BB Seguridade Participacoes SA

BOVESPA:BBSE3

Earnings Call Transcript 2022-Q3

[Felipe Peres, executive]

Good morning. Thank you for attending our conference call to release the results of the second quarter -- third quarter of 2022. Few reminders before we get started. This conference call is being recorded and has simultaneous interpretation into English. If you want to listen in English, please click on interpretation on the lower menu on your screen.

During the presentation, we are going to show the slides in Portuguese. If you want to see the document in English, go to our Investor Relations website at the address that you can see on the screen. [Operator Instructions]

Today with us, we have Ullisses Assis, CEO of BB Seguridade; and Rafael Sperendio, IRO and CFO. Now I'll give the floor to Mr. Assis to start the presentation. Please, Mr. Ullisses, you may start.

[Ullisses Christian Assis, executive]

Good morning, everyone. First of all, I would like to thank you immensely to join us to talk about the results of the third quarter.

We're very happy with our performance. And before going into numbers, I would like to talk to you a little bit and give you a few highlights and share with you what we've been doing in terms of strategies.

Now on the highlights of this quarter, we have BRL 1.65 billion. This is a new record in net income for the company and we are very happy because it's being built on very, very solid basis, and we can see the results growing 48% year-on-year, BRL 1.4 billion in consolidated numbers. All business lines are growing in a very robust manner, 45% growth in the issuance of premiums. Loss ratio is 14.7 percentage points lower than the same period last year. Pension plans have grown more than 29%.

And then also in terms of our net inflow has also grown. So in the same period of last year, we had BRL 1.2 billion negative in inflows. Now it's BRL 1.8 billion positive. Also inflow is positive in a market that where we lost leadership. Now we are growing very consistently this year.

And all of this are making us to have a brokerage of BRL 1.3 billion in brokerage revenues. So the operating result is going on a very solid basis in every business line and the net invest income is again gaining more share in our total revenues getting to BRL 232 million this quarter in contrast with BRL 14 million in Q3 '21.

Now talking about the strategic lines, we have 3 fronts that we've been pursuing on its management. It is technological modernization, digital transformation, and diversification of sales channels and also the IT architecture. So starting on technological modernization quarter-on-quarter, it's been growing in terms of its share of our total sales. We have grown 10% over the same period last year. In this period of the first 9 months of the year, we had 100% of our digital journeys were reviewed according to best practice.

So very simplified contracting in our app. This is work that is being developed with great mastery and now we have a record of BRL 2.9 billion in business originated from analytical intelligence. This means that of everything that we sold this year, BRL 2.9 billion, customers were impacted before buying other physical digital, but they were impacted by some actions that we implemented in terms of digital marketing. This is a very major increase as compared to last year.

So this has provided great effect, and we were very bold earlier this year, investing and planning to invest and approving total investments of BRL 600 million in digital transformation, and we are doing very good investments. We have reached BRL 350 million in terms of investments until September 2022. And our idea was to advance 1 year -- to have it 1 year earlier, our new IT architecture. So originally, it was in the end of 2023. We advanced it for the end of 2022. We have completed 75% by September, and we are going to deliver 100% by December, as previously announced.

So we are moving very fast, and we are going to complete all this process, which is going to provide us more potential for distribution in Brazil and in other channels. And this transformation is fundamental once we think in the new market, especially thinking of open finance when we can work with the model of hyper personalization, which is our main objective for future quarters and years.

Now talking a little bit about our diversification and distribution strategy. This is another information that makes us very, very happy. Once I started talking about strategy, our initial aim was to have 10 partnerships in the first half of this year. We have ended June, 23; September, 43 partnerships with many different types of companies. We are negotiating another 11 partnerships, and we're seeing the results of this strategy.

If you look at the left-hand side, this year, we have issued BRL 814 million through other channels. This is a business that didn't exist in the company, that we created from scratch. Of course, this is still very much focused on rural and credit life insurance. We are going to sell -- use this distribution model, this diversification in other business lines, but considering the types of partnerships that we had with cooperatives and agro partners, of course, we expected it to go intensely in this segment.

