, 114 , 9 7 1
P e rsona l a nd
pe nsion pla n
insura nc e
717,573
(194,494)
523,079
O the r insura nc e
Consortium
a nd Le nding
ope ra tions
2,206,256
(185,070)
2 , 0 2 1, 18 6
O the r
De c e mbe r 2 0 14
De c e mbe r 2 0 13
-
-
12,675,415
11,267,308
-
-
-
-
(814,217)
11, 8 6 1, 19 8
(858,024)
10 , 4 0 9 , 2 8 4
Contribution to pension plans, net
-
-
169,271
-
-
-
169,271
178,191
Changes in technical reserves for pension plans
-
-
(155,185)
-
-
-
(155,185)
(112,885)
-
11,042
Revenues from capitalization
-
-
-
-
Revenues from lending operations
-
-
-
-
863,733
-
244,341
Income from servic es rendered
Expenses with claims and benefits, net (i)
(4,720,263)
(841,549)
(189,562)
(850,578)
-
450,623
-
11,042
4,421
863,733
636,816
694,964
(6,601,952)
581,950
(5,659,467)
Total acquisition costs
(1,706,069)
(86,800)
(147,121)
(393,960)
(60,836)
(9,244)
(2,404,030)
(2,107,608)
Other operating income (expenses)
(1,658,253)
(170,924)
(141,074)
(694,798)
(819,610)
(365,687)
(3,850,346)
(2,530,968)
Costs of services rendered
O pe ra ting profit
117 , 3 7 7
Finance result
P rofit be fore ta xe s
Income tax and social contribution
15 , 6 9 8
59,408
8 1, 8 5 0
227 ,6 28
(162,022)
(7 5 , 2 8 8 )
(131,500)
1, 2 6 8 , 2 3 4
497,832
26,865
35,193
269,981
33,746
42,263
905,880
958,132
6 15 , 2 0 9
42,563
94,601
3 5 1, 8 3 1
2 6 1, 3 7 4
(3 3 , 0 2 5 )
1, 3 3 2 , 5 5 3
2,226,366
(212,254)
Ne t P rofit (loss) - De c e mbe r 2 0 14
402,955
Ne t P rofit (loss) - De c e mbe r 2 0 13 (ii)
953,392
(17,315)
25,248
(2 5 2 )
(30,534)
(106,480)
(95,031)
5,249
64,067
245 ,3 51
16 6 , 3 4 3
(2 7 , 7 7 6 )
113 , 2 2 6
2 8 1, 9 7 3
12 3 , 9 4 3
(7 4 , 9 7 1)
Asse ts a nd lia bilitie s
Identified assets
(162,022)
426,673
7,162,544
De c e mbe r 2 0 13
348,605
17,137,820
14,190,574
-
344,170
-
1,746,934
2,250,771
2,021,535
Goodwill from business combination (iv)
109,902
-
-
236,898
-
23,980
370,780
370,477
77,958
-
-
168,042
-
-
246,000
246,000
-
-
-
2,415,038
2,415,038
3,580,729
4 ,5 34,557
22,420,409
2 0 , 4 0 9 , 3 15
12,890,926
-
4,745,239
De c e mbe r 2 0 14
-
Identified liabilities
2,042,254
1, 3 9 7 , 3 11
159,667
Other non identified assets (v)
2,543,950
8 7 6 , 18 8
(829,055)
Fixed assets and Intangibles (iii)
Intangibles with no useful lifes (iv)
295,228
(456,365)
-
7 , 5 10 , 0 7 1
295,228
2 ,54 3,950
2 , 7 9 1, 3 6 4
4,745 ,2 39
5,138,356
258,406
2,941,413
1,564,345
4,745,239
348,605
14,996,364
Other non identified liabilities
-
-
-
-
-
1,435,233
1,435,233
1,624,881
Equity
-
-
-
-
-
5,988,812
5,988,812
5,893,508
7 ,7 72,650
22,420,409
2 0 , 4 0 9 , 3 15
5 , 13 8 , 3 5 6
258,406
2 , 9 4 1, 4 13
1, 5 6 4 , 3 4 5
4,745 ,2 39
(i) The amounts of retained claims are stated net of recovery of reinsurance, coinsurance, savages and reimbursements. (ii) In 2013 the provision for COFINS was reversed (Note 18 (a)(iii)). (iii) The intangibles assets alocated in “Automobile” and “Othe – insurance” refer to the acquisition of Itaú Auto e Residência (see Note 12). (iv) The goodwill and intangible assets with indefinite useful life allocated to segments “Automobile” e “Other ‐ insurance”, Refers to those originated from the acquisition of the Itaú Auto e Residência (see note 12). The goodwill allocated to the segment "Other", refers to those originated from the acquisition of Bioqualynet. (v) Refers primarily to financial assets not related to technical reserves, deferred income tax and social contribution and recoverable taxes and contributions. Porto Seguro S.A. and Subsidiaries 6. Cash and cash equivalents December
2014
Cash
Cash Equivalents (*)
Parent
December
2013
Consolidated
December December
2014
2013
67
18,974
130
245,132
139,153
864,709
132,243
1,204,260
19,041
245,262
1,003,862
1,336,503
(*) Cash equivalents include highly liquid short‐term investments with original maturities of up to three months and an insignificant risk of change in value, comprised by repo operations backed by National Treasury Bills (LTNs) and National Treasury Notes (NTNs). 7. Financial assets 7.1. Financial assets at fair value 7.1.1. Held for trading (i) Parent
December
2014
Open funds
Investments fund quotas
61,435 121,133 61,435
Exclusive funds
Financial Treasury Bills - LFT
National Treasury Bill - LTN
Time deposits with special guarantee - DPGE
Open funds
National Treasury Notes - NTN - series B
Private securities
National Treasury Notes - NTN - series C
Debentures
Financial Bills - Private
Shares of publicly-held companies
Total
December
2013
151,746 115,078 109,680 56,572 22,962 6,645 2,822 ‐ ‐ ‐ 121,133
141,793 98,062 5,483 ‐ 70,493 19,684 68,874 24,585 5,293 2,118 465,505
436,385
526,940
557,518
Porto Seguro S.A. and Subsidiaries Consolidated
December 2014
Insurance
Open funds
Investments fund quotas (ii)
Retained funds - IRB
Other investments
Exclusive funds
Financial Treasury Bills - LFT
National Treasury Bill - LTN
National Treasury Notes - NTN series C
National Treasury Notes - NTN series B
Debentures
Financial Bills - Private
Shares of publicly-held companies
Open funds
Time deposits with special guarantee DPGE
Private securities
Derivative financial instruments (iii)
Own portifolio
Financial Bills - Private
Time deposits with special guarantee DPGE
Total
Current
Non-current
Pension
Plans
Other
activities
Total
December
2013
Total
525,856
431
3,461
48,738
3
-
172,220
-
746,814
434
3,461
611,047
293
4,003
529,748
48,741
172,220
750,709
615,343
705,884
259,984
525,880
602,743
223,619
69,309
1,455,383
932,036
1,124,088
2,808,545
197,822
552,759
-
750,581
782,523
32,938
47,946
140,727
314
217,090
100,453
247,087
44,150
11,744
114,523
20,604
48,532
115,078
59,327
364,551
169,003
436,346
159,228
71,385
94,140
463,458
177,970
145,795
-
26,722
1,130
35,726
-
-
62,448
1,130
31,046
12,515
-
1,413,467
2,337,632
650,992
4,402,091
5,640,080
491,667
-
-
491,667
501,481
32,896
-
-
32,896
29,272
524,563
-
-
524,563
530,753
2,467,778
2,386,373
823,212
5,677,363
6,786,176
5,676,227
1,136
6,784,235
1,941 (i) The Company’s trading securities are mainly comprised of investment fund units; therefore, the adjusted unit value is the portfolio’s fair value. (ii) Refer mainly to the investment fund units of DPVAT Plan whose portfolio comprises substantially by government securities. (iii) See note 7.1.3. Porto Seguro S.A. and Subsidiaries 7.1.2. Available‐for‐sale securities ‐ consolidated December
2014
Pension
Plans
Insurance
Other
activities
Total
December
2013
Total
Restricted funds
Investments fund quotas
-
-
41,343
41,343
45,789
Total - Parent Company
-
-
41,343
41,343
45,789
1,114,362
1,305,238
157,447
-
-
1,114,362
1,305,238
157,447
1,023,080
-
Own portifolio (i)
National Treasury Notes - NTN series B (i)
National Treasury Bill - LTN
Private securities
National Treasury Notes - NTN series C
103,879
2,577,047 103,879 103,879
‐ 2,680,926 1,023,080 Other investments
Investment in IRB (ii)
Others
Total - Consolidated
Current
Non-current
13,196
522
13,718
13,718
2,026
220
142
2,388
1,291
15,222 742 142 16,106 15,009 2,592,269
104,621
41,485
2,738,375
1,083,878
41,343
2,697,032
45,789
1,038,089 (i) As at December 31, 2014, the curve value (adjusted cost) of the notes amounted to R$ 2,684,895 (R$ 1,016,027 in 2013), generating unrealized gains, in line item "Other comprehensive income”, in the amount of R$3,969 (R$ 7,053 in 2013), and a effect of ‐R$ 11,022 in the Statement of Comprehensive Income, gross of tax effects. (ii) Investment stated at acquisition cost, due to the lack of active markets for these shares. 7.1.3 Derivatives The Company’s short‐term investment portfolio includes derivatives used to hedge against the risk factors to which those instruments are subject. Such derivatives are used as part of the strategy to manage the market risks to which the Company is exposed. Information on the market risk is shown in Note 4.3. Derivative transactions are as follows: 
Swap IGPM + Rate x CDI: swaps the difference determined between the short (CDI) and long (accumulated inflation rate + rate) position, calculated based on the agreed notional amount. Such agreement enables the Company to mitigate the real interest rate risk of the NTN‐Cs. 
Ibovespa Futures Rate Options: summarizes the exposure to variable income. Porto Seguro S.A. and Subsidiaries December 2014
Active position
IGPM rate + fixed rate
Liability position
Floating rate (CDI)
Average rate contracted
Notional value
Fair value
100.00%
14,000 14,973 5.75%
14,000 15,283 Net of Swap
310
Net of options on Ibovespa future 820
Result (*)
1,130
(*) Gains or losses on derivative transactions are recorded in the Company’s exclusive funds (Note 7.1.1).
