BB Seguridade (BBSE3.SA) has reported a net income of R$2 billion for the first quarter of 2024, marking a 10.4% increase compared to the same period in 2023. The company's premiums written in insurance saw a significant rise of 15% to R$4.3 billion, with notable growth in pension, credit life, and rural insurance sectors. BB Seguridade also emphasized its strategic expansion beyond its primary sales channel, Banco do Brasil, and its investment in technology to enhance its digital journey and cybersecurity.
Key Takeaways
- BB Seguridade's net income grew by 10.4% year-on-year, reaching R$2 billion.
- Premiums written in insurance increased by 15%, driven by pension, credit life, and rural insurance.
- The company's loss ratio improved by two percentage points from the previous year.
- Pension reserves hit R$406 billion, with net inflows amounting to R$5.6 billion.
- BB Seguridade is expanding its business model beyond Banco do Brasil and investing R$108 million in technology upgrades.
- Brokerage revenue saw a 12% increase due to growth in credit life insurance.
- Net investment income contributed 12% to the company's income for the quarter.
Company Outlook
- BB Seguridade expects its results to align with its guidance throughout the year.
- The company is set to continue its share repurchase program, considering the stock's market value.
- Higher demand for rural insurance is anticipated in central and southern Brazil, despite minimal impact from southern floods.
- Pension plans inflows are expected to persist, but interest rate changes could introduce uncertainty.
Bearish Highlights
- Management fees decreased by 4 basis points year-on-year.
- A share of multi-markets and total funds under management fell from 25.7% to 21.4%.
- Net income dropped by 30% compared to Q1 2023 due to negative net financial income.
Bullish Highlights
- Premium bonds collections rose by 16%, with a 12% increase in reserves.
- Draws paid decreased by 25%, positively impacting the loss ratio.
- Net investment income grew by 33%, contributing to a 13% increase in net income.
Misses
- The IGPM dynamics impacted the growth and market share in the life insurance sector within the rural market.
Q&A Highlights
- Rafael Sperendio from Banco do Brasil discussed pension plans' performance, attributing growth to macroeconomic improvements.
- The tax reform could simplify operations, but its impact remains uncertain.
- BB Seguridade plans to cancel treasury stock and maintain its dividend policy.
- All home insurance originates from Banco do Brasil, and the growth rate is expected to remain steady.
BB Seguridade's first-quarter performance showcases the company's resilience and strategic initiatives to foster growth amidst a challenging macroeconomic context. The company's focus on expanding its insurance offerings and improving its digital infrastructure reflects a commitment to long-term sustainability and customer satisfaction. With various factors contributing to the company's financial health, BB Seguridade is poised to continue its trajectory of growth as it adapts to market dynamics and consumer needs.
InvestingPro Insights
BB Seguridade has demonstrated a solid financial performance in the first quarter of 2024, with notable growth in net income and premiums written. Supporting this positive trend, InvestingPro data reveals that the company has a market capitalization of $12.59 billion and is trading at an attractive price-to-earnings (P/E) ratio of 8.04, indicating that the stock may be undervalued relative to its earnings potential. Furthermore, its revenue growth over the last twelve months as of Q1 2024 stands at a robust 14.7%, showcasing the company's ability to increase its top line effectively.
InvestingPro Tips suggest that BB Seguridade's management has been actively engaging in share buybacks, which can often signal confidence in the company's future prospects. Additionally, the company has been recognized for its high shareholder yield, which includes dividends and share repurchases, providing investors with direct returns on their investment. These actions, combined with a significant dividend yield of 9.92% as of the most recent data, make BB Seguridade an attractive option for income-focused investors.
For readers interested in further insights, InvestingPro offers additional tips for BB Seguridade, including an analysis of its low earnings multiple and its status as a prominent player in the insurance industry. To explore these valuable insights, visit https://www.investing.com/pro/BBSEY and use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to a total of 13 InvestingPro Tips for BB Seguridade.
Full transcript - BB Seguridade Participacoes SA (BBSEY) Q1 2024:
Felipe Peres: Good morning, and thank you for attending our virtual meeting to present the Results of the First Quarter of 2024. This meeting is being recorded, and there is simultaneous interpretation into English. If you want to hear the audio in English, click on the language interpretation button at the bottom of the screen. During the meeting, the Portuguese version of the presentation will be shown. The English version of the presentation is available at our investor relations website at www.bbseguridaderi.com.br/en. Today, we have André Haui, CEO, and Rafael Sperendio, CFO and IRO. I would like to give the floor to Mr. Haui, who will begin the presentation.