Just to give you an idea, to operationalize this strategy, we issued BRL 737 million in premiums. So if we were just an insurance company, it would be #3 in the market. We would be the same one and we would be the third in considering open sea. We created business from scratch in 1 year, and we are #3 in the market, which demonstrates that we are on the right track in relation to our diversification strategy. This is a business model that, as I said before, we have created structures inside BBC goals for each one of our colligates to expand these channels and really take our products to more and more customers.

Now talking a little bit about the customer experience, which is a very strong ambition that we have, and it's very much necessary. And we have done a lot this year. And so I just would like to explain this to you and to show how important restructuring are some of the actions that we are implementing. Our customer base has grown about 4% in terms of number of customers, ,15% growth in customers from premium bonds, 9% more customers in home insurance, 4% in life insurance.

So even though we have a high rate of loss ratio, especially in Q1 more specifically in rural insurance, we were able to improve our NPS and to reduce the levels of complaints significantly. When we look at reduction of complaints, we have reduced by 26% comparing the first 9 months of '21 to the first 9 months of '22. In terms of NPS, in rural in spite of all loss ratio has grown 5%; premium bonds, 26%; term life, 34%; and we have improved 67% our NPS in pension plans.

So we wanted to hear our customers in each of the interactions that they have with our holding, so that we can effectively capture their needs, and we are able to provide services that are timely, fast and that can resolve and solve their problems.

So in last call, I mentioned that what we did this year was to segment our customer base in different levels, and we have different protection levels to do the segmentation. We completed a segmentation that Banco do Brasil already has, and we are more and more ready to assign new meaning. So customers were segmented in Banco do Brasil, but once they bought one of our products, they had the vision of that colligate in terms of their business model.

So Brasilprev only saw their businesses, cap same thing. So we have the CRM implemented in each one of the colligates and now we are integrating the segments or -- and the model, the platform of BB Corretora, the brokerage firm with each one of the insurance business lines. And so this is going to be augmented in future quarters.

Because once we analyze our base internally, almost half of our base only has one of our products. So we have huge opportunity and also the obligation of working very intensely in terms of cross-selling in our customer base also because the super protected and most engaged customers, they are 10x higher profitability than other customers. So we want to escalate, so that these customers buy more and more products from BB Seguridade so that they have top engagement. And that's why we have this program.

This program started in October. It's still being tested with 50,000 customers. We are validating a few assumptions. We have 2 very robust best in experience that we called gain for life 1 and 2. The gain for life 1, our objective was to seek more and more behavioral information of our customers, their needs, data sharing. And in gain for life 2, we tested many tasks in terms of many different models, in terms of style of the auto consumption. And then we brought all this intelligence to our relationship program and its bias is to take many benefits to customers, progressive discounts, many benefits in terms of service, service testing, so that they are encouraged to centralize their businesses and their protection in our group.

So they will think harder before the change insurance company because we are going to deliver effective value position. The right product at the right price at the right life moment, because we are going to improve product between creation and revitalization of products. We have delivered more than 24 products this year combined with technology and this customer intelligence, we will be able to translate this into an effective value proposal, reducing churn, increasing profitability, too.

Now I'm going to give the floor to Rafael. These were my initial words. Rafael is going to talk about the numbers. And at the end, I will be available for questions and answers.

[Rafael Sperendio, executive]

Thank you. This is -- good morning, ladies and gentlemen. And these are the main highlights of the third quarter year-to-date numbers. So we have BRL 1.7 billion in Q3 this year, 69% year-on-year with a strong growth in sales. The main highlight in the quarter is the rural segment and credit life, too with strong recovery. And I'm going to give you details and also in premium bonds with a really amazing performance in terms of collection this year.

Financial also provided significant contribution especially in Q3 '21. So in the combination of all companies, we had a financial of BRL 14 million after tax, BRL 232 million, which is 14.1% of the results of the quarter, getting closer to the more normalized level that we used to have before in the past in terms of the net investment income, about 1/4 of our bottom line.