7.1.4. Changes in financial investments – consolidated (*) December
2014
December
2013
9,074,314
9,946,063
(10,607,705)
867,775
8,931,847
10,086,953
(10,344,937)
400,451
Closing balance
9,280,447
9,074,314
Current
Non-current
6,582,279
2,698,168
8,034,284
1,040,030 Opening balance
Financial investments
Redemptions
Earnings
(*) The changes in financial assets include financial assets “Held for trading” and “Available for sale” and assets classified as cash equivalents (except cash amounted in R$ 139,153 in December 31, 2014 (R$ 132,243 in December 31, 2013)). 7.1.5. Fair value estimate ‐ consolidated Given the short‐term characteristics and constant assessments of recoverability carried out by Management, the Company’s estimates that the balances of trade receivables and payables, net of impairment provision, are assumed to approximate their fair values. The table below show the fair value hierarchy of “Held for trading” and “Available for sale” held by Porto Seguro: Porto Seguro S.A. and Subsidiaries Level 1
Exclusive funds
Own portifolio
Open funds
Restricted funds
Level 2
December
2014
Total
Level 1
Level 2
December
2013
Total
3,734,295
2,523,478
750,709
-
667,797
682,010
41,343
4,402,092
3,205,488
750,709
41,343
4,955,091
1,023,080
615,343
-
684,989
530,753
45,789
5,640,080
1,553,833
615,343
45,789
7,008,482
1,391,150
8,399,632
6,593,514
1,261,531
7,855,045
Current
Non-current (*)
5,717,570
2,682,062
6,830,024
1,025,021
(*) The difference in non–current relates to the investments evaluated at acquisition cost, since there are no active markets for these shares amounted to R$ 16,106 in December 31, 2014 (R$ 15,009 in December 31, 2013). 7.1.6. Interest rates The average interest rates contracted of financial applications, on 31 December 2014, are shown below: December 2014
Interest rate % (p.y.)
Parent Consolidated
Cash Equivalents (*)
11.65 Exclusive funds
National Treasury Notes ‐ NTN ‐ series C ‐ IGPM +
National Treasury Notes ‐ NTN ‐ series B ‐ IPCA +
National Treasury Bill ‐ LTN
Debentures DI+
Debentures %CDI
Debentures IPCA
Financial Treasury Bills ‐ LFT SELIC + discount
Financial Bills flow DI+
Financial Bills %CDI
Financial Bills DI+
Time deposits with special guarantee ‐ DPGE %CDI
‐ 5.86 5.99 5.83 11.99 12.02 0.99 1.04 111.82 112.20 ‐ 6.18 (0.04) (0.02)
1.47 1.36 108.52 108.15 1.55 1.45 ‐ 109.31 Own portifolio
National Treasury Notes ‐ NTN ‐ series C ‐ IGPM
National Treasury Notes ‐ NTN ‐ series B ‐ IPCA
National Treasury Bill ‐ LTN
Debentures IPCA
Time deposits with special guarantee ‐ DPGE %CDI
Financial Bills ‐ Private %CDI
(*) See note 6. ‐ ‐ ‐ ‐ ‐ ‐ 11.65 6.10 5.45 12.60 8.00 111.50 108.90 Porto Seguro S.A. and Subsidiaries 7.2. Loans and receivables (clients) ‐ consolidated Premiums receivable from policyholders consolidated (7.2.1)
Notes and credits receivable (*)
Lending operations (7.2.2)
Receivable from services
Current
Non-current
December
de 2014
December
de 2013
3,155,721
2,827,581
1,257,233
39,567
2,737,949
2,141,010
1,054,428
38,215
7,280,102
5,971,602
7,014,999
265,103
5,722,745
248,857 (*) Refer to unbilled or falling due credit card receivables recorded in current assets. These amounts are classified as credit granting and are accounted for as a balancing item to payables to merchants registred in Credit Card Transactions (Note 17). The amount of the allowance for doubtful debts recognized for these receivables is stated in Note 7.2.3 7.2.1. Premiums receivable from policyholders ‐ consolidated Premiuns
Receivable
from
policyholders
December 2014
Provision for
impairment Premiums
of trade receivable
- net
receivables
December 2013
Premiuns Provision for
impairment Premiums
Receivable
of trade receivable
from
- net
policyholders receivables
2,292,810
(4,922)
2,287,888
2,051,547
(3,284)
2,048,263
512,181
191,059
(2,623)
-
509,558
191,059
384,178
155,231
(3,445)
(852)
380,733
154,379
Health
91,980
(2,533)
89,447
84,789
(1,421)
83,368
Uruguay
57,463
(5,853)
51,610
54,358
(4,640)
49,718
Transportation
26,159
-
26,159
21,618
(130)
21,488
3,171,652
(15,931)
3,155,721
2,751,721
(13,772)
2,737,949
Automobile
Casualty
Life
Current
3,155,032
Non-current
689
2,737,312
637 Porto Seguro S.A. and Subsidiaries 7.2.1.1. Changes in premiums receivable from policyholders ‐ consolidated Opening balance
Issuances
Tax on Financial Transactions - IOF
Interest on premium installments
Cancelations
Receipts
Provision for impairment of trade receivables
Closing balance
December
2014
December
2013
2,737,949
13,058,549
737,103
268,776
(815,235)
(12,829,262)
(2,159)
2,379,474
12,419,476
695,609
253,880
(785,113)
(12,222,407)
(2,970)
3,155,721
2,737,949
7.2.2. Lending operations ‐ consolidated December
2014
December
2013
Credit Cards (*)
847,972
619,083
Financing
532,526
478,632
Loans
102,651
93,867
1,483,149
1,191,582
(225,916)
(137,154)
1,257,233
1,054,428
992,819
806,208
264,414
248,220 Provision for impairment of
receivables
Current
Non-current
(*) Refer to receivables from holders of credit cards billed, overdue or payable in installments. Porto Seguro S.A. and Subsidiaries 7.2.3. Impairment of financial assets ‐ consolidated Premiums
Notes and
receivable from Lending
credits
policyholders operations receivable
Amount at December 2012
Provisions for the period
Reversal of provisions for
impairment
Amount at December 2013
Provisions for the period
Reversal of provisions for
impairment
Amount at December 2014
Total credits individually
significant classified as
impaired
Receivable
from
services
Total
10,800
87,942
8,166
1,343
108,251
6,532
56,502
6,247
3,847
73,128
(2,531)
(3,160)
(16,541)
(3,560)
(7,290)
13,772
137,154
11,882
2,030
164,838
9,339
102,936
5,261
4,934
122,470
(7,180)
(14,174)
(1,557)
(4,946)
(27,857)
2,018
259,451
15,931
-
225,916
15,586
154,318
298
-
154,616
The expenses/reversals of provisions for doubtful accounts were recorded under "Other operating expenses" in the Income Statement (see note 30). 8. Taxes 8.1 Taxes and contributions recoverable Current assets
Income tax (i)
Social contribution (i)
INSS a recoverable
Other
Non-current assets
PIS and COFINS over unsettled
claims
Income tax
Social Investment Fund (FINSOCIAL)
(ii)
Others
December
2014
Parent
December
2013
Consolidated
December December
2014
2013
14,948
2,835
-
17,801
5,017
-
39,187
12,565
2,293
14,584
67,483
62,805
1,180
9,606
17,783
22,818
68,629
141,074
-
-
42,140
5,338
44,218
3,231
-
-
2,561
3,709
2,561
3,673
-
-
53,748
53,683
17,783
22,818
122,377
194,757
(i)Refer mainly to income tax and social contribution withheld at source and income tax and social contribution to offset. (ii) The company, Porto Cia, filed an overpayment refund claim in connection with amounts charged and paid to the Brazilian government as FINSOCIAL. The claim was deemed with grounds by way of a final and unappeasable Porto Seguro S.A. and Subsidiaries decision, which requires the Brazilian government to refund the overpayment in ten installments, by means of a court‐ordered instrument. 8.1.1 Liabilities – non‐current Nature
Income tax and social
contribution on business
combination - Itaú Auto e
Residência (i)
Parent
Decem ber
2014
Decem ber
2013
Additions
Reversals
(5,048)
299,935
307,389
-
(5,513)
301,876
-
-
-
66,766
-
(959)
65,807
-
-
-
14,129
295
(1,128)
13,296
8,103
-
8,103
8,139
2,525
522
-
2,525
8,661
Decem ber
2013
Reversals
304,983
Income tax and social
contribution on future realization
of revaluation reserve
contribuion on deferred PIS and
COFINS (ii)
Income tax and social
contribuion on financial
instruments adjustments
Other
313,086
(5,048)
308,038
396,423
3,342
Consolidated
Decem ber
2014
(7,600)
392,165
(i) See note 12. (ii) Refer to PIS and COFINS tax credits on provisions for unsettled claims (PSL) and on provisions for losses incurred but not reported (IBNR) in Porto Cia, Porto Saúde, Azul Seguros and Itaú Auto e Residência as well as Tax on Revenue (COFINS) (as at December 31, 2014) recorded on the PSL and IBNR in Porto Saúde, Azul Seguros and Itaú Auto e Residência. 8.2 Taxes and contributions payable Tax on Financial Transactions - IOF
on insurance premiums (*)
Income tax
PIS and COFINS contributions
Whithholding Income Tax - IRRF
Contributions to INSS and FGTS
Social contributions (*)
Services Tax (ISS) withheld at
source
Other
December
2014
Parent
December
2013
4,294
3,247
3,391
3,404
191,305
57,143
25,434
23,594
165,982
34,040
18,787
20,857
20
17
23,046
24,495
-
-
13,382
3,835
11
-
7,719
4,222
-
-
18,643
16,184
7,572
6,812
Consolidated
December December
2014
2013
360,266
288,402
(*)Refer to income tax and social contribution provisions, net of anticipated amounts, totaling R$ 262,672 – income tax and R$ 184,241 – social contribution in December 31, 2014 (R$ 243,107 – income tax and R$ 176,072 – social contribution in December 31, 2013). Porto Seguro S.A. and Subsidiaries 8.3 Deferred income tax and social contribution 8.3.1 Non‐current assets (*) (a) Consolidated Decem ber
2013
Tax credit - Tax losses (i)
Reversals
Decem ber
2014
11,025 52,688 (47,897)
15,816 11,025 52,688 (47,897)
15,816 Additions
Tem porary differences (ii)
Provision for legal obligations
195,687 29,456 (12,400) 212,743 Provision for credit risks
58,740 53,055 (2,259) 109,536 Provision for risks - civil and labor
23,549 3,501 (1,433)
25,617 Other provisions
58,289 19,308 (5,076)
72,521 336,265 105,320 (21,168) 420,417 347,290
158,008
(69,065)
436,233
(*) Tax credits are recorded in assets and were determined according to current legislation. Management, using technical study of estimated future taxable income and other factors, approved by the company's governance bodies, estimates the realization period as follows: (i) Approximately three years; (ii) See note 8.3.1.1. (b) Parent
The Company’s deferred taxes, in the amount of R$ 13,678 in December 31, 2014 (R$ 13,609 in December 31, 2013), refer to temporary differences on provisions for legal obligation COFINS and PIS. 8.3.1.1 Estimated realization The tax credits arising from temporary differences on provisions for legal contingencies are recognized on lawsuits of tax nature, whose estimated realization depends on the outcome of the lawsuit. In case all tax lawsuits assessed as “legal contingencies” were decided favorably to the Company, the tax credits as at December 31, 2014 would be realized in the current year. If the outcome was unfavorable, the credits would be realized as follows: Porto Seguro S.A. and Subsidiaries Consolidated
2015
2016
2017
2018
After 2018
395,922
9,905
242
11
14,337
Total
420,417
Present value (*)
389,511 (*)For the adjustment to present value was considered the SELIC rate of the last day of the quarter, net of tax effects. 8.4. Reconciliation of income tax (IRPJ) and social contribution (CSLL) December