Andre Haui: Thank you, Felipe. Firstly, good morning, everyone. Thank you for attending our virtual meeting to present the earnings of first quarter of 2024 at BB Seguridade and discuss the execution of our strategy this year. Before starting the presentation, I will break the protocol to send my condolences to the victims of the flooding in Rio Grande do Sul. BB Seguridade and the Companies in the group have taken several measures within their activities to support our customers and colleagues in the area. We hope that everything gets solved as soon as possible. And those who listen to me could make donations, the Bank of Brazil is coordinating efforts to make sure that they reach those in need. Now, let us start with the highlights for this quarter. Starting on Slide 2, we have some highlights of the net income. I am happy to say that our net income in the first quarter was R$2 billion, with a growth of 10.4% compared to the same period of 2023. The managerial net income, which does not take into account the effects of IFRS 17, has increased by 4.7% to R$1.8 billion. I would like to call your attention to the robust commercial and operational performance in all areas. Insurance has grown by 15% in premiums written when compared to first quarter of 2023, reaching R$4.3 billion. Here, the main highlights are pension, credit life, and rural insurance. The loss ratio was a good surprise and has improved by two percentage points year-on-year. In pension, the reserves balance has reached R$400 billion almost R$406 billion, with a growth of 14% in 12 months with net inflows of R$5.6 billion, which is more than 2% higher than the first quarter of 2023, explained by the record collection and by the low outflow ratio. We have grown 16% in premium bonds reaching R$11 billion in reserves. And finally, as it reflects that the strong commercial performance, brokerage revenues have added to R$1.3 billion, with a growth of 12% year-on-year. About the strategy execution. We are now on Slide 3. In general, we have a very positive result, which reflects our constant search for modernization and innovation in the portfolio of solutions for customers. I have some highlights here of the first quarter. In rural lien insurance, we have expanded coverage for cattle, generating R$200 million in insurance. In credit life insurance, we sold R$28 million more in premiums. In credit life insurance, which is for programs for families and small producers, we expanded coverage for small producers. And at the first quarter, we launched the product low-ticket term life insurance, that has affordable prices that provides assistance to prevent and provide support according to the profile of the insured. As for our business model, Banco do Brasil is and will continue to be our main sales channel and where we see the best opportunities for growth for BB Seguridade. However, we have funds to go beyond that and look for other opportunities to expand our business model. In the first quarter 2024, we reached the volume of R$470 million of premiums written in partnerships, a growth of 13% compared to the same period of 2023. In large risks and transport, R$45 million were written with partner brokers. In pension, we reached R$22 billion in assets managed, and we want to have asset managers that meet the needs of customers with different risk profiles. In order to meet everyone on their favorite channel, we continue with IT transformation as an important pillar. In first quarter of 2024, R$108 million was invested in technology, cybersecurity, and digital journey solutions. Our focus on provide complete solutions in digital channels caused sales to increase by 16%, not including credit related insurance. And in alignment with our purpose to provide peace of mind for everyone, everything we have has the end goal of providing the best customer experience. This obsession resulted in a consolidation of NPS at the quality zone, with an improvement of 0.5% points in March 2023 and a reduction of 9.8% in complaints. We want to be in very important places and in difficult areas. More than 33,700 customers assisted in natural disasters were and in order to mesmerize our customers, we increased our protection levels with more than 12,000 overprotected customers, with an overall NPS improvement of 7.5%. Now, I turn the floor over to our CFO, Rafael Sperendio, who will talk about the figures of this quarter, and I will be around for the Q&A session. Thank you.
