Company: BBD
Filing Date: 2025-03-31
Form Type: 20-F
Source: 0001292814-25-001244
Chunk: 361

Company: BANK BRADESCO
Filing Date: 2025-03-31
Form: 20-F
Item: Item 19
Chunk 361
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 cost of capital methodology is used for the Liability for Remaining Coverage (LRC) and the confidence level methodology
for the Liability for Incurred Claims (LIC).

Under the cost of capital methodology, the
RA is determined by multiplying the risk capital the insurance contract is expected to require by a cost of capital. The risk capital
that the insurance contract is expected to require is obtained through an approximation methodology that multiplies the current risk capital
by the duration of the insurance cash flows. The cost of capital is the minimum return that shareholders will require from a portfolio
and is obtained through the Capital Asset Pricing Model (CAPM) methodology.

The confidence level methodology is based
on recalculating the contract's cash flows in a defined stress scenario. In this case, the risk adjustment will be the difference between
the insurance cash flows in the defined stress scenario and the insurance cash flow in the base scenario.

The equivalent percentile to the non-financial
risk adjustment is 60% for the Life and Pension portfolios. In the Non-Life portfolio, the LRC used a 58% confidence level, in the LIC,
the equivalent of a 75% confidence level is used and Dental, the equivalent of a 56% confidence level.

To calculate the confidence level for the
Health portfolio, the Group uses an internal risk model where it calculates the confidence for the insurance contracts in its portfolio,
60% of percentile for the Liability for Remaining Coverage (LRC) and 70% of percentile for the Liability for Incurred Claims (LIC).

Allocation of Contractual Service Margin
(CSM)

The Contractual Service Margin (CSM)
for each group of insurance contracts is recognized in the statement of income for each period to reflect the insurance coverage provided.
The amount of the Contractual Service Margin (CSM) recognized in each period is determined by identifying the coverage units, allocating
the Contractual Service Margin (CSM) at the end of the period (before recognizing any release to profit or loss to reflect the services
provided in that period), equally to each coverage unit provided in the current period and expected to be provided in the future and recognizing
in profit or loss the amount allocated to units of coverage provided in the period.

For groups of contracts measured by
the General Measurement Model (GMM/BBA) and the Variable Fee Approach (VFA), the allocation of the Contractual Service Margin (CSM) is
calculated over the life of the group of contracts in a way that systematically reflects the transfer of insurance benefits