2014
Parent
December
2013
December
2014
Consolidated
December
2013
Profit before income tax, social contribution (A)
Standard rate - % (i)
860,494
34%
1,439,566
34%
1,332,553
40%
2,226,366
40%
Computation of IRPJ ans CSLL expenses at
the standard rate (B)
(292,568)
(489,452)
(533,021)
(890,546)
299,264
29,195
(20,556)
496,342
32,465
(70,894)
(2,820)
102,368
15,931
(41,643)
90,134
(89,553)
26,345
50,413
12,425
(28,273)
307,903 455,093 76,656 61,491 15,335 (34,359)
(456,365)
(829,055)
34.2%
37.2%
Income tax and social contributions effect of
permanent differences
Equity in subsidiaries
Interest on capital
Provision/Revesal of tax credit - tax losses
Provision/Revesal of temporary differences
Tax Debt Refinancing Program (ii)
Tax incentives
Other
Income tax and social contribuition effect of
perment differences (C)
Total IRPJ and CSSL expenses (D = B + C)
Efective rate
(i) The 40% rate used in this reconciliation of income tax and social contribution expenses refers to the nominal rate used by the insurance and financial companies of Porto Seguro, which correspond to the companies that most contribute to the consolidated profit. (ii) See note 18 (b). Porto Seguro S.A. and Subsidiaries 9. Non‐financial assets held for sale ‐ consolidated December
2014
December
2013
193,408
5,312
(29,775)
138,385
5,769
(30,952)
168,945
113,202
Salvage for sale (*)
Assets received from third parties (ii)
Provision for impairment
(*) Refers to salvages arising from total indemnifications in car accidents and recovery of stolen vehicles, recorded at estimated realizable value. In 2014 the percentage of initial recognition of the saved were reviewed, the average achievement, reflecting the improvement in the market for used vehicles in year 10. Deferred acquisition cost (DAC) ‐ consolidated December
2014
December
2013
Automobile
841,901
770,146
Property
163,060
136,319
Financial Risk
55,904
52,863
Personal
44,251
44,228
Health
2,971
1,552
Casualty
1,546
1,145
Transportation
1,221
1,373
Other
5,401
3,893
1,116,255
1,011,519
1,109,880
6,375
1,004,720
6,799 Current
Non-current
10.1. Changes in DAC – consolidated Opening balance
Additions on brokerage
Deffered expenses
Closing balance
December
2014
December
2013
1,011,519
2,296,445
(2,191,709)
851,806
2,020,642
(1,860,929)
1,116,255
1,011,519
Porto Seguro S.A. and Subsidiaries 11. Other assets (*) December
2014
Other accounts receivable (11.1)
Judicial Deposits (11.2)
Supplies
Current
Non-current
Consolidated
December
2013
593,178
311,406
22,508
532,052
286,632
22,025
927,092
840,709
581,698
345,394
531,241
309,468 (*)The Parent’s other assets in the amount of R$8,038 (R$7,110 in December, 2013) refer mainly to the sale of Integração Assessoria e Informática Ltda., whose amount receivable up to November 2020, is adjusted based on the IGP‐M. 11.1. Other accounts receivable December
2014
Current
Commissions in process (i)
Administrative advances
Prepaid expenses
Notes and credits receivable - credit
card
Undeposited checks
Receivables from IRB
Receivable from policyholders
Amounts receivable - Fundação Itaú
DPVAT agreement
Advances to employees
Other
Non-current
Advances to employees
Credits receivable
Other
Consolidated
December
2013
359,844
34,446
24,362
361,888
20,549
9,148
20,309
16,453
13,571
11,200
10,462
8,302
1,629
58,612
15,500
15,110
9,123
8,014
4,347
6,115
8,444
50,978
559,190
509,216
10,775
3,319
19,894
10,149
3,821
8,866
33,988
22,836
593,178
532,052
(i) These represent the payment of commissions to brokers on policies still in the process of issue and policies issued and paid in installments. Porto Seguro S.A. and Subsidiaries 11.2. Judicial deposits – consolidated December
2014
Claims
Income tax and social contribuition (i) and (iii)
INSS - independent contractors (ii) and (iii)
PIS/COFINS
CSLL
Other
December
2013
105,744
98,204
56,676
26,985
17,599
6,198
90,198
90,697
58,664
25,542
15,397
6,134
311,406
286,632
(i) Refers mainly to escrow deposits made under lawsuits addressing deductibility from Corporate Income Tax (IRPJ) base) and the deductibility of taxes and contributions from the IRPJ and CSLL tax base. (ii) Refers mainly to an escrow deposit relating to the lawsuit addressing the INSS levied on the Company’s profit sharing. See Note 18 (b). (iii) The difference between the escrow deposit and provisions for legal obligations resulted from the benefits set forth in applicable legislation relating to the Tax Recovery Program (REFIS). 12. Investments in subsidiaries ‐ Parent O wne rship
inte re st
(% )
Ba la nc e s a t
De c e mbe r
2 0 13
Equity in the
re sults of
subsidia rie s
Ca pita l
inc re a se
Adjustme nt
of
se c uritie s
Tra nsla tion
a djustme nt
/ othe r
Porto Cia
Itaú Auto e
Residência
Azul Seguros
99.99
2,491,840
410,729
270,184
(3,572)
5,868
99.99
693,766
163,390
-
(1,499)
69.14
476,587
157,578
-
(1,542)
Portoseg
99.99
343,483
128,641
-
Porto Consórcio
Proteção e
Monitoram ento
Porto Serviços e
Com ércio
Serviços Médicos
99.99
126,787
37,416
99.98
50,355
99.99
99.99
Portopar
99.99
24,696
7,139
-
-
Portom ed
99.00
8,609
(2,170)
7,500
-
-
Porto Investim entos
99.00
2,742
3,775
-
-
-
Crediporto
99.80
3,045
(10)
-
-
Porto Renova
99.97
1,079
(4,860)
5,000
-
Porto Odonto
Com binação de
negócios (ii)
99.00
158
(69)
100
-
-
-
-
Inte re st on
c a pita l/
divide nds
Ba la nc e s a t
De c e mbe r
2 0 14
(292,985)
2,882,064
(146)
(132,980)
722,531
(804)
(240,939)
390,880
-
(20)
(33,223)
438,881
-
-
(2)
(87,492)
76,709
3,706
-
-
(12)
(8,379)
45,670
35,752
(35,481)
75,245
-
(30)
-
75,486
77,779
10,405
10,720
-
(47)
(1,800)
97,057
79
(15,598)
16,316
-
13,939
-
6,517
4
(1,996)
1,043
(2)
-
1,217
-
-
189
-
(12,622)
-
1,096,637
(6,613)
(7,734)
1,109,259
5,445,937
880,189
368,749
(815,392)
5,865,136
(i) See note 1(v). (ii) On August 23, 2009, Porto Seguro executed an association agreement with Itaú Unibanco Holding S.A. whereby its residential and car insurance operations were unified as well as an operational agreement to offer and distribute, on an exclusive basis, residential and car insurance products to Itaú Unibanco clients in Brazil and Uruguay. On November 30, 2009, Itaú Auto e Residência, which received the assets and liabilities of Itaú Seguros S.A. related to the residential and car insurance activities was merged by Porto Seguro. On this business combination, goodwill and other intangible assets were recorded. See note 14. Porto Seguro S.A. and Subsidiaries Ownership interest ‐ %
Indirect subsidiaries
Porto Vida
Porto Saúde
Porto Capitalização
Porto Uruguai
Azul Seguros
Porto Serviços Uruguai
Porto Atendimento
Porto Conecta
Conecta Serviços
Bioqualynet
Bioqualynet Sul
Franco
99.97
99.98
99.99
100.00
30.66
100.00
99.94
100.00
99.99
100.00
100.00
99.99 Other information on the operations of each subsidiary is presented in note 1. 12.1 Summarized subsidiaries’ financial information The table below shows the summarized financial information of the Company’s subsidiaries as at and for the year ended December 31, 2014 Total assets
Porto Cia
Portoseg
Itaú Auto e Residência
Azul Seguros
Porto Consórcio
Serviços Médicos
Porto Serviços e Comércio
Proteção e Monitoramento
Portomed
Portopar
Crediporto
Renova
Porto Investimentos
Porto Odonto
Other - indirect subsidiaries
Total
liabilities
Total
revenues (*)
Year end
profit (loss)
7,568,691
4,577,296
2,665,301
2,232,161
137,556
113,857
79,446
58,550
43,243
21,429
2,793
1,799
8,958
196
3,837,301
4,693,964
4,136,882
1,944,668
1,666,848
60,787
16,799
3,958
12,870
29,164
5,112
1,748
581
2,375
6
3,441,384
6,670,510
894,561
2,866,701
2,441,419
218,709
139,077
22,366
87,256
50,437
29,733
8,886
1,700
10,737
8
2,159,277
403,656
128,824
161,451
162,434
37,416
10,405
(35,478)
3,706
(2,095)
7,139
(10)
(4,859)
3,775
(69)
18,208
21,348,577
16,017,146
15,601,377
894,503
(*) Include finance income. Porto Seguro S.A. and Subsidiaries 12.2 Related‐party transactions Related‐party transactions are carried out at amounts, terms and average rates compatible with those of third parties on the respective dates. The main restrictions are: (i) Administrative expenses charged by the subsidiary Porto Cia, Porto Vida and Azul Seguros for the use of properties and workforce; (ii) Rendering of health insurance services by the subsidiary Porto Saúde; (iii) Rendering of monitoring services by the subsidiary Proteção e Monitoramento; (iv) Agreement for apportionment of administrative costs of the subsidiary Itaú Auto e Residência with the companies of the Itaú Unibanco Conglomerate, mainly due to the use of common structure and personnel expenses; (v) Rendering of portfolio management services by the subsidiary Porto Investimento; (vi) Agreement for use of credit card payment credit between the Port Cia, Azul and Portoseg for payment of insurance policies; (vii) Rendering of services to obtain credit and financing between Crediporto and Portoseg; (viii) Services rendered of medical care and use of hospital network hired by Porto Saúde from Serviços Médicos; (ix) Services provided by Bioqualynet management of administrative activities of the portfolio SSO (Occupational Health and Safety) contracted from Serviços Médicos; (x) Rendering of call center services obtained from Porto Atendimento; (xi) Underwriting of capitalization bonds between Porto Capitalização and Porto Cia. (xii) Raising funds from Itaú Group companies. The balances receivable and payable regarding related‐party transactions are shown below: Porto Seguro S.A. and Subsidiaries Statement of income
Parent company
Direct and indirect subsidiaries
Porto Cia
Porto Atendimento
Porto Saúde
Serviços Médicos
Proteção e Monitoramento
Portoseg
Crediporto
Porto Conecta
Porto Capitalização
Portomed
Porto Vida
Porto Investimentos
Conecta Serviços
Portopar
Porto Serviços e Comércio
Renova
Bioqualynet
Azul Seguros
Itaú Auto e Residência
Porto Consórcio
Bioqualynet Sul
December
2014
Revenue
December
2013
December
2014
Expenses
December
2013
-
-
546
388
490,806
128,978
74,749
67,934
16,437
11,232
10,206
9,486
5,726
5,576
4,438
3,874
2,533
1,560
1,667
91
3
-
396,639
97,582
55,376
47,543
11,708
9,953
10,615
1,668
6,278
4,268
1,125
3,353
1,765
4
-
157,700
35,848
127,169
12,396
22,667
82,306
1,545
6,000
3,005
11,204
18,917
383
53
4,798
4,023
1,098
3,152
163,654
152,969
25,755
108
122,529
26,981
112,622
7,182
20,288
64,317
1,049
3,869
1,114
2,822
16,937
51
3,662
3,769
520
367
123,024
116,485
19,830
71
835,296
647,877
835,296
647,877 As of December 2014 was recognized in the P&L of Portoseg the amount of R$ 56,146 (R$ 33,635 in December 31, 2013) relating to the funding costs with companies of Itaú Group.
