2011 ANNUAL REPORT. Porto Seguro S.A ANNUAL REPORT

Transcription

1 2011 ANNUAL REPORT 1

2 2011 ANNUAL REPORT Table of Contents 01. A Message from the CEO 02. ABOUT US Corporate Profile Our History Business Strategy Acknowledgements Corporate Governance Corporate-Governance Structure 03. OUR PRODUCTS Porto Seguro Auto Itaú Auto e Residência Azul Seguros Health & Dental Insurance and OHS & Outpatient Services Basic Lines Annuities and Retirement Plans Porto Seguro Aluguel Porto Seguro Transportes Financing and Credit Card Consórcio Protection and Monitoring Porto Seguro Investimentos SUSTAINABLE COMPANY Sustainability at Porto Seguro Corporate Social Responsibility Environmental Responsibility Cultural Responsibility 05. BUSINESS PERFORMANCE Industry Scenario and Prospects Our Performance MISCELLANEOUS INFORMATION GLOSSARY CREDITS

3 01. A MESSAGE FROM THE CEO In 2011, earned premiums for the auto insurance segment added up to BRL 5,747 million, a BRL 312 million or 5.8% increase over the BRL 5,434 million in In turn, earned premiums for the health insurance segment worked out at BRL 852 million in 2011, with a BRL 137 million or 19.2% increase over BRL 715 million in In 2011, our policyholders and their dependents amounted to 567,000, a 27% increase over the 447,000 figure in In 2011, our net income added up to BRL 580 million, recording a 6.9% decrease over the BRL 623 million we earned in This decrease is mainly due to an increase in retained loss expenses and the necessary administrative costs to sustain our distinguished service strategy. The year 2011 was also filled with investments. We repositioned the Itaú Auto e Residência brand, which now relies on special benefits for Banco Itaú account holders. We continued to invest in the improvement of our research park and our operational and business relations with insurance brokers. The year 2011 was filled with accomplishments and challenges. The environment of economic growth in Brazil, in spite of the crisis in developed countries, continued to propel the insurance market, which saw a nearly 16% growth over The insurance industry penetration in Brazil represents development opportunities, chiefly due to the expansion of the emerging Brazilian middle class. Within this context, 2011 continued to single us out in terms of quality of service, service delivery, and convenient solutions for more than six million families and corporate clients. We work with three auto insurance brands: Porto Seguro, Itaú Auto, and Azul Seguros. With these, we meet the various needs of our different audiences, our insurance brokers, and our policyholders. We ended 2011 with nearly 4.1 million insured vehicles and a total of over 11.6 million items covered by our products, which represents a 32% increase over the previous year. Earned premiums amounted to BRL 8,426 million, with a BRL 661 million or 8.5% increase over the sum of BRL 7,765 million in 2010, which does not factor in the Brazil-specific Roth individual retirement accounts (VGBL, acronym in Portuguese). In addition, we took on the challenge of managing Itaú Seguros tow truck and guaranteed hire car services. Now, three companies are managed by only one platform. The integration of auto insurance assistance resulted in a 28% growth in the volume of tow truck and guaranteed hire car services that are managed by Porto Socorro. Additionally, we enhanced both results and operational structure of other businesses, such as credit card, financing, consórcio, monitored alarms, among others. Income from such businesses grew by about 27% over I would also like to emphasize that we established Porto Seguro Telecomunicações S.A., a company that provides phone services. We optimized the internal management of cell phone costs. In addition, we seized the opportunity of bringing together our insurance products to add mobility to our clients and insurance brokers. Within the context of campaigns and actions, I would like to emphasize the Porto Vias campaign, a service that provides drivers with real-time traffic information over notebooks, smartphone applications, or desktop computers. The driver, either in São Paulo or Rio de Janeiro, chooses the best way to get to his or her destination. I would also like to emphasize the Trânsito+Gentil movement, a Porto Seguro Auto initiative for drivers to avoid aggressive behavior and treasure a more tolerant attitude as well as a quality-of-life program for employees, training for service providers, and policyholder benefits, such as cultural and food discounts. I would like to thank all of our employees, providers, and insurance brokers, who did their job with dedication and commitment, during Jayme Brasil Garfinkel CEO, Porto Seguro Our results also singled us out in terms of growth of total revenue, which, including net finance revenue, added up to BRL 10,155 million, a growth of BRL 979 million or 10.7% over the BRL million during the previous year. 3

4 MISSION STATEMENT Our mission is to underwrite risks and provide services with a family feel that exceeds expectations while ensuring quickness at competitive rates with social and environmental responsibility. What good is it to build skyscrapers if there are no human souls to live in them. Érico Veríssimo OUR PHILOSOPHY The Porto Seguro Corporation is a collection of people that includes employees, managers, stockholders, brokers, service providers, and business partners that, individually and collectively, guide their actions by the following core values, examples, and undertakings: 1. Cooperation, transparency, justice, and customer service with genuine interest are our core values; 2. The pursuit of perfection requires humility, determination, and patience; 3. Everyone is entitled to participate and state his or her opinions through dialogue according to egalitarian and ethical principles; 4. Mistakes happen and must be immediately owned and rectified as a learning, improvement, and growth opportunity; 5. Jobs must be performed enthusiastically and taken as an opportunity to grow; 6. Dedication must go beyond the duties of your role; 7. You must not use your job for personal gain and you must keep a no-nonsense attitude with no cult of personality; 8. We are duty-bound to make simple, flexible, agile, and integrated managerial efforts; 2012 VISION STATEMENT In 2012, we would like to be acknowledged as a beautiful, lean, healthy, and mythical corporation: Where customer service with genuine interest is ever-present; That is a benchmark for applying ethical principles contained in our Corporate Philosophy and for being oriented towards simple and deep concepts; That is a benchmark for designing creative solutions, seizing opportunities fully, and being present in the everyday lives of clients from all levels of income; That provides employees, brokers, partners, and service providers with conditions to learn, grow, and hone their skills according to our corporate goals; That respects the competition and works towards protecting and developing the segments where we operate; That is composed of companies, product divisions, and corporate departments that work together, grow continuously, and are interconnected by shared management principles; That relies on governance and planning processes as well as internal controls that empower proactivity, self-control, and autonomy with responsibility, quickness, and common sense; That is sound and admired because of our profitability and our financial potential and that relies on a vast and loyal sales network; That is a benchmark for client satisfaction, growth, organizational climate, and social responsibility in the markets where we operate. 9. We must prepare successors that are able to expand our horizons; 10. Professional fulfillment must come as a result of the encouragement of self-development and the search for new challenges. Our mission is to underwrite risks and provide services with a family feel that exceeds expectations while ensuring quickness at competitive rates with social and environmental responsibility 4