So in the first 9 months of the year, we had a net income of BRL 4.2 billion, growing 57% as compared to the same period last year. And here, making the adjustment of the results because of the time mismatch in the update of the liabilities that really makes sense once this effect at total 0 in the time, and there's no reason for why we shouldn't take out this effect. If we're segregating this effect, we added BRL 123 million negative in the first 9 months of the year. And then our net income would be BRL 4.4 billion. In the first 9 months, we already exceeded the record net income of the company that was in 2019.

Now, next page, where you have the details. You can see the breakdown of this growth, of the net income of BRL 1.5 billion in the first 9 months of the year. Most of the growth came from the improvement in the operations, so BRL 1.5 billion, BRL 877 million came from the growth of the operation, and the performance of sales, especially in the segment of insurance materialized in the BRL 710 million growth in terms of our premiums and other products, collection of pension and premium bonds, the brokerage revenues and an increase of BRL 261 million. Another significant drive for the operational result was a decrease in the loss ratio, although we had higher crop claims concentrated in the first half of the year.

If we look at year-to-date numbers, the total effect accumulated impact was much lower because of the problem that we had in 2021 because of COVID with products with coverage for death. So the combined effect of higher loss ratio in rural and reduction in life products will -- ended up being very positive and thereby contributed for a net effect with a significant growth in the operating result.

Lastly, here, the last component offsetting part of that growth, we had BRL 396 million of negative impact, especially a result of expenses and these expenses are the result of variable costs associated to higher sales, to the growth of the operation, to the adjustment of the inflation expenses, especially because of collective bargaining agreements and also investments, as Ullisses mentioned in infrastructure, in technology and other sales areas to support our channel expansion.

In terms of net investment income, contributed BRL 654 million of the BRL 1.5 billion. BRL 476 million came from the higher volume and the rate change as a result of the Selic interest rates. As you look at the longer period, the impact is slightly lower than it was last year with BRL 13 million in terms of the time mismatch of Brasilprev. And lastly, we had an effect coming from the yield curve that was more -- that was steeper. This year, BRL 49 million of negative adjustments of marking-to-market in contrast to BRL 240 million in the first 9 months of last year, totaling BRL 654 million high in the net investment income for the first 9 months of the year.

Now we have the details that you are used by operations. Starting insurance operations, you can see written premiums growing 45% year-on-year, quarter-on-quarter 30%. Rural with fantastic performance, 73% growth year-on-year, 56% in the first 9 months. And then we still have a strong trend of covering our performance growing above the market for the 9 months for credit life, 46% year-on-year, 13% growth in the first 9 months of the year.

As to the operating performance, you can see here a substantial improvement in the company's combined ratio. So in blue on the left, below. The combined ratio improved 17.7% year-on-year, 13 points in year-to-date first 9 months of the year. Loss ratio is the main driver that has been consistent in the levels of 20-something. So it's a level that we had already announced aggregating levels of COVID, the loss ratio is more structural for the company. And this is in the second and third quarter, and we expect -- we are not expecting any major changes in these levels from now towards the end of the year.

Commissions has dropped comparing year-on-year and most of the effect is related to the higher share of rural insurance where commissions are much lower than other products in the portfolio. And this ends up providing lower average commissions. And SG&A has also dropped year-on-year in the third quarter and also quarter-on-quarter, consider the substantial growth that we have seen in terms of earned premiums.

Net investment income has grown 144%. Considering the first 9 months of the year in terms of average balance, we have almost 80% of this portfolio is mark-to-market. In insurance, it's both fixed. So it can use all -- make profit from the higher Selic rates. And if we look in the higher premiums, better net investment, you can see 160% in the third quarter year-on-year as compared to the third quarter last year and 115% growth if we see the year-to-date numbers.

On the next page, you can see contributions, as I've said, and it's in the highest record ever, BRL 40 billion in year-to-date numbers, 40% year-on-year (sic) [ 29% year-on-year ] third quarter, 18% growth in collections for the first 9 months of the year.