Porto Seguro S.A. and Subsidiaries December
2014
Parent
December
2013
1,085
182,843
Azul Seguros
13,520
18,611
Portoseg
16,124
11,705
Itaú Auto e Residência
12,080
6,703
439
27
43,248
219,889
206,042
334,099
206,042
334,099
Assets
Current assets
Dividends receivable
Porto Cia
Trade receivable
Porto Cia
Liabilities
Interest on capital and dividends payable
Transactions with the key management personnel refer to profit sharing, management fees and charges paid or payable to directors, officers and members of the Executive Committee, as shown below. December
2014
Profit sharing - management
Fees and social charges
Parent
December
2013
Consolidated
December December
2014
2013
13,927
14,308
72,938
152,355
1,275
1,142
17,501
15,853
15,202
15,450
90,439
168,208
Porto Seguro S.A. and Subsidiaries 13. Fixed assets – consolidated Cha nge s
De c e mbe r 2 0 14
Ba la nc e a t
De c e mbe r
2 0 13
Ac quisitions
284,066
24,383
591,310
1,933
875,376
2 6 , 3 16
IT
88,060
40,654
(544)
Equipment
Equipment held by thrid
parties
Furniture, mac hines and
fittings
53,586
29,800
(1,380)
20,310
7,635
(85)
(4,549)
49,937
11,468
(359)
(9,226)
9,812
6,203
(3,488)
(3,253)
16
14,572
22,700
(889)
(8,542)
236,277
118 , 4 6 0
(6 , 7 4 5 )
(6 9 , 12 8 )
62,789
103,163
Land
Buldings (*)
P rope rtie s in use
Vehic les
Traking equipment
Asse ts in use
Construction in progress
Leasehold improvements
and works of art
O the r
Disposa ls
De pre c ia tion
e xpe nse s
O the rs
Cost
Ac c umula te d
de pre c ia tion
Ne t a mount
Annua l ra te de pre c ia tion (% )
(2,300)
-
-
306,149
-
306,149
-
-
(11,457)
10,940
647,649
(54,923)
592,726
2.4
(11, 4 5 7 )
10 , 9 4 0
953,798
(5 4 , 9 2 3 )
898,875
(33,021)
3,830
264,218
(165,239)
98,979
33.3 a 20.0
(10,537)
(6,997)
109,516
(45,044)
64,472
10.0 a 14.3
-
42,537
(19,226)
23,311
10.0
98,738
(47,801)
50,937
10.0 a 50.0
18,955
(9,665)
9,290
12.5 a 20.0
3,221
179,102
(148,040)
31,062
25.0 a 33.3
(8 13 )
7 13 , 0 6 6
(4 3 5 , 0 15 )
278,051
(2 , 3 0 0 )
-
-
(883)
(11,401)
154,551
-
154,551
38,973
20,578
(265)
(15,282)
1,547
85,780
(40,229)
10 1, 7 6 2
12 3 , 7 4 1
(2 6 5 )
(15 , 2 8 2 )
(9 , 8 5 4 )
240,331
(4 0 , 2 2 9 )
2 0 0 , 10 2
1, 2 13 , 4 15
2 6 8 , 5 17
(9 , 3 10 )
(9 5 , 8 6 7 )
1, 9 0 7 , 19 5
(5 3 0 , 16 7 )
1, 3 7 7 , 0 2 8
273
45,551
(*) Weighted average rate was used for this item. The Company did not identify any impairment as a result of the tests carried out in 2014, therefore, it decided that there was no need to recognize impairment losses. In December 2014, the Company had properties that could be pledged in guarantee of technical reserves for insurance with SUSEP amounting to R$ 140,022 (R$ 129,556 in December 2013) (see note 15.4). Aditionally, the Company leases several assets (mainly third‐party properties through operating lease contracts) to conduct its business in the branches located in various regions of Brazil. Rental contracts do not have an asset purchase option and most of them can be renewed. 20.0 a 33.3
Porto Seguro S.A. and Subsidiaries 14. Intangible assets – Consolidated Changes
Balance at
Decem ber
2013
Acquistions
Disposals
Am ortization
expenses
Other /
Transfes
Accum ulated
am ortization Net Am ount
(4)
(732)
(736)
(49,264)
(832)
(50,096)
(1,187)
(25)
(1,212)
532,197
10,580
542,777
(168,391)
(10,191)
(178,582)
363,806
389
364,195
Cost
Annual rates ‐ amortization (%)
Softw are
Other intangibles
Intangibles in use
282,685
1,900
284,585
Trademark
Distributition Channel
Goodw ill on acquisition of
investments
Businnes Com bination Itaú Auto e Residência (*)
246,000
516,458
-
-
(12,621)
-
246,000
568,000
(64,163)
246,000
503,837
2.2
346,800
-
-
-
-
346,800
-
346,800
1,109,258
-
-
(12,621)
-
1,160,800
304
-
-
-
23,981
-
23,981
-
-
(1,367)
-
8,330
(2,620)
5,710
30,754
304
-
(1,367)
-
32,311
(2,620)
29,691
1,424,597
131,958
(64,084)
(1,212)
1,735,888
(245,365)
1,490,523
Goodw ill on acquisition of
investments
Other - Businnes Combination
Bioqualynet
Businnes Com bination Bioqualynet (ii)
23,677
7,077
131,576
78
131,654
Decem ber 2014
(736)
(64,163)
1,096,637
(*) Intangible assets arising from business combination of Itaú Auto e Residência (see Note 12). 14.1. 20
10.0 a 20.0
Measurement of goodwill impairment and intangible assets with indefinite useful lives At December 31, 2014, the carrying amount of goodwill and intagibles assets with indefinite useful lives were tested for impairment based on its value in use, in accordance with the discounted cash flow for the CGUs (see note 5). The estimation of value in use involves the utilization of assumptions, judgments and projections of future cash flows and represents the Company's best estimate as approved by management. The methodology consists of projecting the Company's results for a maximum period of five years and discounting them to present value (the risk‐free rate), based on financial budgets approved by management, thus determining the business economic value for shareholders. Goodwill and intangible assets with indefinite useful lives are allocated to the CGSs of the operating segments, accordingly note 5: (i) “Vehicle insurance” and “Insurance – other lines”, refer to acquisition of Itaú Auto e Residência; and (ii) “Other”, refer to acquisition of Bioqualynet. Based on the Company's asset recovery test, the recognition of impairment losses was not necessary. 14.3
Porto Seguro S.A. and Subsidiaries 15. Liabilities of insurance contracts ‐ consolidated December
2014
Gross of
Net of
reinsurance reinsurance
Technical reserves for insurance
contracts (15.1)
Technical reserves for pension plans
(15.2)
Gross of
reinsurance
December
2013
Net of
reinsurance
8,144,593 8,071,036 7,276,798 7,200,014 1,757,927 1,757,927 1,630,855 1,630,855 9,902,520 9,828,963 8,907,653 8,830,869 Current
Non-current
9,881,827 20,693 8,887,137 20,516 As a result of the TAP conducted on December 31, 2014, deficiencies were identified in the supplementary pension plans in the amount of R$9,525 and, an additional provision (PCC) was recognized with respect to such deficiencies. For all other groups, no deficiencies were identified as of this base date (Note 2.15.2). 15.1. Technical reserves for insurance contracts ‐ consolidated Gross of
reinsurance
Unearned premiums reserve
Unsettled claims (administrative and
judicial)
Mathematical reserve - insurance
Reserve for claims incurred but not
reported
Reserve for vested benefits
Other
December
2013
Net of
reinsurance
5,453,400
5,425,113
4,877,448
4,855,154
1,292,344
908,794
1,248,864
908,794
1,222,373
778,760
1,171,171
778,760
475,038
1,805
13,212
473,248
1,805
13,212
374,446
918
22,853
371,158
918
22,853
8,144,593
8,071,036
7,276,798
7,200,014
December
2014
Net of
Gross of
reinsurance reinsurance
Porto Seguro S.A. and Subsidiaries 15.2. Technical reserves for pension plan contracts ‐ consolidated December
2014
Gross of
Net of
Gross of
reinsurance reinsurance reinsurance
Mathematical reserve for unvested benefits
Mathematical reserve for vested benefits
Supplementary Coverage Reserve
Provision for benefits to be regulated
Reserve for claims incurred but not reported
Other
December
2013
Net of
reinsurance
1,621,430
73,974
43,097
5,600
1,261
12,565
1,621,430
73,974
43,097
5,600
1,261
12,565
1,505,412
66,238
32,567
6,247
1,405
18,986
1,505,412
66,238
32,567
6,247
1,405
18,986
1,757,927
1,757,927
1,630,855
1,630,855
15.3. Changes in liabilities of insurance contracts and reinsurance assets ‐ consolidated Liabilities of
insurance
contracts
Amount at December 2012
Additions from premiums/contributions
Defferal by incurred risk
Claims reported
Payments
Monetary variations and interests
Redemptions
Portabilidades líquidas
Outras (constituição/reversão)
Amount at December 2013
Additions from premiums/contributions
Defferal by incurred risk
Claims reported
Payments
Monetary variations and interests
Redemptions
Portabilidades líquidas
Outras (constituição/reversão)
Amount at December 2014
Assets of
reinsurance
contracts
8,124,837
53,265
11,247,345
(10,271,838)
5,800,074
(5,448,777)
30,166
(185,413)
(38,314)
(350,427)
55,485
(56,914)
49,142
(26,969)
2,775
8,907,653
76,784
12,200,777
(11,234,115)
6,914,935
(6,418,239)
165,218
(116,819)
(58,660)
(458,230)
68,227
(63,111)
37,666
(45,140)
(869)
9,902,520
73,557
Porto Seguro S.A. and Subsidiaries 15.4. Technical reserve guarantee ‐ consolidated In accordance with current rules, the following assets were provided as guarantees to SUSEP and ANS: December
2014
December
2013
Total technical reserves
9,902,520
8,907,653
Credit rights (i)
2,300,730
2,185,507
785,212
548,346
73,557
76,784
3,194
434
6,407
293
Total of reducing assets (B)
3,163,127
2,817,337
Amount to be guaranteed (C = A - B)
6,739,393
6,090,316
508,329
-
2,523,479
1,019,460
681,026
515,841
2,385,793
2,041,680
3,099,601
1,817,047
140,022
129,556
7,772,000
6,581,505
524,278
491,189
Deferred acquisition costs
Reinsurance operations
Judicial deposits
Funds and reserves retained by IRB
Net assets requeired (ii) (D)
Fixed-income government securities
Fixed-income private securities
Investment fund quotas
Specially constituted fund quotas
Properties
Technical reserve guarantees (E)
Excess (E - C - D)
(i) Refers to installments not yet due of premiums receivables from policyholders and insurance policies of risks to elapse. (ii) Beginning 2014, CNSP Resolution 302/13 (superseded by Resolution 316/14) required supervised companies to offer at least 20% of their Minimum Required Capital (CMR) in government bonds (or funds comprised by such bonds). The CMR calculation is shown in Note 4.6. Porto Seguro S.A. and Subsidiaries 15.5 Behavior of the claims reserve in years subsequent to the recognition year The table below shows the changes in the Company’s claims reserve (In later years to years of constitution, in millions), called claim development table: December
2007
2008
2009
2010
2011
2012
2013
2014
Reserves for claims at the end of the previous year
519.0 522.0 494.4 966.1 1,117.7 1,181.6 1,186.6 1,274.9 Claims reported
2,153.8 2,449.3 2,737.3 4,007.7 4,747.0 5,185.8 5,201.2 6,451.0 Current yea r
2,084.8 2,310.9 2,519.1 3,671.6 4,480.1 4,829.3 4,840.4 5,997.2 Prior yea rs
69.0 138.4 218.2 336.1 266.9 356.5 360.9 453.8 Payments (2,150.8) (2,476.9) (2,699.5) (3,856.1) (4,683.2) (5,180.7) (5,112.9) (6,495.0)
Current yea r