5 02. ABOUT US Corporate Profile We operate in the insurance market, which, via our direct and indirect subsidiaries Porto Seguro Cia., Porto Seguro Saúde, Porto Seguro Vida e Previdência, Porto Seguro Uruguay, Azul Seguros, Itaú Auto e Residência, among others, and provide individuals, families, corporations, and government bodies in Brazil, especially in the states of São Paulo and Rio de Janeiro, and Uruguay with a wide range of products. Currently, we are four largest insurance carrier and the leading auto and homeowners insurance company in Brazil. In Uruguay, we are the second biggest auto insurance company. Since our company was established in 1945, we try to expand our businesses by using innovation, which is applied to the improvement of products and services and the development of new solutions that meet the needs of all of our clients. Based on this strategy, our portfolio is growing constantly, which turns Porto Seguro into a brand that is ever-present in the everyday lives of people at all times. Bike Serviços, Serviços Avulsos, Porto Vias, and Auto Mulher are examples of customized products and services that are a part of the everyday lives of a growing number of clients, who have various needs. Our corporation is composed of nineteen (19) companies, which are divided into insurance carriers, financial-services firms, and general service providers. In 2003, we expanded our footprint in the insurance market by acquiring Azul Seguros previously known as AXA Brasil, with options for the auto, property, and life segments (with the exception of retirement products). In 2009, we associated with Itaú Unibanco to create a new company, Itaú Seguros de Auto e Residência. In 2011, we established Porto Seguro Telecomunicações S.A., a phone service provider. Group Companies LINES OF INSURANCE Porto Seguro Companhia de Seguros Gerais Porto Seguro Vida e Previdência S/A Porto Seguro Saúde S/A Established in 1945, this is the main company in the group. It operates auto, property, renters, and inland marine insurance portfolios. Established in 1986, it exclusively operates in the lines of life insurance and individual retirement arrangements. This company has been operating in the healthcare industry for more than 10 years. It works with health and dental insurance for corporations as well as small and midsized businesses. Porto Seguro Seguros del Uruguay S/A Azul Seguros Itaú Seguros de Auto e Residência S/A Established in 1995, it is the second largest auto insurance company in Uruguay. It works with the lines of auto, homeowners, fire and theft, renters, farm machinery, glass, liability, and inland marine insurance, among others. After acquiring Axa Seguros, it became a part of the Company in 2004 under the corporate name Azul Seguros. It operates in the line of auto insurance. It became a part of Porto Seguro in 2009 after an association with Banco Itaú Unibanco. It operates in the lines of auto and homeowners insurance in Brazil. 5

6 OTHER SEGMENTS Portoseg S/A Portoseg Promotora de Serviços S/C Ltda. Porto Seguro Administradora de Consórcios Ltda. Established in 2002, it operates in the payday loan, working capital, vehicle financing and refinancing, and investment segment. It has been renewing and prospecting for new businesses for insurance brokerage firms for more than 10 years. With over 25 years in business, it operates in the automobile, realestate, and professional equipment consórcio business. Porto Seguro Proteção e Monitoramento Ltda. Portopar Distrib. de Títulos e Valores Mobiliários Ltda. Crediporto Promotora de Serviços Ltda. Established in 1998, it operates in the around-the-clock property, transportation, and vehicle monitoring and tracking industry. Established in 1996, Porto Seguro Investimentos specializes in asset management and financial consulting. Established in 2007, it distributes Portoseg s products. Porto Seguro Serviços Médicos Ltda. Porto Serviços S/A Porto Seguro Atendimento S/A Established in 1996, it provides outpatient health services and prepares and implements occupational-health programs. Established in 2008, it provides services to corporate and residential condominiums. Established in 2009, it provides outbound and inbound telemarketing, communications, call center, and general customer support services. 6