So -- and then redemption ratio is at 10%, stable, growing 60 basis points as compared to the third quarter last year, 140 in the first 9 months, a strong influence because of income available and the market in terms of fixed income and variable income somehow impacted the redemption and the outflow of funds. But if we look at net inflow, we have been able to reverse this trend. And thereby, if you look at in the first quarter, we had BRL 1 billion of net redemptions in the third quarter, we have the inflow of BRL 2 billion net. So we could reverse this balance in terms of net inflows going from negative to positive in the first 9 months of the year of 2022.

It's important to highlight this level of redemption in the third quarter. When we look at this indicator, it was higher in July and it's been following a downward trend ever since. I don't know whether we are going to be able to keep this trend, but it's a positive indication from now towards the end of the year.

In terms of reserves, BRL 336 billion at the end of September, growing 8% year-on-year. And our participation in multi-market is also significant if we look at year-on-year numbers at 28.2%. And this is also a consequence of what we had in terms of net inflows.

The volatility in the market led to risk aversion by customers, and most of their funds are being allocated on more defensive products. And this is very clear here, when we look at the chart on the bottom, at the left, and you can see fixed income minus multi-market lower admin fees from 1.03% in the third quarter, annualized numbers last year to 0.98% annualized numbers in Q3 this year and also in the first 9 months, 1.02% to 1%. Despite this growth in the balance of reserves, we end up being able to offset the drop in the average rate with a growth of revenue of 1% year-on-year, 4% in the first 9 months because of net inflow. And also because of the interest rates in the reserve balance in our portfolio is in the first and second quartiles as compared to the market, and this has also contributed significantly for the growth of reserves.

Net investment income, we went from BRL 220 million negative last year to a deficit of BRL 35 million in the third quarter this year. We had a deficit of BRL 613 million in the first 9 months of 2021 to a surplus positive result of BRL 69 million in the first 9 months of 2022. And also in the quarter, this reduction, if we compare year-on-year, is explained basically because of the real interest rate that offset most of the negative impact coming from deflation that we have seen in the third quarter with a higher impact in IGP-M also. And this also brings a reduction in the cost of liability, but ends up having an impact on profitability of the assets.

We have positive prospects. IPCA is already in a positive territory as IGP-M reduces inflation along Q4, converging to 0 and even positive. We might benefit from this positive movement either in 4Q '22 or in Q1 '23, depending on how fast this goes.

And then lastly, our growth in revenue in terms of management fees. So we had a marginal improvement in operational efficiency and the reduction of the negative impact in financial results. If we look at year-on-year and also for the third quarter and also a positive in year-to-date numbers. And so there is a quite positive contribution for the company's performance, 82% growth year-on-year in Q3 and 98% growth in the first 9 months of the year.

Now going to premium bonds, collections grew 43% year-on-year in the third quarter. And if you look at the first 9 months, 32% growth. This is a very, very good performance of sales that will also affect the revenue of BB Brokerage.

So we had approximately 160 basis points in the financial margin of interest rates. This is adjustment of the hedge in the portfolio available for sale, which explains this drop of 31% in the net investment income. And when we look economically, this is 0 because the positive contribution that offsets this is impacting the other part of the company in terms of cash generation, and this doesn't have much of an influence.

And if we look at the first 9 months of the year, you can see that even though this hedge in the financial adjustment is still positive in year-to-date numbers. It's at 35% were the high of the Selic rate of growth in the net investment income for the 9 months of the year with 60 basis in the financial margin from interest rate.

So what happened this dynamics that had an impact in the net investment income of the company also explains the variation in the net income for premium bonds with a drop of 37% quarter-on-quarter and the high.

So now dental plans, a smaller operation and so we had a growth of 40% year-on-year, considering the Q3, especially because of lower loss ratio and the profit of this operation grew 37% year-on-year and [ 37% ] in the first 9 months.