(1,891.9) (2,207.7) (2,334.0) (3,291.1) (4,001.4) (4,316.7) (4,331.4) (5,636.8)
Prior yea rs
(258.9) (269.2) (365.5) (565.0) (681.8) (864.0) (781.6) (858.2)
Reserves for claims at the end of the year ‐ gross of reinsurance (*)
522.0 494.4 532.2 1,117.7 1,181.6 1,186.6 1,274.9 1,230.9 DPVAT
416.4 Retroces s ion operations
4.0 Total
1,651.3 Reserves for claims at the end of the year ‐ net of reinsurance
500.7 479.1 507.2 1,092.1 1,150.7 1,155.9 1,205.5 1,185.7 (*) Does not include the reserves of Porto Uruguai and Porto Vida. The inclusion these reserves could distort the information presented in this table as such reserves are immaterial, are not applicable or are calculated using different methodologies. The presentation criterion of the claims reserves in the date they are incurred. Beginning 2010, with the business combination with Itaú Unibanco Holding S.A., we added to the Company’s claims reserve balance the balances of Itaú Auto e Residência (see note 13). The table below shows the development of claim payments (in million). The line "Cumulative surplus (deficiency)" reflects the difference between the last recalculated reserve amount and the reserve amount originally established. The purpose of this table is to show the consistency of the Company's policy related to reserves for claims. Porto Seguro S.A. and Subsidiaries December 2006
Reserves for claims Cumulative amount paid up to 2007
2008
2009
2010
2011
2012
2013
2014
519.0 522.0 494.4 966.1 1,117.7 1,181.6 1,186.6 1,274.9 1,230.9 One yea r l a ter
258.9 269.2 365.5 565.0 681.8 864.0 791.7 858.2 Two yea r l a ter
296.5 311.5 393.4 677.8 846.8 952.0 884.9 Three yea r l a ter
325.1 329.3 418.7 812.2 918.6 1,028.0 Four yea r l a ter
341.1 351.1 473.9 876.8 983.7 Fi ve yea r l a ter
360.3 399.4 495.4 934.8 Si x yea r l a ter
404.1 416.9 510.6 Seven yea r l a ter
419.9 429.2 Ei ght yea r l a ter
429.2 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Reserves re‐estimated One yea r l a ter
158.3 136.4 152.6 400.4 327.2 321.2 336.6 363.5 Two yea r l a ter
116.6 127.0 163.7 288.7 280.5 301.3 308.2 Three yea r l a ter
109.8 136.3 111.2 248.7 260.7 272.2 Four yea r l a ter
116.1 95.0 114.9 227.4 229.2 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Fi ve yea r l a ter
81.8 96.2 111.1 196.3 Si x yea r l a ter
82.7 93.7 90.9 ‐ ‐ ‐ ‐ ‐ Seven yea r l a ter
81.3 75.1 Ei ght yea r l a ter
64.7 Cumulative Surplus (deficiency) ‐ gross of reinsurance 25.1 17.7 (107.1) (165.0) (95.2) (118.6) (6.5)
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 53.2 1,230.9 DPVAT
416.4 Retroces s i on opera ti ons
4.0 Total
1,651.3 Cumulative Surplus (deficiency) ‐ net of reinsurance 27.6 21.2 (92.3) (151.0) (88.8) (120.5) (20.2) (1.7)
1,175.1 15.6 Discount rate The result of future payment flows is also considerably influenced by the fluctuation of interest rates, used as discount rate. The Interest Rate Term Structure (ETTJ) corresponds to the discount rate defined and informed by SUSEP to the market. The possibility of use of an interest rate to discount the actuarial liability flow, based on as specific study, is not used by Porto Seguro. The effects of the discount rates and their change on insurance and pension liabilities as at December 31, 2014, considering LAT results, are shown below: Porto Seguro S.A. and Subsidiaries Insurance
Pension
plan
Interest rate with no discount 82,260
1,429,727
Increase of 2.5% in discount rate
(1,967)
(341,659)
Increase of 3.0% in discount rate
(2,360)
(398,859)
Increase of 3.5% in discount rate
(2,752)
(453,049)
Increase of 4.0% in discount rate
(3,145)
(504,464)
Increase of 5.0% in discount rate
(3,929)
(599,794)
16. Insurance and reinsurance payables ‐ consolidated December
2014
December
2013
550,744
550,855
Other insurance payables (16.1)
52,259
45,624
Reinsurance companies
44,301
47,208
647,304
643,687
Commissions on premiums issued
16.1. Other insurance payables ‐ consolidated Assistance services
Provision for operating expenses
December
2014
December
2013
27,483
24,727
4,181
4,650
Agents and correspondents
3,476
2,446
Invoices received in advance
2,844
1,091
Premiums to be refunded
2,468
2,455
118
300
11,689
9,955
Insurance companies
Other
52,259
45,624
Porto Seguro S.A. and Subsidiaries 17. Financial liabilities ‐ consolidated Credit Card transactions (i)
Interbank deposits
Funds from acceptance and issue of securities
Liabilities from capitalization (ii)
December
2014
December
2013
2,920,498
687,638
2,169,859
318,390
189,263
4,115,789
681,409
179,370
80,447
3,111,085
(i) Refer mainly to amounts payable to merchants arising from credit card transactions. (ii) Consisting of reserves for redemptions and reserved for lot drawings. 18. Provisions The Company is party to lawsuits involving tax contingencies and labor and civil claims. Provisions arising from these lawsuits are estimated and periodically updated by management, based on the opinion of the Company's legal department and external advisors, however, there are uncertainties with respect to the determination of the likelihood of loss of the lawsuits, in the expected cash outflow amount and at the final term of these outflows. The balances of and changes in the provisions for risks are as follows: Porto Seguro S.A. and Subsidiaries Tax (a)
Labor (d)
Civil (e)
Total
2,390,197
182,538
(1,517,902)
(157,485)
229,007
16,354
6,714
(5,191)
(470)
1,827
42,915
21,566
(17,836)
(7,290)
3,547
2,449,466
210,818
(1,540,929)
(165,245)
234,381
1,126,355
19,234
42,902
1,188,491
(1,103,266)
(8,638)
(7,712)
(1,119,616)
23,089
10,596
35,190
68,875
Opening balance
Additions
Reversals
Payments
Monetary restatement
1,126,355
42,527
(4,810)
77,122
19,234
7,082
(5,204)
(1,583)
2,003
42,902
19,537
(13,580)
(6,010)
1,757
1,188,491
69,146
(23,594)
(7,593)
80,882
Closing balace
1,241,194
21,532
44,607
1,307,333
(1,193,538)
(7,165)
(9,076)
(1,209,779)
47,656
14,367
35,531
97,554
41
877
3,499
Opening balance
Additions
Reversals
Payments
Monetary restatement
Closing balace
(-) Judicial deposits
Net provision in December 31, 2013
(-) Judicial deposits
Net provision in December 31, 2014
Number of proceedings
4,417 (a) Provision for tax lawsuits When classified as legal obligations, the tax lawsuits are provided for regardless of the likelihood of loss. The legal obligations are provided for if classified as possible losses.The other lawsuits are provided for if classified as probable losses. The table below shows a breakdown of these lawsuits by nature: Porto Seguro S.A. and Subsidiaries December
2014
Parent
December
2013
13,307
12,537
513,917
458,180
-
-
244,472
222,794
61,960
58,366
197,811
184,832
INSS - independent contractors (iv)
Social contribution - deductibility from
tax base (vi)
-
-
173,533
164,004
-
-
65,854
64,229
Provision for PAT
-
-
17,755
13,549
Other
-
-
27,852
18,767
Total
75,267
70,903
1,241,194
1,126,355
(75,267)
(70,903)
(1,193,538)
(1,103,266)
-
-
47,656
23,089
Legal obligations
PIS (i)
Income tax (ii)
COFINS (iii)
Judicial deposits
Net provision
Consolidated
December December
2014
2013
(i) PIS The companies Porto Seguro, Porto Vida, Porto Saúde and Azul Seguros are challenging the levy of the Social Integration Program (PIS) contribution, introduced under the provisions of Constitutional Amendments 01/94, 10/96 and 17/97, which changed the calculation basis and the rate of the contribution, which began to be calculated on gross operating income. The subsidiaries are also challenging the applicability of Law No 9.718/98 as regards this contribution, which began to be calculated on gross revenue, regardless of accounting classification. In case of Constitutional Amendments 01/94, the company Porto Vida partially enjoyed the benefits under Law 11.941/09 and await the calculation of the remaining balance; for the portion still being challenged is pending judgment of the Special and Extraordinary Appeal filed by the company. The lawsuit filed by company Azul Seguros is currently awaiting judgment of the Extraordinary Appeal. The lawsuit filed by subsidiary Porto Seguro e Porto Vida challenging EC 10/96 is awaiting judgment of the Special and Extraordinary Appeal. The lawsuit filed by subsidiary Azul Seguros is currently awaiting judgment of the Extraordinary Appeal filed by the Federal Government. The lawsuit filed by companies Porto Seguro e Porto Vida challenging Constitutional Amendments 17/97 is awaiting judgment of the Special and Extraordinary Appeal filed by the companies. The lawsuit filed by company Azul Seguros, the escrow deposits in the amounts of R$ 1,054 were withdrawn. The lawsuit filed by subsidiaries Porto Seguro and Porto Vida challenging Law 9.718/98 is awaiting judgment of the Appeal filed by the companies and by the Federal Government. The lawsuit filed by company Azul is awaiting judgment of the Extraordinary Appeal filed by the Brazilian government, which was postponed until the judgment of Extraordinary Appeal 400.479 and Interlocutory Appeal 732.247. The lawsuit brought by Porto Saúde is awaiting Porto Seguro S.A. and Subsidiaries the judgment of the special and extraordinary appeals brought by the company, which were halted until judgment of the repetitive appeal by the STF. (ii) Deductibility of taxes and contributions from the IRPJ and CSLL calculation bases The companies Porto Seguro, Porto Vida, Porto Saúde and Porto Consórcio are challenging the constitutionality of the Law 8.981/95, which prohibited the deduction of taxes and contributions being discussed in court from the IRPJ and CSLL calculation bases on the accrual method. In December 2013 the companies have joined the Tax Debt Refinancing Program (REFIS), see item (b) below. (iii) COFINS With the enactment of Law No 9.718/98, insurance and pension plan companies, among others, became subject to Social Contribution on Revenues (COFINS) levied on their revenues, at the rate of 3% as from February 1999, and at the rate of 4% after the enactment of Law 10.684/03. The companies Porto Seguro, Porto Vida, Azul Seguros, Porto Saúde, Itaú Auto e Residência and Portopar challenged this taxation in court, as well as the tax basis established by Law 9.718/98, which classified revenues as equivalent to gross revenue The lawsuit filed by companies Porto Seguro and Porto Vida is currently awaiting