7 Groundbreaking Products and Services In 2011, we broke new ground and expanded our range of products and services. Highlights included: Porto Seguro Consórcio Professional Equipment: we expanded our businesses to include consórcio transactions for professional equipment. Porto Seguro Eventos: this line of insurance includes a wide range of coverage for organizers, attendees, and associates. Basic coverage insures you against property or bodily damage to third parties or the policyholder s employees arising from several perils, such as cancellations or accidents. Portable Equipment Insurance: this line expanded coverage and now covers the ipad and similar devices, insuring you against perils such as aggravated theft or larceny, fire, lightning, explosion, and other consequences, as well as additional coverage against electrical damage. Porto Seguro Residência e Equipamentos Portáteis: this free disposal service is now available for electronic devices. This service is delivered in association with Descarte Certo, a Brazilian company specializing in picking up and recycling cell phones, smartphones, CPUs, printers, laptops, camcorders, among others. Porto Seguro Shipping Insurance: this provides you with insurance coverage when shipping goods. It gives you a set of basic and additional coverage for trucking and air carriage. This insurance policy protects you against several unforeseen events. Porto Seguro Residência Veraneio: this homeowners insurance policy contains vacation home-specific coverage. It insures you against several types of perils, from fire to explosion to theft to electrical damage to personal and family liability. Seguro Residencial Itaú: this insurance is now offering you environmental services that contribute to environmental protection. These include: environmental education, where policyholders learn how to use natural resources and avoid waste, and smart disposal, where we pick up items that are no longer being used, such as furniture, electronics, and appliances. Porto Seguro Viagem: this insurance policy gives ample coverage to travelling policyholders. You can buy this insurance policy for domestic or international trips and include medical assistance, luggage tracking, trip interruption and cancellation services, as well as a travel schedule, recommendations and reservations for hotels, restaurants, and parks, car rental discounts, among others. Porto Seguro Telecomunicações: we cover the entire Brazilian territory with our mobile virtual network operator (MVNO) footprint. We enter this industry with Datora Telecom and TIM is our network provider in all Brazilian states. We intend to optimize our internal management of cell phone costs and take the opportunity to bring together our insurance products to add mobility to our clients and insurance brokers. We are now deploying our infrastructure and establishing our business model, but MVNOs are expected to attract 16 million subscribers in Brazil and reach USD 1 billion in sales within the next five years. CORPORATE VALUE ADDED 2011 X % % 4% 5.2% 12.6% 17.2% % 34.8% 36% HUMAN RESOURCES GOVERNMENT REINVESTMENT OF PROFITS DIVIDENDS AND INTEREST ON EQUITY INTEREST AND RENT 31% 7

8 Our History 1945 The history of dates back to August 27, 1945, when José Alfredo de Almeida, José da Cunha Júnior, and José Andrade de Souza, officers of the Banco Brasileiro de Descontos (Bradesco), with Amador Aguiar acting as Managing Director, establish Porto Seguro Companhia de Seguros Gerais, which is authorized to conduct insurance and reinsurance operations in lines that include fire, inland marine, disability, and mutiny. Our operations were restricted to the city of São Paulo. At that time, we placed forty-fourth in the Brazilian insurance market and only had 25 employees On December 17, 1947, we open our first branch in Rio de Janeiro to operate in the same lines as the São Paulo headquarters We acquire Rochedo Companhia de Seguros, thereby unifying our management and establishing the Porto Seguro Insurance Group (Central, Porto Seguro, and Rochedo). With this corporate association, we were trying to raise the technical limit insurance carriers in Brazil were required to observe This was our expansionary phase due to a boom in the auto portfolio. However, the number of delinquent policyholders increases as well. This portfolio starts to be deemed high-risk The Porto Seguro Insurance Group acquires Companhia Renascença de Seguros. Due to our expansion, we move to the headquarters of Renascença, which is based at Rua do Tesouro, São Paulo, Brazil. This year, insurance professionals go on strike and demand pay increases. This movement, which was covered by the media, publicizes insurance in general and this category of employees in particular Policies were typewritten and, for group policies, we used mimeograph machines and stencil. The Porto Seguro Group was deemed to be privileged, since we had modern calculators and typewriters, while many insurance carriers in the market were still issuing handwritten policies. At that time, our official color was green The Reinsurance and Fire departments become one, which allows us to rationalize our procedures and, as a result, streamline our service Quirino Ferreira, our Chief Executive Officer, engaged the services of a Canadian consulting firm to rationalize our internal procedures. This firm prepared a study to simplify the operations of all of our departments. For instance, insurance applications, which were previously specific to each line, were now consolidated. Based on this rationalization, there was a single application with different exhibits for each line. On that same year, we sold our controlling interest in Renascença to Calil Eid Mansur We move to our new headquarters in Avenida Paulista, São Paulo, Brazil. We transferred almost all of our 150 employees, our staff at the time, to the then recently erected building On May 10, 1972, Abrahão Garfinkel and Felippe Cardilo quit from Boa Vista and join Porto Seguro. On that occasion, as a result of compensation for losses, we owed four times the amount for which we were acquired. The only way out from this critical situation was to produce and invest a lot and turn insurance brokers into business partners and great allies. With this mindset, a new managerial stage begins. The color of printouts, which up until then was green, starts being blue We purchase a plot of land in Avenida Rio Branco, Campos Elíseos Neighborhood, São Paulo, Brazil, and start building our new headquarters. That year, two garages, Repar and Sevepe, as well as the Guaporé General Motors Dealership join our Group On November 15, we move to our own headquarters in Avenida Rio Branco. This best-in-class building design stood out for its functionality, its hanging garden, and its thirteen storeys On June 27, CEO Abrahão Garfinkel passes away. Rosa Garfinkel is appointed to act in his stead. Jayme Brasil Garfinkel becomes our Executive Vice President. On the first floor of our headquarters, we open the Porto Seguro Art Room We buy two two-storey houses located in Rua Guaianases in downtown São Paulo. These houses belonged to the Dino Bueno family, who resided there until 1933, and were then ceded to the Salesian Congregation of the Daughters of Mary Help of Christians, which used it as a boarding school. These two-storey houses were designated as historic by the Brazilian Historic Landmark Defense Council (CONDEPHAAT, acronym in Portuguese) that same year. The 24-Hour Porto Seguro Call Center started operating with a staff of nine on-call employees, who rotated the role of taking calls on theft, larceny, and collision events We became the first company to install an A-10 computer, with 12 MB of RAM, in São Paulo. This change leads to a revamp of our entire data center Our new headquarters in Rua Guaianazes are opened with a party for employees from Corporate and branches. We start distributing keycards, a spare plastic card to be used when the original key goes missing, to policyholders. We deployed the Professional Education and Retraining (FAP, acronym in Portuguese) program, which prepares practical courses for inspectors, auto body workers, mechanics, and painters that work for Porto Seguro Serviços. The FAP has a classroom and a teaching shop with a paint booth, a dismantled car, and purpose-specific tools. This initiative was later extended to the other shops of our Group We sell our controlling interest in Companhia Central We merge with Companhia Rochedo, which ceases to exist. Thus, we became a single company. 8