Rafael Sperendio: Thank you, Andre. Now, moving on to Slide 5, let us see our results in the old accounting standard. We continue to show the same format until SUSEP decides to use the new accounting standard IFRS 17 or not. For those who usually see our earnings presentation we continue with the same R$1.9 billion when compared growth of 24% when compared to last year. There is a mismatch of one month in the update of liabilities in the defined benefit plans. This effect adds zero in time, so it is not an effect that could be classified as a structuring impact on the business. As the VPM becomes stable, this has been impacted by a downward trend curve that increases on a monthly basis. When it stabilizes the R$74 million of lag in the first quarter will be reverted in the income statement. So if it wasn’t for this time mismatch that adds zero in time, profit would have grown 7.4% on a normalized basis because it was a very good performance for the beginning of the year. Considering everything we can see on the right side of the chart, the overall impact coming from net investment income, that accounted for 19% of the profit last year and in the first quarter it contributed with 12% of our income. So when compared to the first quarter of 2023. On Slide 6, there is an overview of the main components of this variation of the net income. Out of the growth we had, operations accounted for R$200 million. The main highlights side the growth of net income at Brasilseg; retained earning premiums; so credit life is the main driver for growth in the first quarter of 2024; and the reduction of the loss ratio in the Company as a whole, especially in the agricultural area. The events that took place resulting from the end of the El Niño cycle had a total effect on the loss ratio of the agriculture area was much lower than we expected and even lower to the loss ratio reported in the first quarter of 2023. The brokerage area with the growth in sales and insurance in general. Credit life, premium bonds, agriculture insurance. This is on a cash basis – recorded on a cash basis. So the collection of these two areas of the incoming funds have a strong sensitivity on the income from revenues from brokerage. In the financial net income as I mentioned in the previous slide, as operations added R$200 million, financial net income removed R$117 million year-on-year. There is no Selic effect we were able to offset the drop in the average Selic interest rate with an increase in volumes. So the first line of the financial net income drop of R$7 million in volume and rate change ex-MtM. There was a time mismatch of R$49 million, which is slightly different from what I showed in the previous slide because this figure R$49 million is the variation of the quarter, the first quarter of 2024 and 2023, where as on the previous slide it was an absolute figure. So finally, the main effect that had an impact on the net investment income was the opening of the interest rate which caused a negative mark to market effect, especially in Brasilprev, has a longer duration in order to pay for the defined benefit plans. So there this time mismatch tends to be possibly reverted in the second quarter. It depends on the IGPM behavior, but that is what we expected. And then it goes back to – goes to the positive trend in the second quarter and positive in the third, and then this event of time mismatch is reverted by the end of the year. So, the mark-to-market is more of an economic context. Now on Slide 7, our premiums written grew by 15%, credit life grew by 25%, not only disbursements but especially in consigned credit. But also a reduction in cancellations and a more active performance in credit life. We have trying in rural insurance, been able to offset with the best performance in lien and rural life, either by launching new products or by increasing coverage in electable lines of business. As Andre mentioned in his live, with the highlight on lien insurance that added R$200 million in premiums written. Life grew by 2.7% a bit more slowly. It’s adjusted by IGPM, and when there is a deflation in IGPM, there is no adjustment. So zero is just a risk increasing according to age brackets. With the quality of this risk that’s written, combined risks had a significant improvement, improving by the fifth time year-on-year. And the main component was a reduction in the loss ratio, starting in the agriculture insurance, and there was also life contribution of loss ratio decrease in life. Commissions increased year-on-year due to the sales mix with a higher concentration in products that pay higher commissions to brokers. And administrative expenses, the G&A ratio increased 40 basis points due to an improvement in the provision for losses recoverable, but nothing very significant. Net investment income dropped by 9%, which is – reflects of the drop in interest rates. And with the growth, either in premiums written, reduction in premiums earned and reduction in loss ratio, and this combined effect added up in the net income growth of 12%, reaching R$1 billion in the first quarter of 2024. On Page 8, on pension, gross collections grew by 13%. Net inflow went from 11.9% to 8.6% of redemption ratio, and the net collections almost tripled when compared to the same period of 2023, with a growth of 14% in 12 months. Management fees, there is a drop of 4 basis points year-on-year. As you can see in the lower part of the bars, the share of multi-markets and the total funds under management went from 25.7% to 21.4% in March, mostly due to the macroeconomic context. There is a slight increase to risk exposure in the end of last year, but that was reverted due to late – to lately – things that happened lately. Now it's becoming more conservative, especially in fixed – investing in fixed income. And despite all the improvement we see in the operation itself that grew by 7% year-on-year, net income dropped by 30% when compared to the same period of 2023 due to the net financial income that became negative due to the mark-to-market in this time mismatch. And these are facts that we expect not to continue throughout the year. Now on Page 9, premium bonds collections increased 16% with a growth of 12% on reserves. Draws paid add up to 13% in the first quarter 2024, with a drop of 25%, which is due to shorter term – it's a mix issue here. The shorter the term, the last time we have to pay premiums – to pay the draws. And net investment income grew 33%. And the main factor was the reduction of the liabilities cost as it reflects of the interest rates that compensates and liabilities. And the growth of net investment income was responsible for the increase in net income, which grew year-on-year by 13%, reaching R$71 million. And the last page, we see the BB Corretora performance and brokerage revenue grew by 12%, and the main drivers for improvements of [indiscernible] cap, where they're very sensitive to revenue in insurance, especially credit life, either from previous sales or new sales. The net margin improved 0.3 percentage points due to mix of this accrual of past sales and commissions paid, contributing to an increase of 12% in net income in the first quarter. And to conclude my presentation, we show the guidance. We have three indicators, operating result, noninterest, the results derived from a lower loss ratio, pension plans and premium bonds is more this – the fact that we exceeded the guidance was expected. It has to do with the curve, and it was expected for the first quarter, and we believe that the realized will converge to the guidance. So this is something we expected, but figures should converge during the year. Of course, pension plans could also have a income added, but we expected a convergence. These were the main points, and now we can move on to the Q&A session.