judgment of Extraordinary Appeal and Constitutional Claim by the Federal Supreme Court (STF). The lawsuits filed by companies Porto Saúde and Portopar are currently awaiting judgment of the Special and Extraordinary Appeal filed by the companies. The lawsuit filed by company Azul Seguros is currently awaiting judgment of the Extraordinary Appeal filed by the company. The lawsuit filed by company Itaú Auto e Residência is currently awaiting judgment of the Appeal filed by the company. On December 12, 2013, in the lawsuit brought by Porto Cia and Porto Vida, the decision that acknowledged the invalidity of the Extraordinary Appeal was made final and unappealable, based on the judgment of the interlocutory appeal filed by the federal government, which is in progress at the Federal Supreme Court, and, on December 19, 2013, the loss of the subject of the Constitutional Claim also filed by the federal government was acknowledged. In light of the abovementioned decisions handed down, which ratified the non‐levy of COFINS on revenues, the companies reversed, in December 2013, the portion of provisions for risks relating to the levy of COFINS in the amount of R$ 1,492,919 (R$ 895,751, net of taxes), reversed in line items “Tax expenses” and “Finance costs” in the amounts of R$ 946,926 and R$ 545,993, respectively. (iv) National Institute of Social Security (INSS) ‐ independent contractors The companies Porto Cia and Azul Seguros are discussing in court social security contribution amounts, and requesting the suspension of this contribution on the compensation of independent contractors, proprietors and day workers, under Supplementary Law 84/96 and Law 9.876/99, since they understand that the additional 2.5% payment, instituted only for financial institutions and insurance companies, is improper. In December 2013 the companies have joined the Tax Debt Refinancing Program (REFIS), see item (b) below. Porto Seguro S.A. and Subsidiaries (v) PIS and COFINS ‐ revenues from interest on capital The Company has filed a lawsuit to challenge the legality and constitutionality of sole paragraph of article 1 of Decree No 5.164/04, which addresses the levy of PIS and COFINS on amounts received as interest on capital. Currently awaiting judgment the Special and Extraordinary Appeals filed by the Parent Company. (vi) Social Contribution on Net Income (deductibility from the Corporate Income Tax (IRPJ)calculation basis) The companies Porto Seguro, Porto Vida, Porto Saúde, Portopar and Azul Seguros are challenging the legality and constitutionality of Law 9.316/96, which prohibited the deduction of social contribution on net income from the Corporate Income Tax (IRPJ) calculation basis. In December 2013 the companies have joined the Tax Debt Refinancing Program (REFIS), see item (b) below. (vii) Social contribution (rate difference) The subsidiary Portopar is challenging in court the CSLL due to the rate difference in the period from 1991 to 1998, claiming the offset of the amount unduly paid. The credit was offset, but the subsidiary subsequently received a tax assessment from the Brazilian Federal Revenue Secretariat (RFB). In December 2013 the companies have joined the Tax Debt Refinancing Program (REFIS), see item (b) below. (viii) CSLL The company Rio Branco, merged into Azul Seguros, was challenged for the non‐payment of CSLL in the period from 1992 to 2000. The company is discussing the application of this tax assessment at the administrative level, once it was granted a favorable final and unappealable decision that grants it the right to not paying said tax. Currently awaiting the judgment of Special Appeals filed by the Brazilian government and the company, due to the decision that partially approved the Voluntary Appeal. (ix) Deductibility of interest on capital from the social contribution basis (1996) The company Porto Seguro is claiming in court the deductibility of expenses relating to interest on capital in the social contribution calculation basis, in the base period of 1996. The special and extraordinary appeals brought by the company are currently pending judgment. Upon cancellation of the no obligation to pay, the Company elected to pay the debt and the provision was reversed in June 2013. (b) Tax Debt Refinancing Program (“REFIS”) In December 2013 Porto Cia, Porto Vida, Porto Saúde, Azul Seguros, Porto Consórcio and Portopar have joined the REFIS (“Refis da Crise”), introduced by Laws 11.941/09 and 12.865/13, with the benefits set forth in the aforesaid laws. The payments relating to the participation in the program were made in cash, with the prompt payment of taxes and/or request for conversion of part of the deposits into federal government’s income. Porto Seguro S.A. and Subsidiaries The benefits introduced by REFIS, which was joined by the companies, enabled, in conformity with art. 1,§ 3, I of Law 11.941/09 and Law 12.685/13, the decrease by 100% of late payment and voluntary fines, 40% of individual fines, 45% of late payment interest and 100% of legal charges. The benefits from joining the tax debt refinancing program on the companies’ results was equivalent to R$ 63,256. Below is the debt amount included in the REFIS: INSS - independent contractors
CSLL (dedutibilidade da base de cálculo do
Social contribution - rate difference
Deductibility of taxes and contributions from
the IRPJ and CSLL calculation bases
Principal
Penalty
Interest
Total
63,308
110,487
604
17
-
70,436
38,140
1,528
133,744
148,644
2,132
103,651
99
127,472
231,222
278,050
116
237,576
515,742
In August 2014 companies Port Cia, Portopar and Port Protection and Monitoring joined the fiscal recovery program ‐ REFIS, established by Law no. 11.941 /09 and Law No 12.996 /14, with the benefits set forth in the aforesaid laws. The payments relating to participation in the program were made in installments. With future use of part of the tax losses of the parent company. The benefits introduced by REFIS, which was joined by the companies, enabled, in conformity with art. 1,§ 3, I of Law 11.941/2009 and Law 12.996/14, the decrease by 100% of late payment and voluntary fines, 35% of individual fines, 45% of late payment interest and 100% of legal charges. Below is the debt amount included in the REFIS: Principal
CSLL s/ JCP
CPMF
INSS
Demutualisation CETIP and BM&F PIS
Penalty
Interest
Total
5,712 ‐ 15,468 21,180 1,728 1,296 3,432 6,456 528 396 260 1,184 156 32 16 3 11 21 199 40 8,140 1,727 19,192 29,059 (c) Tax and social security contingencies The Company is a party to other tax and social security lawsuits which are not classified as legal obligations and are not recognized in accounting records, when assessed as possible or remote loss. The amount of tax and social security lawsuits whose likelihood of loss is assessed as possible is estimated at R$ 226,310 (R$ 204,048 in 2013). The lawsuit addresses the INSS levied on the Company’s profit sharing (see judicial deposit in note 11.2) (d) Labor claims The Company is party to various labor lawsuits. The most frequent claims refer to overtime, overtime effects and weekly remunerated rest period, termination pay, salary equalization Porto Seguro S.A. and Subsidiaries and undue payroll deductions. The likelihood of loss of these lawsuits is assessed as probable. The average term for the conclusion of labor claims in the Company is 30 months. In addition to the provisions recorded, there are other contingent liabilities in the amount of R$ 12,359 (R$ 9,689 in December 2013) with respect to which, based on the opinion of the Company’s legal counsel, losses are assessed as possible and no provision is recognized. Despite the uncertainties inherent in the determination of these liabilities, Management does not expect significant effects on the Company’s results of operations arising from the outcome of these lawsuits. (e) Civil claims The Company is party to civil. The most frequent claims refer to pain and suffering, property damages, bodily injuries and loss of suit. The likelihood of loss of these lawsuits is assessed as probable. The average term for outcome of these civil claims in the Company is 30 months. In addition to the provisions recorded, there are other unaccrued contingent liabilities, amounting to a risk of R$ 72,343 (R$ 58,593 in 2013), for which no provision is necessary, according to the opinion of the subsidiaries’ legal department (possible loss). Despite the uncertainties inherent in the determination of these liabilities, Management does not expect significant effects on the Company’s results of operations arising from the outcome of these lawsuits. 19. Other liabilities (i) December
2014
Consolidated
December
2013
185,904
132,680
88,596
284,281
94,606
83,519
Provision for loyalty credit card
Thrid-party deposits
86,922
72,187
63,659
83,991
Refund to consortium members
33,069
21,865
Post-employment benefits (ii)
27,369
20,841
Uncleared checks
13,341
15,682
3,070
11,506
55,246
69,294
Profit sharing
Suppliers
Provision for vacation pay and social
Business combination (iii)
Other
Current
Non-current
698,384
749,244
624,114
74,270
696,895
52,349 (i) Parent’s other liabilities mainly refer to profit sharing payable. (ii) See note 33.2. (ii) Refer to the amounts payable resulting the acquisition of Bioqualynet, payable by February 2018, monetary restateed by SELIC. Porto Seguro S.A. and Subsidiaries 20. Share capital and reserves ‐ Parent (a) Share capital At December 31, 2014 and 2013, subscribed and paid‐up capital is R$ 2,782,000, comprising 323,293,030 common nominative book‐entry shares, with no par value. The Annual/Extraordinary General Meeting held on March 28, 2013 approved the cancellation of 1,376,100 treasury shares in the amount of R$ 24,252 (all shares), without capital decrease, upon the use of the bylaws reserve. (b) Capital reserves In November and December 2004, 6,881,216 shares were issued at the unit value of R$ 18.75, of which R$ 6.89 were allocated to the "Share premium" account, totaling R$ 47,412. (c)
Treasury shares On February 13, 2014, the Board of Directors approved a new share repurchase program with the following conditions: 
Objective of the program: purchase of shares to be held in treasury and subsequently sold or cancelled, without capital reduction. 