9 We implemented a documentation center and a library at our headquarters. We broke new ground when we offered policyholders a kit containing water and crackers while assisting them. This was the brainchild of an employee to improve the experience of policyholders while they waited for their cars to be fixed Porto Seguro del Uruguay, our subsidiary based in Montevideo, starts operating according to the Mercosur integration trend. Our operations start with an auto insurance portfolio. We establish Porto Seguro Vida e Previdência S.A We launch the Porto Seguro Electronic Service initially for the Auto Losses department to check the necessary documentation to commence procedures, schedule payments, authorize payments to shops, and calculate deductibles. We inaugurate Porto Seguro Online, our new website, which aims to become a major source of information for policyholders and nonpolicyholders alike. It is divided into two major areas, a general one and another for brokers Our funds start to be managed by Portopar Distribuidora de Títulos e Valores Mobiliários Ltda. We become a holding company in September We establish Portonline, the first Internet service provider for insurance brokers only. This service was originally released in São Paulo at no cost and with unlimited access, including technical support We opened our first 24-Hour Automotive Center to provide emergency mechanical, electrical, and tire and wheel repair services. In November, we acquired AXA Brasil, a subsidiary of AXA, a French multinational insurance company. After the acquisition, the company was renamed to Azul Seguros. After this deal, we expanded our presence worldwide, particularly in the lines of auto, property, and life insurance (which does not include retirement plans) We launch our initial public offering (IPO) and enter the New Market, a listing segment of the BM&FBovespa, which leads to the adoption of corporate-governance practices that go beyond legal requirements. On the first day of trading, our shares were sold at BRL 19.95, a 6.4% increase over our issue price of BRL per share. We open the Casa Campos Elíseos Melhor, a neighborhood improvement location that aims to generate income and education for the community of the Campos Elíseos neighborhood in São Paulo, Brazil We create the 4004-Porto, our easy-to-remember phone number, which is available for policyholders from several Brazilian regions to request emergency auto and / or home services. We opened our new Porto Seguro Automotive Centers for a total of 48 units. We expanded our presence in the health insurance market. Porto Seguro Saúde starts operating in new cities We merge with Itaú Unibanco Holding to integrate our homeowners and auto insurance operations. For these products, we adopt the Porto Seguro, Itaú Auto e Residência, and Azul Seguros brands We release an app to file auto insurance applications via iphone. We open the first Quick Repair Shops (CARs, acronym in Portuguese), which provide policyholders with the necessary structure to give them peace of mind when navigating their way through losses. Automotive Centers for Motorcycles: Porto Seguro Auto opened new specific automotive centers for motorcycle repair and maintenance services. Automotive Waste Management: we deployed a automotive waste management system at the Porto Seguro Automotive Centers. Any hazardous waste is recycled and / or co-processed, which minimizes any environmental impact. In 2010, we recycled about 178 tons of auto junk We are the fourth largest insurance company and the leader in auto and homeowners insurance in Brazil. In addition, we employ over 13,000 professionals, who are divided into 130 offices and 4,917 Itaú bank branches across Brazil. We also rely on nearly 24,000 independent brokers and 10,000 service providers, with exclusivity agreements. We were authorized by the Brazilian National Telecommunications Agency (ANATEL, acronym in Portuguese) to do business as Porto Seguro Telecomunicações. AXA Seguros is then renamed to Azul Companhia de Seguros Gerais or Azul Seguros for short. This name was chosen in a contest between brokers We open our first Automotive Center in Rio de Janeiro. 9

10 Business Strategy We strive for growth and profitability through continued expansion. As a leading auto and homeowners insurance company in the main Brazilian regions, we try to increase our share in other market segments. Our strategy is based on four pillars: Segmentation Outstanding Broker and Customer Service Groundbreaking products and services Sophisticated risk selection and pricing model Three brands to meet different needs and preferences Different offers to add value: specific services, rates, benefits, and convenience High service level based on familiar service Focus on long-term relationship Above-market-average renewal rates Portfolio with innovative, synergetic products (cross-selling opportunity) Services that go beyond the basics (home, auto and people) Services as main branding asset Yield-based product pricing Sophisticated statistical models and a robust database Historical loss ratio below the market average Our brokers play the fundamental role of implementing our corporate strategy. This is why we promote campaigns to encourage this audience on an annual basis. In 2011, the Conquistadores and Carga Premiada campaigns, the former about annuities and retirement plans and the latter about Porto Seguro Transportes, are examples of this. We also conducted a campaign that was especially oriented towards corporate health insurance products, particularly occupational safety and health and Porto Seguro dental insurance. For such initiatives, the best-performing brokers are rewarded for their contribution to our business. We strive for growth and profitability through continued expansion 10