A - Felipe Peres: Thank you, Rafael. We'll now start the Q&A session. [Operator Instructions] If it's not possible to answer all your questions live, we are going to send you an answer by e-mail for questions sent in writing. The first question in audio comes from Antonio Ruette from Bank of America (NYSE:BAC). Go ahead.
Antonio Ruette: Good morning. Thank you for the call, and congratulations on the results. First question is about rural insurance. I would like to understand how rural producers performed in this first quarter after the El Niño season. How is the demand? What is the size of the protected area? I would like to understand a bit more about how the demand will be in the future. What is the expected loss ratio, especially looking at the second quarter? Are you also looking at La Niña or something like that? And after the rural the second question has to do with the net financial income. If you could give us an update on the sensitivity that you for every 100 bps coming from – resulting from the new rules by SUSEP? Thank you.
Rafael Sperendio: Thank you, Antonio. Now answering your first question about rural insurance. What we have seen in the last agricultural season. There has been a drop both in frequency and severity, globally speaking, of our full exposure. When we break down the exposure by regions in Brazil, we see a significant drop in frequency and loss ratio in the South region and an increase of the severity and frequency in the North and Midwest area. Our exposure in this area is much lower than in the South, so this combined effect ended up being positive for the loss ratio. That won't necessarily be reflected or reflect impact of the crop as a whole. Because we are talking about the risks we are exposed to and the customers who buy protection. But Farmers who decided not to buy insurance, especially in the Central area of Brazil and the North, could be in difficult situations. But farmers who buy insurance, when we look at our exposure to risk, the combined effect of El Nino ended up being more positive in general than expected initially, also due to this exposure dynamics that I mentioned. As for demand, we are now having the transition to a neutral period, especially now that we have a next agricultural cycle within – under the impact of La Nina. This will probably be reflected in higher demand for the area of the central area and southern areas of Brazil. It's too early to say how much demand could increase. One has to take into account if farmers will have funds to pay for protection and how much will they buy, it's still early to quantify that. As for the net investment income, the sensitivity we change – has not changed much since previous quarter. It was an event concentrated in Brasilprev on the reclassification of a portfolio capped until maturity that will be available for sales. When we say a 100 basis points for R$100 million, that's the sensitivity in the result. So this reclassification does not have a sensitivity effect on the results. So this reclassification was made to comply with the new regulation that now provides the possibility of pension plan company that when the customer that has a defined benefit plan and reaches time of retiring, they could be called to the company and either redeem his total fund or receive the income, but he has the option. So the idea is to provide that to customers. So the reclassification was made, but at the end of the day, the sensitivity does not change much, or the impact on the net income.
Antonio Ruette: Okay. Thank you.
Felipe Peres: Thank you, Antonio. The next question comes from Guilherme from JPMorgan (NYSE:JPM).
Guilherme Grespan: Thank you for the presentation. We have two questions. The first regarding credit life insurance. We see a net high growth above 30% when we compare it to the systems. But in the systems, it is growing around 20%. So you have been able to grow this product above concessions. It seems to me that it is still related to your activity because you start growing the eligible customer base. So we would like to have an update on this initiative to sell credit life to your noninsured loans. And if it's possible to continue to grow in the next quarters above the origination level of Banco do Brasil? And my second question is about this flooding that we see in the [indiscernible]. It's too early to discuss the impact, but in conceptual terms you have an exposure to agricultural insurance that's easy to see. But when we think about other insurance such as life, rural life and traditional or net lean insurance rurally and – as compared to traditional products, what is the impact on each of these segments, low, medium or high? Thank you.