Effective period of the program: start on February 21, 2014 and end on February 20, 2015. 
Number of shares to be purchased: up to the limit of 5 million shares. 
Financial Institution Authorized: Itaú Corretora de Valores S.A. In 2014, the Company does not have repurchase operations and treasury shares. (d) Earnings reserve (i)
Legal reserve The legal reserve, established through the appropriation of 5% of profit for the year, has the purpose of ensuring the integrity of share capital, in accordance with article 193 of Law 6.404/76. As at December 31, 2014, the balance was R$ 333,476 (R$ 289,684 in 2013). (ii)
Statutory reserve The purpose of the statutory reserve is to compensate for eventual losses or capital increases in order to protect the Company’s equity and ownership interest in its subsidiaries and associated companies or ensure future distribution to shareholders. The remaining balance of net profit, after recognition of the legal reserve and distribution of minimum mandatory dividend, may be allocated to this reserve, except if the Company’s management considers this reserve sufficient to meet the needs, in which case, in a specific year, the remaining balance, after recognition of the legal reserve and distribution of minimum mandatory dividends, is fully or partially distributed to shareholders or the reserve Porto Seguro S.A. and Subsidiaries is fully or partially reversed for the Company’s capital increase or distribution to shareholders. This reserve is limited to the Company’s capital. As at December 31, 2014, the balance was R$ 2,510,835 (R$ 2,151,466 in 2013). (e) Dividends and interest on capital Pursuant to the Company's bylaws, shareholders are entitled to receive minimum mandatory dividends of 25% of adjusted profit for the year of the parent company. The payment of mandatory dividends can be limited to the amount of profit realized financially, under the terms of the law. The payment of interest on capital (net of taxes) is imputed to the minimum mandatory dividends. The provision related to any amount that exceeds the compulsory minimum dividend will be recognized on the date it is approved, and up to such approval it will be maintained in equity, as shown in the statement of changes in equity. The Company’s management approved, at the Board of Directors’ meetings held on October 29, 2014 and December 11, 2014, the distribution to its shareholders of interest on capital amounting to R$ 228,140 (R$ 203,660 in 2013), net of income tax. Interest on capital is attributed to mandatory minimum dividends. The minimum dividends and the additional dividends proposed (to be approved at the Extraordinary/Annual Shareholders’ Meeting of March 27, 2015) were calculated as follows: Decem ber
2014
Net profit for the year
(‐) Legal reserve ‐ 5%
IFRS aqdjustment
Decem ber
2013
875,829 1,405,207 (43,791) (70,260)
(7,951) 1,421 Basic profit used to determine dividends 824,087 1,336,368 Mandatory minimum dividends ‐ 25% (*)
206,022 334,092 Additional interest on capital ‐ net Additional proposed dividends
22,228 205,689 ‐ 508,855 Total dividends/additional interest on capital 227,917 508,855 Total dividends
433,939 842,947 Total per share (R$)
1.34225 2.60738 (*) Comprised of net interest on capital already credited in the books and minimum dividends accrued. Mandatory minimum dividends separately disclosed in the statement of changes in equity include R$ 40,149, relating to the income tax (15% for shareholders resident in Brazil and differentiated tax rate for shareholders resident abroad) on the amount of R$ 246,171. Porto Seguro S.A. and Subsidiaries 21. Earned insurance premiums and net payments ‐ consolidated Earned premiums comprise issued insurance premiums, net of cancellations, refunds, and premiums ceded to other insurance companies and net payments of health plan. The amounts of the main insurance lines are as follows: Written
premiums
Premiums
ceded
(reinsurance)
December
2014
Net
premiums
earned
8,635,729
-
8,635,729
7,731,591
-
427,553
-
427,553
295,062
-
295,062
1,115,858
-
1,115,858
1,021,815
-
1,021,815
Personal
499,648
(14,040)
485,608
460,629
(11,295)
449,334
Property
1,088,661
(38,950)
1,049,711
914,217
(23,098)
891,119
Transportation
131,277
(347)
130,930
130,919
-
130,919
Financial risks
376,493
(6,332)
370,161
346,010
(5,652)
340,358
50,999
(26,052)
24,947
55,379
(30,525)
24,854
163,504
(1,003)
162,501
143,555
(1,040)
142,515
12,489,722
(86,724)
12,402,998
11,099,177
(71,610)
11,027,567
185,693
-
185,693
168,131
-
168,131
12,675,415
(86,724)
12,588,691
11,267,308
(71,610)
11,195,698
Automobile
DPVAT
Health
Other
Porto Uruguay
VGBL premiums
22. Written
premiums
Premiums
ceded
(reinsurance)
December
2013
Net
premiums
earned
7,731,591
Credit operations income ‐ consolidated December
2014
December
2013
Credit card
582,831
398,560
Interchange (*)
164,699
125,014
Financing
65,691
67,170
Lending
43,387
38,942
7,125
7,130
863,733
636,816
Others
(i) Refers to commission comes from the return of transactions processed credit card. Porto Seguro S.A. and Subsidiaries 23. Income from services‐ consolidated December
2014
Serviços Médicos
December
2013
Porto Consórcio
206,258
184,300
Serviços Médicos
135,545
110,724
Porto Atendimento
118,481
96,987
Proteção e Monitoramento
85,076
73,754
Bioqualynet e Bioqualynet Sul
49,031
37,894
Portopar e Porto Investimentos
Porto Serviços e Comercio
Other
38,083
21,771
40,719
29,293
24,674
24,324
694,964
581,950
24. Other operating income – consolidated December
2014
December
2013
Income - insurance (*)
37,895
58,465
Credit card
30,426
22,526
Pension plan
21,216
28,715
6,240
4,760
95,777
114,466
Other
(i) Refers primarily to revenue arising from contractual charges relating to DPVAT Agreement. 25. Changes in technical reserves ‐ consolidated December
2014
December
2013
Gross of
Net of
Gross of
Net of
reinsurance reinsurance reinsurance reinsurance
Unearned premiums reserves
569,819
561,313
629,247
630,688
Mathematical reserve
181,731
181,731
161,427
161,427
Reserve for prension plan
155,185
155,185
112,885
112,885
Other reserves
(15,551)
(15,551)
891,184
882,678
(5,701)
897,858
(5,701)
899,299
Porto Seguro S.A. and Subsidiaries 26. Retained claims ‐ consolidated Retained claims comprise reported indemnifications. The table below shows retained claims gross and net of recovery of reinsurance and co‐insurance and before salvages and reimbursements. Gross of
reinsurance
Automobile
December
2014
Net of
reinsurance
Gross of
reinsurance
December
2013
Net of
reinsurance
5,482,177
5,482,860
4,645,368
4,643,569
Health
872,591
872,591
928,290
928,290
DPVAT
373,791
373,788
258,271
258,272
Property
307,207
291,606
294,033
265,324
Financial risks
142,246
141,287
115,682
115,209
Personal
Porto Uruguay
136,659
88,627
133,048
88,627
136,329
78,109
128,403
78,109
80,995
64,592
68,342
58,845
7,484,293
7,448,399
6,524,424
6,476,021
Other
27. Amortization of deferred acquisition costs (*) Automobile
December
2014
December
2013
1,648,716
1,442,957
Property
291,153
255,530
Personal
126,610
103,065
Health
Financial risks
86,800
101,315
83,862
87,514
DPVAT
Porto Uruguay
Other
6,083
34,241
28,665
4,237
25,519
30,299
2,323,583
2,032,983
(*)Includes amortization of deferred acquisition costs (Note 10) and non‐deferred insurance selling expenses. Porto Seguro S.A. and Subsidiaries 28. Administrative expenses December
2014
Personnel and post-employment benefits
Parent
December
2013
Consolidated
December December
2014
2013
1,298
1,120
1,145,191
1,048,089
Outsorced services
691
1,190
444,695
361,094
Facilities and operations
Amortization of business combination - Itaú
Auto e Residência
439
262
536,769
460,464
12,622
12,622
13,989
13,875
Advertising and legal publications
Profit-sharing
538
13,927
516
14,308
144,511
212,846
137,187
308,482
-
5
47,514
25,313
416
3
49,285
44,824
29,931
30,026
2,594,800
2,399,328
Donations and contributions
Other
29. Tax expenses ‐ consolidated Parent
December
2014
COFINS (*)
PIS
Tax on services
Other
December
2014
December
2013
13,903
10,953
156,234
(685,095)
3,018
2,378
47,879
43,612
-
-
16,518
14,320
178
183
34,970
28,770
17,099
13,514
255,601
(598,393)
(*) See note 18 (a) (iii). December
2013
Consolidated
Porto Seguro S.A. and Subsidiaries 30. Other operating expenses ‐ Consolidated December December
2014
2013
Credit card expenses
Provision for credit risks - financial
Bonus expenses - Porto Socorro
Collection
Risk inspections
Policy and contracts administration
Expenses with anti-theft devices
Social charges on insurance transactions
Provision for credit risks - insurance
Other
328,269
223,565
82,242
74,816
72,452
68,247
66,316
38,169
369
152,494
231,167
145,581
63,677
62,124
66,255
67,923
61,082
35,482
(3,453)
124,662
1,106,939
854,500
31. Financial income December
2014
Net gains on changes in fair value and interest
revenue of financial assets at fair value through
profit or loss:
Revenue from interest on:
- Available for sale financial assets
- Payment of insurance premiums in
installments
PGBL /VGBL transactions
Monetary variations of judicial deposits
Other
30,375
(4,446)
-
Parent
December
2013
25,749
(4,326)
-
December
2014
Consolidated
December
2013
460,818
301,051
245,687
17,366
268,776
253,880
2,019
1,617
161,270
66,393
87,555
82,034
35,310
51,264
27,948
23,040
1,290,499
740,905
Porto Seguro S.A. and Subsidiaries 32. Financial costs ‐ Consolidated December
2014
December
2013
104,145
63,920
PGBL transactions
98,609
48,895
VGBL transactions
Monetary variations on provision for long-term taxes (*)
71,957
54,475
32,361
(349,339)
Pension Plan transactions
37,914
(34,294)
Other
17,519
21,230
Insurance transactions
384,619
(*) See note 18 (a) (iii). (217,227)
33. Employee benefits ‐ Consolidated 33.1. Pension plan In 1994, Porto Seguro implemented a defined contribution pension plan, according to IAS 19, for their employees, through Portoprev ‐ Porto Seguro Previdência Complementar, a nonprofit, private pension fund. Under this plan's regulations, the main funds are represented by contributions from the plan's sponsors and participants, and the yield on the related investments. Contributions made by participants vary from 1% to 6% of each participant's salary, and the sponsor's contribution corresponds to 100% of the participant's contribution. In December 2014, the entity had 5.2 thousand active participants (5.0 thousand in December 2013). The Company’s contribution to the plan amounted of R$ 13,105 in December, 2014 (R$ 11,524 in December 2013). Porto Seguro S.A. and Subsidiaries 33.2 Post‐employment benefits Changes in obligations with post‐employment benefits are as follows: December December
2014
2013
Present value of actuarial liability in the