Now ending in distribution, Brokerage revenues grew 23% year-on-year, 18% quarter-on-quarter and 15% if we consider the first 9 months of the year. Rural insurance had a very, very good performance, also pension and premium bonds. And you can see this improvement of 3 points in the net margin is the result of the average balance of funds and also the high on Selic that has contributed for a growth of 30% of the net income year-on-year and 22% in the first 9 months of the year.

So on the last page, to wrap up, we have our guidance in terms of noninterest operating results. So we had better loss ratio, and that was more accelerated than we had expected before. So that's why you're reviewing our range from 15% to 20%. We are going from the revised estimates from 24% to 27%.

So in terms of premiums written, we are delivering 30.4% with a very significant contribution from rural insurance. We're also reviewing it with a growth from 25% to 28% for the year of 2022.

In terms of pension plans reserves, we delivered 8.2%. If we analyze this growth rate that as we've been doing in our reports, annualized would be 9.9% within our range -- estimated range. And for this reason, we are maintaining this range and we are not reviewing these estimates.

These were the main points that I would like to highlight. And now we are available to answer any questions you may have. Thank you very much.

[Felipe Peres, executive]

Thank you, Rafael. Now we are going to start questions and answers. [Operator Instructions] If we cannot answer all questions here live, we are going to send you and enter by e-mail soon as we finish our conference call today.

Our first question comes from Antonio Ruette from the Bank of America.

[Antonio Gregorin Ruette, analyst]

Congratulations on your performance. My question is for 2023. So what can you tell us about growth in premiums and loss ratio? What are going to be the focus? It says the rural is so strong and the credit life insurance is doing so well quarter-on-quarter. So what are the focus for growth in next year in terms of lines? And what can you tell us in terms of loss ratio?

And another question that is more specifically for rural, what are you seeing you for about La Niña on month-to-month? So what is the loss ratio for rural that you're seeing for future quarters?

[Rafael Sperendio, executive]

Antonio, I'm going to answer your question, Ullisses may contribute. So first, loss ratio. So at first La Niña goes on and even though we understand the severity of this climate event will not be as bad as it was in the last cycle. In any way, we are much better prepared than we were in the last cycle. We had a few adjustments in our subscription model, in our negotiations is with a reinsurance company. We also reviewed our distribution of risk throughout the Brazilian territory.

So even though La Niña might have the same severity as it was in the last agricultural season, we think that it's not going to have such an intense impact on loss ratio, at least not as high as we had in the first quarter this year. But it's still too early to say anything. We are working very much based on assumptions. This scenario is going to be clearer in December and January.

As to sales performance, well, the overall macro content -- context, is better than what we experienced along 2022, talking about the same variables. Unemployment has been going down. We ended 2021 with 11%. Now it's already at 1-digit level. It had the first level in the last 10 years. And the trend is of improvement, which will favor our commercial performance. So we are confident that the economic context for businesses is likely to be better in '23 than it was in '22.

[Antonio Gregorin Ruette, analyst]

Can we have the same growth rates?

[Ullisses Christian Assis, executive]

Well, in principle, no, not as a big there will be some slowdown, but we don't think that the slowdown is going to be significant. It's going to keep a significant pace of growth in all our business lines in 2023. This is what we are expecting.

Specifically about credit life insurance. We understand that this new level is here to stay because today, we have a product that is better. In the past, we had changed the product, that was a time of transition in the portfolio. This happened really. And so we believe that we are at different level of sales of credit life insurance, and we think this is going to be strong.

For rural insurance, we still have a lot of space to grow. There is an increasing demand for this product also -- especially considering the claims that happened in the near past. So our loss ratio was 1/3 of the market, and this definitely provides us leverage to negotiate with reinsurance. And we understand and as this has been going on this year, we are still strong for next year, not to mention planted versus insured area, which in Brazil is still a very low number, and we still have lots of room to grow.

[Felipe Peres, executive]

Our next question comes from Tiago Binsfeld from Goldman Sachs.

We're going to move to the next question. We have Marlon Medina from JPMorgan.