Rafael Sperendio: Thank you for the questions, Guilherme. As for credit life, insurance premiums written growing by 35%. I'd see that the disbursement in eligible lines of business have grown among the main drivers in addition to increasing the scope of the product in terms of age, coverage, et cetera, the origination of credit talking about eligible lines had a good performance, and that's the main driver. So more credit facilities being signed, therefore, the basis increases. As for if we would break down the premiums between Selic, which is a product offered when the loan is made, and the noninsured outstanding loans, we'd have something like 57% of penetration in Selic and 9% in noninsured outstanding loans. That's for the first, we had 47% in the first quarter in Selic and that increased a lot in terms of a 9% for noninsured. So figures almost doubled in the first quarter of 2024 when compared to 2023. The third driver is the reduction of cancellations. So these three factors together contributed to this robust growth in credit life. As for the natural disaster in the south of Brazil, according to mapping of affected areas, there's also an impact on Santa Catarina. We look at both states, Rio Grande do Sul and Santa Catarina, together. But the main impact on Rio Grande do Sul. The impact on rural areas is very low. Most of the crop that would be harvested in this first quarter has been harvested already, especially soybeans and other crops that would be planted in Rio Grande do Sul we have very low exposure there. So impact on rural insurance is minimal. And when we look on a more general point of view in terms of claims, it's more concentrated on property, warehousing infrastructure, buildings, et cetera. Unfortunately, the culture of insurance is very low in Brazil when we are exposure to written premiums for house and commercial lines it doesn't reach 10%. In the south, it's even a portion of this small amount. So we do not expect any major impact coming from this catastrophe in our net income, which does not mean that we're not acting. There is a crisis protocol that's put into practice. Whenever something like this happens, we send providers. We make our procedures more agile. We facilitate payments. We provide all the needed support to our customers that were affected by the strategy. But in terms of loss ratio and impact on net income, it's very low, nonmaterial.
Guilherme Grespan: If you would allow me a follow-up, the last time I talked to you, the premium on the insured or on the face value is around 10%. Does this still valid?
Rafael Sperendio: Well, the concept here is the planted area with insurance?
Guilherme Grespan: No. The premium that you charge compared to the face value.
Rafael Sperendio: This is a variable that is very hard to find an average. It depends a lot on the product, on the period, so I do not have that figure to give you. 10%, 12% in terms of subventions and its an average. But funds for areas that do not have any incentives are different.
Guilherme Grespan: Okay. Thank you very much, Rafael.
Felipe Peres: Thank you, Guilherme. The next question comes from Kaio from UBS.
Kaio Prato: Good morning, everyone. Thank you for the question. My question is about pension. Similar to credit life and pension plans, we see a strong contribution. I would like to understand what were the main drivers any effect from competition? If this effect from contributions could be extended throughout the year? And if we could also comment on this improvement on the redemption rates, what were the drivers for that? And what do you expect for the year? And if these points together could not mean a growth in reserves or even above the guidance throughout the year? Thank you.
Rafael Sperendio: Thank you, Kaio. The performance in inflows from pension has been more of a macro nature. It's because of the reduction in the unemployment rate, increase in available income, reduction in leverage, all of these factors – macroeconomic factors have enabled people to invest more in their pension plans and also a lower need to withdraw funds, therefore, redemption rates decrease. When compared to post-pandemic until the first half of last year, if we could have a sample of explanation – reasons given for redemption by customers, the main factor was the need to fund – to find daily activities and families to make ends meet, usually caused by loss of jobs or loss of income. This year, the situation is different. Now the portion of customers that justify redemptions due to need of funds to pay for their daily expenses has dropped considerably. And the remaining portion of customers are doing that due to relocation of investments. For high-income customers, they are now investing in real property. So the profile has changed. Within the macroeconomic environment has favored an increase in incoming flows from pension plans. Interest rates are still high. Now when we look at the market expectation, if I'm not mistaken, that points out to a Selic at 9.75% towards the end of the year, enables a two digit average rate. So that leads customers to have a lower appetite for risk, especially Banco do Brasil customers. That's reflected into a longer maintenance of funds, a lower rate of portability to other securities that have a higher risk. And the combined effect allowed net incoming funds 3x higher than the same period of last year. From now on, it's still a bit uncertain when – because the interest rate expectation has changed a lot in the last – in the first five months of 2024 due to global factors. Today, we see the market has reviewed their expectations upward so we don't expect interest rates to drop so much as we did before. If this remains this way, I don't know if it would be enough to be above guidance, but the likelihood of being close to it increases to this card, the lower zone of the interval, but still too early. There's a high volatility so it's very hard to say this right now. This is why we keep the interval for guidance. We haven't reviewed it yet.