beginning of the year
Cost of benefits
Cost of interest
Benefits paid
Initial recognition
Effect - payment/reduction
(Gain)/loss on the actuarial liability
20,841
1,378
2,288
(1,418)
1
4,279
35,186
2,927
3,061
(1,577)
107
(13,433)
(5,430)
Liability final balance
27,369
20,841
Actuarial Gains /(losses) in other
comprehensive income
9,157
13,557 The actuarial assumptions are reviewed on an annual basis. The principal actuarial assumptions used for December 31, 2014 were as follows: Discount rate (annual)
Future salary increases (annual)
Economic inflation (annual)
Medical inflation (annual)
Rate of FGTS balance variation (annual ‐ nominal
Life insurance capital
6.00% to 6.25%
3.00%
4.50%
4.00%
4.55%
R$ 31.1 Porto Seguro S.A. and Subsidiaries 33.3 Other benefits December
2014
Food and meal vouchers
Health and dental assistance
Transportation vouchers
Child daycare assistance
Tuition
December
2013
135,069 130,774 79,206 67,313 30,412 10,532 6,030 5,196 6,104 6,203 256,821 220,018 34. Earnings per share ‐ Parent Company Basic earnings per share of the Company is calculated by dividing the profit attributable to shareholders by the weighted average number of shares outstanding during the period, excluding shares held in treasury repurchased by the Company and classified as treasury shares in the financial statements, as a deduction from the Company's equity. During the period, the Company did not have liability financial instruments convertible into shares of the Company or transactions that would generate a dilutive or anti‐dilutive effect (as defined in IAS 33) on earnings per share. Accordingly, basic earnings per share for the period are the same as diluted earnings per share. The basic earnings per share is shown in the table below: December
2014
Profit attributable to the shareholders of the Company
Weighted avarage number of shares outstanding during
the year
Basic and diluted earnings per share - in R$
December
2013
875,829
1,405,207
323,293
323,293
2.71
4.35 Porto Seguro S.A. and Subsidiaries 35. 35.1 Other informations Insurance ‐ consolidated The insurance practices of the Company contemplate mainly the concentration of risks and their significance, and insurance coverage is considered sufficient by management taking into consideration the nature of operations. The insurance coverage is as follows: Items
Types of coverage December
2014
December
2013
Buildings
Any damage to buildings, installations and machines and equipment 252,523 230,497 Fire, theft and collision ‐ optional civil liability 6,248 6,723 258,771 237,220 Vehicles
35.2 Social balance sheet Porto Seguro is also presenting the social balance sheet, which discloses social and environmental indicators, headcount data, and relevant information on exercising corporate citizenship. Some information was obtained using subsidiary records and certain managerial information. ***
AUDIT COMMITTEE’S REPORT
The Audit Committee of Porto Seguro S.A. is a statutory body subordinated
to the Board of Directors, comprised of independent members, in
accordance with best corporate governance practices adopted by companies
with shares traded on the Novo Mercado segment of the BM&FBovespa
S.A. - Bolsa do Valores, Mercadorias e Futuros, and complies with
conformity with the prevailing law, in particular Resolution 312/2014, of the
National Private Insurance Council (CNSP), as well as National Monetary
Council Resolution 3198/04.
The work scope of the Audit Committee encompasses all companies in the
Porto Seguro conglomerate, which committee is operated through Porto
Seguro S.A., a publicly-held company holding the controlling stake in the
companies comprising the conglomerate. The companies supervised by
SUSEP: Porto Seguro Ccompanhia de Seguros Gerias, Itaú Seguros de Auto
e Residência S.A., Azul Companhia de Seguros Gerais, Porto Seguro Vida e
Previdência S.A. e Porto Seguro Capitalização S.A.
The management of Porto Seguro S.A. is responsible for the preparation,
presentation and integrity of the financial statements of Porto Seguro S.A.
and its subsidiaries, as well as for the implementation and maintenance of
internal controls that are adequate to the complexity of transactions, strictly
in conformity with the accounting practices adopted in Brazil, including the
pronouncements issued by the Accounting Pronouncements Committee and
International Financial Reporting Standards (IFRSs) issued by the
International Accounting Standards Board (IASB).
Deloitte Touche Tohmatsu Auditores Independentes audits the financial
statements of Porto Seguro S.A. and its subsidiaries, including the
consolidated financial statements. Based on the audit work, conducted in
accordance with the Brazilian and international standards on auditing, the
independent auditor issues an opinion on whether these financial statements
present fairly, in all material respects, the financial position of Porto Seguro
S.A. and its subsidiaries as at the balance sheet date, and their financial
performance and their cash flows for the period then ended in accordance
with accounting practices adopted in Brazil with respect to individual
financial statements and, with respect to consolidated financial statements,
also in accordance with International Financial Reporting Standards (IFRSs)
issued by the IASB.
The Audit Committee is mainly responsible for independently analyzing,
monitoring and issuing recommendations on: (1) the financial statements of
Porto Seguro S.A. and its subsidiaries; (ii) the internal control systems of
Porto Seguro S.A. and its subsidiaries; (iii) the compliance with legal and
regulatory provisions applicable to Porto Seguro S.A. and its subsidiaries,
considering the characteristics inherent in each entity, in addition to internal
rules and policies; (iv) the work performed by the internal and external audit,
staff and (v) the integrity or improvement of policies, practices and
procedures identified under the scope of the work.
Based on its bylaws, in 2014 the Audit Committee has performed the
following activities, among other, and relevant matters, including the
companies supervised by SUSEP: (a) analyze, approve, and monitor the
annual internal audit activity plan for 2014; (b) hold meetings with various
organization functions; (c) request, analyze, and monitor information and
reporting on the internal control and risk management environment
framework and functioning; (d) assess the level of the work performed by
internal and external audit staff, and the independence policy maintained; (e)
request and analyze the documentation related to the accounting and
financial aspects of the Group and the ongoing legal proceedings; and (f)
analyze the compliance with regulations relevant to the industries where
Porto Seguro S.A. and its subsidiaries operate.
The Committee met the independent auditor and became aware of the report
on the financial statements for the year ended December 31, 2014 of Porto
Seguro S.A. and subsidiaries (consolidated).
Thus, in reliance upon the activities performed during the period and based
on the limitations arising from the scope of its work, the Audi Committee
understands that the financial statements of Porto Seguro S.A. and
subsidiaries (consolidated), including the companies supervised by SUSEP,
for the year ended December 31, 2014 have been prepared in conformity
with the accounting practices adopted in Brazil and International Financial
Reporting Standards (IFRSs) issued by the International Accounting
Standards Board (IASB), and recommends its approval by the Board of
Directors.
São Paulo, February 11, 2015
Alfredo Sérgio Lazzareschi Neto
Evandro César Camillo Coura
Ricardo Baldin
(Convenience Translation into English from the Original Previously Issued in Portuguese)
INDEPENDENT AUDITOR’S REPORT
To the Management and Shareholders of
Porto Seguro S.A.
São Paulo - SP
We have audited the accompanying individual and consolidated financial statements of Porto Seguro
S.A. (“Company”), identified as Parent and Consolidated, respectively, which comprise the balance
sheet as at December 31, 2014 and the statements of income, comprehensive income, changes in equity
and cash flows for the year then ended, and a summary of significant accounting policies and other
explanatory information.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of the individual and consolidated
financial statements in accordance with accounting practices adopted in Brazil and the International
Financial Reporting Standards (IFRS) 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.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Brazilian and International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the Company
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Deloitte Touche Tohmatsu
Opinion
In our opinion, the individual and consolidated financial statements referred to above present fairly, in
all material respects, the financial position of Porto Seguro S.A. as at December 31, 2013, and its
individual and consolidated financial performance and cash flows for the year then ended, in accordance
with accounting practices adopted in Brazil and the International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board (IASB).
Other matters
Statements of value added
We also have audited the individual and consolidated statements of value added (“DVA”) for the year
ended December 31, 2014, prepared under the responsibility of the Company´s management, the
presentation of which is required by the Brazilian corporate legislation for listed companies, and
considered as supplementary information for IFRS that does not require the presentation of DVA. These
statements were subject to the same audit procedures described above and, in our opinion, are fairly
presented, in all material respects, in relation to the financial statements taken as a whole.
The accompanying financial information has been translated into English for the convenience of readers
outside Brazil.
São Paulo, February 11, 2015
DELOITTE TOUCHE TOHMATSU
Auditores Independentes
Francisco Antonio Maldonado Sant’Anna
Engagement Partner
2
EXECUTIVE BOARD
Jayme Brasil Garfinkel
Marco Ambrogio Crespi Bonomi
Lucia Fernandez Hauptmann
Evandro César Camillo Coura
Caio Ibrahim David
Pedro Luiz Cerize
Fernando Kasinski Lottenberg
President
Vice President
Board member
Board member
Board member
Independente Director
Independente Director
EXECUTIVE BOARD
Rosa Garfinkel
Fábio Luchetti
Luiz Alberto Pomarole
Marcelo Barroso Picanço
Lene Araújo De Lima
Honorary President
President Director
Managing Director
Chief Financial Officer and Investor Relations Executive Officer
Chief Legal Officer
Celso Damadi
Accountant ‐ CRC 1SP197919/O‐2