11 Acknowledgements 2011 THE GREATEST MARKETING COUPS AWARD We were acknowledged because of two major marketing initiatives during a forum of the same name that was held on May 4 in São Paulo, Brazil by the Brazilian National Corporate Modernization Center. We were awarded in the Services category for the Trânsito+Gentil movement ads, which encourage politeness in traffic, as well as Porto Seguro Auto Mulher, an auto insurance policy that exclusively designed for women. Trânsito+gentil In order to draw the attention of drivers, pedestrians, and the general public to the importance of adopting more police and respectful attitudes in traffic, the Trânsito+Gentil movement involves several actions that range from delivering stickers and gifts containing our logo to placing ads in newspapers, magazines, radio and television to posting videos on the Internet. You can follow up on all the initiatives by visiting online. You can also on Twitter. By March 2011, we had distributed over 3.5 million campaign stickers. Brazilian celebrities from soap operas, comedy shows, stand-up comedy acts, among others, such as Giovanna Antonelli, Reynaldo Gianecchini, and Marco Luque, starred in these videos. This movement started in 2009 in São Paulo and, since March 2011, it has been sweeping Brazil. Porto Seguro Auto Mulher We created these ad campaigns to mirror the concerns over designing a product to meet the specific needs of women and they were based on their needs according to surveys we conducted with them. Since women were looking for increased practicality to reconcile personal care with their careers and families, this product includes a number of special aids in the Porto Socorro Mais Mulher clause, such as a taxicab to take policyholders to appointments or support them when they are unable to be there (for instance, picking up their kids from school, always with a known family member); emergency third-party auto or home services, provided that policyholders remain where the event took place; Automotive Centers with a clean environment and a room for kids; as well as discounts in gyms and restaurants and theater tickets. For more information about benefits, please go to online. We were acknowledged because of two major marketing initiatives during a forum of the same name that was held on May 4 in São Paulo, Brazil by the Brazilian National Corporate Modernization Center 11

12 Acknowledgements Throughout Our History We receive the Volvo Safety Award because of our attendance at the Brazilian Traffic Safety Year We receive the Best of Marketing award for our If You Love It, Don t Litter campaign to raise awareness of littering in the streets of São Paulo We are elected as the Most Admired insurance company in a joint survey by Carta Capital magazine and InterScience, a Brazilian consulting firm. Overall, 1,061 businessmen from 449 companies were surveyed We are elected as the Most Admired Company in Brazil in our business for the third consecutive time, according to a joint survey by Carta Capital magazine and InterScience, a Brazilian consulting firm We are elected as the Most Admired Company in Brazil in our business for the fourth consecutive time, according to a joint survey by Carta Capital magazine and InterScience, a Brazilian consulting firm. We are the only insurance company to be among the 500 Best Companies to Work For in Brazil in the fifth issue of Guia Exame. We appeared in Valor Econômico s Valor 1000 Yearbook as one of the soundest insurance companies in Brazil We receive the 2002 Performance Cobertura Award for our leadership in the auto insurance business. We win the 2003 Top of Mind Successful Brands award in the Insurance Companies category We receive the Best Company Performance award in the Health Insurance Business category during the 2003 VI Performance Cobertura Award, which was published in the Cobertura Mercado de Seguros magazine. We get the 2003 Top-of-Mind Insurance Company award, which is granted by the Housing Union (SECOVI, acronym in Portuguese). During this awards ceremony, we are the second top-of-mind electronic security company in In 2003, Jayme Garfinkel receives the Business Leadership award from Gazeta Mercantil. We receive the Best-Performing Health Insurance Portfolio award from Revista Cobertura. We win the Alvorada Trophy Best Insurance Company in Other Lines / Best Auto Insurance Company award, which is granted by the Insurance Brokers Union (SINCOR, acronym in Portuguese) from the Brazilian Federal District. Jayme Garfinkel is granted the High-Value Executive award, a tribute to the best-performing professionals in their businesses in We were elected as the 2004 Top of Mind company, according to A Tribuna from Santos. We are among the ten best ranked companies according to InformationWeek, which publishes the Top 100 Innovative Companies in the Use of IT study. We are the best ranked company in our business. We receive the 2004 ibest trophy, the most important Internet awards ceremony in Brazil, in the Insurance Company category as best insurance website in Brazil. We receive the Excellence in Insurance Broker Service award. We are ranked second among the most admired insurance companies, according to Carta Capital magazine. We receive the 2004 VII Performance Cobertura Award, which is granted by Revista Cobertura Mercado de Seguros For the second year in a row, we were considered to be Top-of- Mind Brand in the Insurance Company segment by Pop List. We receive the 2004 The Chosen Ones award, which is granted by Revista Quatro Rodas, the Auto Insurance category. We are granted the Best and Biggest in Transportation and Logistics in 2004 in the Transportation category, by Revista Transporte Moderno. We receive the 2004 Best-Performing Auto Portfolio award from Revista Cobertura. We receive the Social Initiative Paraisópolis Community award from Revista Cobertura. We receive the 2005 The Chosen Ones award, which is granted by Revista Quatro Rodas, the Auto Insurance category. We got first place in the health insurance industry according to Gazeta Mercantil, which granted us the Financial Balance award. We receive the Top of Mind award, which is granted by the Instituto de Pesquisas A Tribuna, a think tank from the Baixada Santista, for the third year in a row. We received the Major Marketing Coups in Brazil award in the Services category for the 333-Porto Campaign. This award is granted by the Brazilian National Modernization Center. We receive the Best Insurance Company award from the Taubaté Brokers Club for the fifth year in a row. We receive the Top of Business award, which is granted by Montreal Eventos, in the Service Delivery category. We get the Best Auto Insurance Product and Ad Campaign of the Year (Mass Media) awards for 333-Porto, which are granted by Top de Marketing Seguros News. We stand out as one of the 100 Top Sensory Companies in Brazil, according to Info magazine. 12