Kaio Prato: Okay. Thank you.
Felipe Peres: Thank you, Kaio. The next question comes from Tiago Binsfeld from Goldman Sachs (NYSE:GS).
Tiago Binsfeld: Good morning, Felipe, André and Rafael. Thank you for the questions. First, I would like to have a follow-up on the previous answer about the pension plan dynamics to understand if there would be any benefit from the rule for exempt amounts. And the second question is about life insurance within the rural. We see smaller growth because IGPM dynamics affect renewals, but you lost market share. Something specific about life dynamics? Thank you.
Rafael Sperendio: It is hard to quantify that for pensions, but there has been a positive impact not only due to the rules of RCA and RCI, but also due to the limitations imposed on exclusive funds. That ended up directing funds to pensions. The securities or letters of credit that were exempt from income tax, with new rules, will be more competitive for new inflows of funds. As for life insurance, that is exactly what you mentioned. Since the inventories are updated by IGPM, and since there is deflation, it is zero and most people update that according to IPCA. So that’s difference of 4%. So by itself that’s a main explanation for our loss of market share in life risk. The adjustment of inventory of premiums accounts for more than 80%, so it is hard to offset that with new sales.
Felipe Peres: Thank you, Rafael. Thank you, Tiago. Next question comes from Eduardo Nishio from Genial Investimentos.
Eduardo Nishio: Hello. Good morning, everyone. I have two questions. One, regarding the guidance, you have an income – net income above guidance. So I would like to know about the dynamics from now on, since you are doing fine. Do you expect any change towards the middle of the guidance, or, with this better start of the year, do you expect a better result? I mean, of course, you don’t give guidance on net income, but maybe the next quarter will provide an improvement in the net financial income from pension funds. And second question, if you have any initial readings on the tax reform and what would be the impacts on your Company? Thank you.
Rafael Sperendio: Thank you, Nishio. As for the guidance, there are several factors that need to be assessed carefully as for the impact on each indicator. Starting with the operating income, the main driver was a lower loss ratio on the agricultural area. But we expect it to be diluted throughout the year because it is concentrated in first quarter, so we would converge to the interval. For insurance premiums, the main variable we have to observe until the end of the year is the performance of rural insurance, which is significant in terms of volume of premiums written. And there is still uncertainty as to the volume that would be made available for funding for rural insurance, so we still don’t not know how funds will be divided until the end of the year. As for pension, as I said in the answer to Kaio's question, there is a dynamic regarding the interest rate, that will be crucial to define whether we will remain above guidance or there will be a conversion. A common factor for these three indicators is too hard to know whether we will continue to exceed the guidance. We tend to converge to the interval, but the likelihood of remaining on the upper part of the three ranges we published is high. Therefore, the likelihood of being in the lower bracket has dropped considerably, and some intervals could be almost discarded. But so far, this is what I can say that we expect convergence. On the second question, as for tax reform, generally speaking, we don’t have a defined rate yet, so it is hard to measure the impact. As we expected for all the companies under BB Seguridade, all of them are classified under the special regime as financial institutions. This was expected, but now it has been defined. So it is clear. And the main gain that we observed according to recent new is the operational simplification process. Something in the current model, this is very complex. There are service taxes that have different rates in brokerage houses for different products, PIS Cofins and whether it will be cut – it will incur on different products. Now, according to the tax reform, it is much simplified, it is much simpler, much clearer. So the simplification of the operational process, so far, has been the main advantage, but it is hard to quantify the impact because we do not know the rates yet.
Eduardo Nishio: Perfect. Thank you.
Felipe Peres: We have a question from Pedro Leduc from Itaú BBA.
Pedro Leduc: Good morning, everyone. Thank you for the call and for the questions. The first question is a quick one. What is your outlook on the pricing or price adjustments for rural premiums? Since now we are now towards the second half of the year, we have the softer plan, the crop plan, and most claims have been reported. What do you expect in terms of premiums? And the second question is about capital allocation. Year-to-date, large figure. Of course, you started a program at the end of last year. But if could consider that something it is a good rate of repurchases per quarter between R$250,000 and R$300,000? How do you think about this will be distributed?