[Guilherme Grespan, analyst]

So this is Grespan speaking. My question is looking to 2023, but now from a different angle. If we analyze this quarter. When we look at your reported income of [ BRL 1.50 billion ]. And we analyze we get to BRL 7 billion, which is materially above what the market is seeing today. Once we do this analysis, what do you think is the main risk for this type of calculation? So one variable would be the interest rate. But even if Selic goes down next year, so the average Selic will have a higher Selic for next year versus this year. If we could criticize the annualization of this quarter's net income, what do you have to say about that?

[Rafael Sperendio, executive]

Thank you for the question. So our performance this quarter, there weren't really any extraordinary events, no one-off events, meaning that we can continue from now on with this performance. So if everything remains normal in the business environment, we don't see much risk, in answering your question. If we look at all components, loss ratio is well within the more sustainable level for the operation of insurance.

Our commercial performance, we think that we -- that these volumes are going to grow, if we look into 2023. So if we look at the results and we see all the competition, so in our vision, we are not seeing any extraordinary events that may have driven up our performance in Q3. This is very much in line with what we've been that is on the company's capacity of generating profit.

[Felipe Peres, executive]

Now I'm going to Tiago Binsfeld.

[Tiago Binsfeld, analyst]

Felipe, can you hear me?

[Felipe Peres, executive]

Yes.

[Tiago Binsfeld, analyst]

Great. Well, the first question is about the new guidance, the new operational guidance. At the top of the guidance, a growth of 27% would be a slowdown as compared to what you have delivered in Q3. Is that right? And do you think this is a conservative assumption? Or does this reflect what you're seeing for the Q4 in terms of October and November? And then I have a second question to ask afterwards.

[Rafael Sperendio, executive]

Tiago, thank you for the question, being very straightforward. So if we compare fourth quarter last year was a very strong quarter. So we expect slowdown in this rate, and we didn't have any COVID effects. This is very similar. And so we are really expecting a slowdown even though small in -- if we look at the whole year.

[Tiago Binsfeld, analyst]

My question is also of the Q3. Do you think Q4 is going to be slightly weaker than Q3? This is what I'm seeing here. Does it make any sense? Or can I interpret this guidance in any other way?

[Ullisses Christian Assis, executive]

If we compare quarter-on-quarter, we are not expecting a reduction -- a significant reduction in the generation of profit. Obviously, investment income is something different. It's separated. But if we think of the operation, there's no reason why we should expect a significant slowdown in our generation of net investment income.

As to sales as a whole, we also have the seasonality of some projects. For example, the rural insurance is seasonal. And it might have some impact on sales. But as Rafael said, in terms of results, we are not seeing much of a difference.

Now of course, we have 1,000 variables. In many years, we expect an IGP-M of 5 in the beginning of the year because of market indicators and we end up with 20. We have IGP-M claims, pandemic, things that are kind of unexpected and that happened. But if we keep all conditions that as we are expecting, well, that shouldn't happen.

[Tiago Binsfeld, analyst]

I have a second question, if I may. In terms of contributions that were quite strong this quarter, but if you could give us more details what you've done this quarter, why has it improved so much and so much above the market and this is a trend for 2023 that you're going to keep?

[Ullisses Christian Assis, executive]

Well, I'm going to start, and Rafael, please feel free. There are a few questions. Well, for rural insurance, in fact, also considering our excellent underwriting capacity, we were able to have capacity to operate slightly better than the competition. In some states, in the last 3 months, we operated almost alone in some of those states because of capacity of other insurance companies. They had very high loss ratio earlier this year. So we are seeing that this is one of our strengths in terms of our growth in rural. So we are operating normally all over Brazil.

And as I said, despite such robust growth, when we analyze the percentage of planted versus insured area, we have a huge space to grow. And as I showed you, in addition to the network of the bank, we have created a new distribution channel. Just in the open sea, as we call it, just in terms of rural insurance, we made BRL 440 million, not depending on anyone from Banco do Brasil. So creating a new business model with these strategic partnerships.