13 We get the 2005 Provider Highlight Best Insurance Brand award from the Housing and Condominium Union (SECOVI, acronym in Portuguese). According to a survey by Carta Capital, we are ranked second among The Most Admired Companies in the Insurance Companies category. We are elected as Preferred Brand among insurance companies by Quatro Rodas magazine. Jayme Garfinkel receives the Brazilian Insurance Person of the Year from Revista Cobertura because of his confidence, serenity, and transparency while running our company. We are ranked first among The Most Respectful Companies Towards Consumers in the Services and Insurance category, according to a Revista Consumidor Moderno survey. For the second time in a row, we are one of the 150 Best Companies to Work For, according to Guia Exame S/A. Jayme Garfinkel is acknowledged as Very Important Person in the History of the Brazilian Insurance Industry by the Brazilian National Insurance and Retirement Academy (ANSP, acronym in Portuguese) We receive the 2006 Financial Balance award from Gazeta Mercantil in the Health Insurance category. We are granted the Best Insurance Group in Brazil award in the Auto and Health category by Revista Conjuntura Econômica from the Getulio Vargas Foundation s Brazilian Institute of Economics. We receive the 2006 The Chosen Ones award, which is granted by Quatro Rodas magazine, for the third year in a row; We are elected as The Most Admired Company in 2006 among insurance companies, according to Carta Capital magazine; We are ranked second in the Insurance category in the 2006 Top of Mind Award, which is granted by Folha de São Paulo and the Datafolha Institute; Our 333-Porto Ensaboada campaign got Gold in the Financial Market and Insurance category from the Group of Radio Professionals (GPR, acronym in Portuguese); We are granted The Companies That Most Respect Consumers award in the Insurance category by Consumidor Moderno magazine; We are ranked third among The Brands That Most Respect Consumers by Reader s Digest; We receive the Best Companies for Stockholders in 2006 award from Capital Aberto magazine; We are ranked first in the Insurance Company category of Top of Mind Campinas, which is promoted by Correio Popular; We receive The Best and Biggest award from Revista Transporte Moderno; We are ranked first in the Insurance Company category of Top of Mind Mato Grosso do Sul, which is promoted by Revista A Gente; We receive the Graphic Design Esso award in the Magazine category from issue 08 of Porto Seguro Brasil magazine; We get the Top-of-Mind Insurance Company by College Students accolade, which is granted by the Paraná branch; We receive 2006 Best Insurance Company Alvorada award in the Auto category from the Union of Insurance Brokers (SINCOR, acronym in Portuguese) of the Brazilian Federal District; We are granted the Best Performance award in the Auto and Rent Guarantee categories by Segurador Brasil magazine. The same magazine granted us the Performance / Category Accolade (Most Leverage and Results) in the Health and Inland Marine Insurance categories. It also elected Jayme Brasil Garfinkel as Insurance Person of the Year; We are elected as Best Insurance Company by the QualiBest Institute We are included among The Most Admired Companies in Brazil in 2007, which is promoted by Carta Capital, in the Insurance Companies category; We receive the Top 100 Companies to Work For from EXAME magazine; We receive the 2007 Financial Balance award from Gazeta Mercantil in the Health Insurance category; We receive the Agência Estado Corporate Highlight in the Insurance Company category from Agência Estado; We are included in the Top 100 Bovespa Companies Corporate Governance; We receive the Trustworthy Brands award from Reader s Digest; We are granted the Best and Biggest in Transportation and Logistics in the Insurance Company category by Revista Transporte Moderno; We win the Best Service and Quick Commission Payment award from Seguro Total magazine; We are elected as The Best in Brazil by the Getulio Vargas Foundation s Revista Conjuntura Econômica in the Auto and Health categories; We are granted the Best-Performing Publicly Traded Companies, Top Companies, and Companies That Most Respect Consumers awards from Agência Estado; Ms. Karen Pimentel is elected by the Union of Insurance Brokers (SINCOR, acronym in Portuguese) of Amazonas State as Best Employee of Basic- Insurance Companies; We are included in Valor 1000 s Top 1000 Companies; We are included in the FGV IBRE, the best insurance groups in Brazil, in the Auto segment; We win the Insurance Market award at the Troféu Gaivota de Ouro ceremony; 13

14 We win the ibest Insurance award from the Brazilian ibest Academy; Jayme Brasil Garfinkel is awarded the 2007 Successful award in the Services category from Banco Hoje magazine; We are elected as Insurance Company of the Year by the Union of Insurance Brokers (SINCOR, acronym in Portuguese) of Pará State We are granted The Companies That Most Respect Consumers award by Consumidor Moderno magazine; We are the 2008 Top of Mind Top Class A company, according to the Datafolha Institute; We were ranked third among the 50 Biggest Property & Casualty Insurance Companies; We receive the 2008 Financial Balance award from Gazeta Mercantil in the Auto Insurance category; We are included in the Top 100 Bovespa New Market Companies in Brazil; We receive the Trustworthy Brands award from Reader s Digest; We receive the Gaivota de Ouro award for Best Auto Insurance Portfolio and Best Broker Service; We get the 2010 Brazil Insurer Best-Performing Insurance Company Globally Porto Seguro Seguros and 2010 Brazil Insurer Leader in Sales Auto awards from Prêmio Segurador Brasil 2010 magazine; We are the 2010 Sorocaba Top of Mind company in the Insurance Company category, according to a survey conducted by the Sorocaba Research Institute (IPESO); We receive the 2010 Trustworthy Brands award from Reader s Digest, in association with IBOPE Inteligência, in the Insurance Company category; We are included in The Best of the Year of the Vehicle and Accessory Repair Industry Union of São Paulo State (SINDIREPA, acronym in Portuguese); Jayme Garfinkel attends the leadership forum to discuss the Insurance and Retirement Business topic; We are included among the Top 100 HR Suppliers, according to a special issue of Gestão RH magazine; We receive the 2010 Marketing Best award from the Getulio Vargas Foundation São Paulo School of Business Administration (FGV / EAESP); We receive the Renato Castelo Branco Social Responsibility in Advertising award from the Escola Superior de Propaganda e Marketing (ESPM). We are ranked first in the Pop List of O Popular from Goiânia; We win the 2008 Top of Mind award in the Property Security category; We are the Top-of-Mind Insurance Company during the Top Tri Vale awards ceremony, which was organized by Revista RDM (Mato Grosso State) We are granted The Companies That Most Respect Consumers award by Consumidor Moderno magazine in the Retirement category; We win the 2009 Great Marketing Breakthroughs awards from the National Corporate Modernization Center; We receive the 2009 Top of Mind award from Folha de São Paulo in the Auto Insurance category We are granted The Companies That Most Respect Consumers award by Consumidor Moderno magazine; We stand out as one of the 100 Top Sensory Companies in Brazil, according to Exame Info magazine; We are included in the Top-of-Mind Brands in the Insurance category, according to the twelve-year-issue of the Marcas de Quem Decide survey, which is conducted by Jornal Comércio and Qualidata Pesquisas e Conhecimento Estratégico; We receive the 2010 Internet Top of Mind award, according to a Datafolha survey, in the Insurance Company category; 14