Rafael Sperendio: Thank you for your question. Speaking of prices, I believe it would be in the savings of agriculture insurance. We look at a very long horizon that varies from 3 to 5 years depending on the crop and the region, so we do not price insurance or give guidance for insurance. So far, there is no scenario that indicates the potential for an increase in prices. It would be on the opposite more to maintain or reduce prices in some cases. Of course, pricing is much more complex than this depending on the area, the location, but an overall figure, I would say that there is no potential to raise prices in agricultural insurance. On the other hand, regardless of the subsidies variable and just looking at supply and demand, a higher demand for protection is expected for this new cycle that will start now than compared to the previous one, especially because there are areas that we have more exposure, and the climate event that will be La Niña maybe end of second mid or end of second semester is an event that usually impacts the areas that we have higher exposure. Therefore, it is likely to have an impact on demand. I would say that, from the premium point of view, a higher demand due to a perception of risk. As for rates, no expectation of a significant adjustment. As for capital allocation, the fact that we have performed more than half of the repurchase program, we believe that BB Seguridade's shares are not priced at a fair value according to our analysis, and we will continue with this repurchase program. Considering all the care we take not intervene in prices that it depends on funds available at the holding, we need to have funds available at the holding company BB Seguridade to execute the repurchase program and that there are also legal limitations. We can only increase the dividends of the brokerage company at the end of the semester. So there are limitations on the shareholder's equity. So the main driver would be the available funds at BB Seguridade. We believe if prices remain at this level that we consider not fair, we will continue to repurchase shares, if we have enough funds.
Pedro Leduc: This could be renewed during this year?
Rafael Sperendio: If we execute 100% of the program, I would have to cancel treasury stocks to start a new program. This would be the natural flow. While these treasury stocks are not canceled, I cannot start a new repurchase program.
Pedro Leduc: Okay. Congratulations and thank you.
Rafael Sperendio: Thank you, Pedro.
Felipe Peres: There are no further questions to be asked, but there are some questions that were sent in writing. One of them is related to the last question asked by Pedro about the repurchase, so with more objective what does the Company intend to do with treasury stock? And still related to compensation, if there is an update on expected payout or even an idea about increasing dividend payment to shareholders?
Rafael Sperendio: Whereas for the destination, we don’t have any indications of other financial destinations other than cancellation of treasures stock. Of course, we need approval, but there will not be any other scenario other than canceling treasury stock. The second question about dividend payment. Today, there is no indication that we will be paying dividends differently from what we have paid previously. A composition between funds used to pay dividends and funds used for share repurchase programs, so we will remain according to what we did in previous quarters.
Felipe Peres: We have seen that the brokerage firm has R$5 billion in prepaid commissions. So it is a more technical question about what is the average term in which you expect to recognize this balance of commissions.
Rafael Sperendio: A good portion of these commissions come from the credit life sales and the accounting recognition. So I would say that the average term for recognizing these commissions is around three years, but that could vary a lot. The current scenario is of growth in terms of credit portfolio. If the trend changes, this flow of recognition could change, but I would say that today is around three years.
Felipe Peres: And the last question. Looking at the guidance in the growth of premiums written by the insurance company, person is asking about home insurance and how much of that is originated by Banco do Brasil?
Rafael Sperendio: 100% comes from Banco do Brasil. I would say that home and the other area you asked for, I don’t believe that the growth rate will not change much from what we have had in this first quarter.
Felipe Peres: Thank you, Rafael. Since there are no further questions, not in the audio or in the Q&A, with that this concludes our earnings meeting for the first quarter 2024. At the end of this meeting, if you can answer the brief questionnaire that will show up on your screen to provide feedback on the organization of the meeting on the presentation. And André and Rafael, do you have any final comments to make.
Andre Haui: I would just like to thank the trust of our shareholders and investors and we continue our search for excellence and results, and we continue to make this company grow more and more and generate the necessary returns. Thank you, and have a good day.
Rafael Sperendio: I would like to thank you all for attending this call again, and I will remain available with the team of Investor Relations to answer any other questions you may have. Thank you, and have a good day.
Felipe Peres: So this ends the conference call for the first quarter. Have a good day.
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