15 Corporate Governance In 2000, the São Paulo Stock Exchange (BOVESPA, acronym in Portuguese) introduced three special listing segments, which are known as levels 1 and 2 of Special Corporate Governance Practices and New Market. They intended to create a secondary securities market for Brazilian publicly-held companies that follow the best practices in corporate governance. Listing segments serve to trade shares issued by companies that voluntarily commit to the best practices in corporate governance and more stringent disclosure requirements than those already mandated by the Brazilian laws. In general, such rules expand shareholders rights and improve the quality of the information shareholders receive. We follow the best practices in corporate governance and, thus, strengthen the principles that favor transparency, fairness, and respect for shareholders and create the conditions for developing and maintaining long-term investor relations. Our constant drive to improve our actions in Investor Relations aims to enhance the permanent hotline between all business stakeholders shareholders, regulatory agencies, brokers, associates, and the community, among others and us. We are listed in the New Market (under the ticker symbol PSSA3), a special segment in the São Paulo Stock Exchange that is exclusive to corporations that meet given minimum requirements and stringent corporate-governance rules. The best practices in corporate governance recommended by the Brazilian Corporate Governance Institute (IBGC, acronym in Portuguese) that we adopt include the following: Our capital is exclusively divided into common shares; All shareholders have the right to sell their stake at the same terms and conditions as would apply to majority shareholders (tag-along rights); A tender offer for all shares outstanding at the current market price, at least, in the event of going private or having our stock delisted from the New Market; The board of directors must have at least five (5) members, with terms of up to two (2) years, and reelections must be allowed. At least twenty percent (20%) of members must be independent directors; Our disclosures are improved and added to our quarterly financial report (QFR) a document that must be submitted by listed corporations to the Brazilian Securities and Exchange Commission (CVM, acronym in Portuguese) and the São Paulo Stock Exchange, which is publicly available and contains our quarterly financial information, including our consolidated financial and cash flow statements; Our fiscal-year disclosures are improved and added to our standard financial statements documents that must be submitted by listed corporations to the Brazilian Securities and Exchange Commission and the São Paulo Stock Exchange, which are publicly available and contain our annual financial reports, including our cash flow statement; Our financial statements are disclosed according to the international financial reporting standards (IFRS) or the United States generally accepted accounting principles (US GAAP); Our disclosures include the initial statement of beneficial ownership of securities (FR, acronym in Portuguese) a document that must be periodically submitted by listed corporations to the Brazilian Securities and Exchange Commission and the São Paulo Stock Exchange, which is publicly available and contains our corporate information, including the amount and characteristics of the securities that we issued and that are currently owned by groups of majority shareholders, directors, officers, and members of the supervisory board, as well as the evolution of such positions; Public meetings are held with analysts and investors at least once a year; An annual calendar containing a schedule of corporate events, such as meetings, disclosures and so forth, is presented; The terms and conditions of agreements between Porto Seguro and associated counterparties are disclosed; The trading of the securities and derivatives our majority shareholders issued is disclosed on a monthly basis; At last twenty-five percent (25%) of our capital remains as shares outstanding; During general public distributions, mechanisms that favor capital dispersion are adopted; We join the market arbitral tribunal to solve corporate disputes. TRADING AT BOVESPA Any transactions at the São Paulo Stock Exchange are settled within three (3) business days of the trade date without any inflation adjustments. Shares are delivered and payments are made by using the Brazilian Clearing and Depository Corporation (CBLC, acronym in Portuguese), the São Paulo Stock Exchange s clearinghouse. Usually, it falls to the seller to deliver the shares to the São Paulo Stock Exchange on the second (2 nd ) business day after the trade date. Even though all outstanding shares of a publicly-held corporation can be traded at the São Paulo Stock Exchange, most times less than half of issued shares is actually available for trading by the public. Oftentimes, most shares are owned by a single majority shareholder or a small group of people with a controlling interest, including government bodies. Sometimes, there may not be an active and liquid market for shares, which would limit the investors ability to resell their shares. REGULATION OF THE BRAZILIAN CAPITAL MARKET The Brazilian capital market is regulated by the Brazilian Securities and Exchange Commission (CVM, acronym in Portuguese), which oversees the stock exchanges and capital markets in Brazil, as well as the Brazilian Federal Open Market Committee (CMN, acronym in Portuguese) and the Brazilian Central Bank (BACEN, acronym in Portuguese), which, among other mandates, must license brokers and regulate foreign investments and foreign-exchange transactions. The Brazilian capital market is governed by 15

16 the Brazilian federal acts 6385/76 and 6404/76 as well as instructions, rulings, and other regulations issued by the Brazilian Securities and Exchange Commission. According to the Brazilian Federal Act 6404/76, corporations may be publicly held, such as Porto Seguro, or privately held. A company is considered to be publicly-held when its issued shares are traded in a stock exchange or an over-the-counter market. All publicly-held companies are registered with the Brazilian Securities and Exchange Commission and must disclose information, reports, and statements periodically. The securities of a privatelyheld company may be traded in Brazilian stock exchanges or the Brazilian over-the-counter market. The shares of a publicly-traded company, such as our shares, may also be privately traded, with certain restrictions. The over-the-counter market is divided into two categories: (i) an organized over-the-counter market where trades are supervised by selfregulated bodies authorized by the Brazilian Securities and Exchange Commission; and (ii) an unorganized over-the-counter market where trades are not supervised by self-regulated bodies authorized by the Brazilian Securities and Exchange Commission. In either case, overthe-counter transactions consist of direct trades between the parties outside the purview of a stock exchange, which are mediated by a financial institution authorized by the Brazilian Securities and Exchange Commission. Other than being registered with the Brazilian Securities and Exchange Commission (and, for organized over-the-counter markets, the appropriate over-the-counter market), no special permits are required for securities from publicly-held companies to be sold in an over-the-counter market. All transactions in the Brazilian overthe-counter market must be disclosed to the Brazilian Securities and Exchange Commission by the respective financial intermediaries. The São Paulo Stock Exchange may suspend the trading of a given security in anticipation of the announcement of a relevant fact. Trading may also be suspended at the behest of the São Paulo Stock Exchange or the Brazilian Securities and Exchange Commission if, among other reasons, a company is suspected of providing misleading information concerning a relevant event or inaccurately replying to an investigation by the Brazilian Securities and Exchange Commission or the appropriate stock exchange. The Brazilian Federal Act 6385/76 and the Brazilian Securities and Exchange Commission regulations provide for, among other things, obligations to disclose information, restrictions on trades based on insider trading and market manipulation, as well as protections for minority shareholders. In the Brazilian stock exchanges, trading by nonresident aliens is subject to certain restrictions according to the Brazilian laws on foreign investments. SUPERVISORY BOARD The Brazilian corporate laws require us to have a permanent supervisory board or a supervisory board that only acts during the fiscal years when it is established at the behest of shareholders. Our articles of incorporation provide for the creation of a nonpermanent supervisory board composed of five members and an equal number of substitutes. The supervisory board is a separate body from our board of directors and independent auditors. The main duties of the supervisory board include overseeing the actions of executive management team, give opinions on some of the board of directors propositions to be submitted to shareholders for deliberation purposes, look at our financial statement, and report any mistakes, instances of fraud, or crimes of which they become aware to the executive boards and shareholders. The members of the supervisory board, when established, are elected during meetings of stockholders for a term of two (2) years. They can be reelected. According to the Brazilian Federal Act 6404/76, the supervisory board may not include our directors, executives, or employees or a spouse or relative (up to the third degree) of any member of the management team. CORPORATE-GOVERNANCE STRUCTURE Our corporate-governance structure includes our board of directors, an executive board, and an audit committee. These bodies are tasked with planning and running our business as well as overseeing the proper implementation of strategies, the actual achievement of results, and the compliance with legal requirements and good business practices. Our articles of incorporation provide for the creation of a supervisory board at the request of stockholders according to statute. Currently, no supervisory board was created. BOARD OF DIRECTORS The duties and responsibilities of the board of directors include establishing our general policies, electing officers, overseeing our management, and approving certain operations. Pursuant to our articles of incorporation, this body is composed of at least five (5) and at the most seven (7) members. Currently, our board of directors is composed of seven (7) members. According to statute, all of them are shareholders, with the exception of two, who are independent. Directors are elected during a meeting of shareholders for a term of one (1) year. They can be reelected. Shareholders can remove them from office at any time. Currently, our board of directors is as follows: Jayme Brasil Garfinkel Chairman of the Board Jayme Brasil Garfinkel holds a degree in Civil Engineering (1970) from the Polytechnic School of the University of São Paulo and an advanced degree in Business Administration (1975) from the Getulio Vargas Foundation. Mr. Garfinkel joined Porto Seguro in 1972 as an Assistant to the Executive Board and took over as Chief Operating Officer in He was a member of the Brazilian Federal Board of Insurance (CNSP, acronym in Portuguese) from 1987 to 1991 and Chairman of the Union of Insurance and Capitalization Companies of São Paulo State from 1989 to Currently, Mr. Garfinkel is the Chairman of the Board and Chief Executive Officer of Porto Seguro S.A. Moreover, he also acts as the Chief Executive Officer of subsidiaries and parent companies. Mr. Garfinkel is also Chairman of the Brazilian Property and Casualty Insurance Federation (FenSeg, acronym in Portuguese) and Vice Chairman of the Brazilian Trade Association for Property & Casualty Insurance, Private Pension & Annuity, Supplemental Health Insurance and Capitalization Companies (CNSeg, acronym in Portuguese). Pedro Moreira Salles Vice Chairman of the Board Pedro Moreira Salles graduated magna cum laude from the University of California at Los Angeles with a bachelor s degree in Economics and History management na Harvard University. He attended International Relations at Yale University and Owner / President Management Program at Harvard University. Currently, Mr. Moreira Salles is the Chairman of the Board of Itaú Unibanco Holding S.A., a position he has been filling since January 2009, and the Vice Chairman of the Board of Banco Itaú BBA S.A., a position he has been filling since February