And so we had quite bold actions because we have created and delivered to Banco do Brasil's network, the highest sales mobilization campaign in the history of the bank ever. So this has an effect on the distribution potential, and we hope that we are going to maintain this next year, and we are negotiating to keep this new format that in our understanding is very appealing and also using the experience that I brought from the time when I was a Network Director, with all the directors and vice presidents of that area so that we can have a differentiated level in terms of positioning of insurance products within Banco do Brasil.

And this is translated into credit life product where we have -- and also in premium bonds that we have grown significantly this year. So there is a whole set of actions. So product improvement, process improvement, better customer experience, new distribution. So -- there is not 1 silver bullet. It's a set of actions that we have improved that have enabled our better -- or the improvement of our performance as a whole.

[Tiago Binsfeld, analyst]

Just a follow-up, when we look at pension, do you think these trends are going to continue? Is there anything specific that you did in pension, and that led to higher contributions?

[Ullisses Christian Assis, executive]

Well, pension. We also have space as the whole insurance market. But for pension, we have a lot of space to grow. I was talking recently or shortly ago to journalists. We have some penetration that we can improve a lot in terms of high retail in private. So still have a high potential for growth of pension plans and we do not have appropriate penetration. For us, that have the highest portfolio, it's an extra challenge for us to defend our customer base. We see some players growing, but they're growing on a much smaller basis. It's different for you to defend a BRL 40 billion portfolio, a BRL 330 billion portfolio. So along the year, we have implemented some actions that made it possible for us to be more efficient, both in attack and defense.

So what we did last year in terms of multi-market, when we migrated BRL 100 billion to multi-market, we took a product with diversification, but not necessarily with a high volatility. This made it possible for us to provide an efficient value proposition when our penetration went from 32% to 28%. Where some competitors had 70% share in the multi-market and today have 15%. So we are much more focused on pension in terms of delivery and effective value proposition with investment in strategy rather than in migrating them from investments to the other all the time. And this improved our retention capacity. So when we talk portability [indiscernible]. So we improved performance, and we also -- improve our performance and transfer out. So we are no longer losing funds.

Now considering our base makes us very optimistic in terms of pension. Also because pension is not such an easy product to sell on the digital channel. The sale of mentioned plans require specialization. The other thing that we did was Brasilprev, we have what we call Premium Island. So we have many highly specialized consultants that have a virtual portfolio together with private or [indiscernible] relationship managers, they have higher value than they talk to those customers all the time through all the channels to have a more appropriate investment strategy and more effective communication. And this also contributes not just to bringing in a fund, but -- so that we are more agile. So for all the reasons I have mentioned and also considering our basis.

[Felipe Peres, executive]

Our next question comes from Eduardo Nishio from Genial.

[Eduardo Nishio, analyst]

Congratulations on your performance. I have 2 questions. Number one is the hedge of Brasilprev. You said that you are hedging already. How can we look at the result from now on? Is it going to be less volatile? Are the numbers going to be more normalized with a minor loss? How should we look at that?

And my second question is related to succession. Unfortunately, this is a theme that comes up every time a new president is elected. I would like to hear from you. Will there be a succession? How would it be like? And what are the mechanisms that you have for shielding against -- for shielding your growing profit trajectory in terms of protecting it, considering the political transition?

[Rafael Sperendio, executive]

I'm going to answer the first question and then Ullisses is going to answer your second question. As to hedging, so in Brasilprev, I talked about Brasilcap, but because both of them have different perspectives, but both of them, we are working with protection mechanisms. And the Brasilcap, our portfolio is pre and then matching our passive, which is also prefixed. It's available for sale impacting the company. So we started a protection strategy, locking that cost. It was much higher in the second half last year. We've been reducing our protection. And in this quarter, the closing of the structure ended up creating negative results. But then on the other end we have an offsetting effect with a gain of this marking coming from the closing of the curve. But then a total 0 at the end.

So we are working here with shorter time frame for this hedging, and we hope that we will be able to benefit from gain once the structure closes in 2023. But obviously, it's still a little bit early to talk about that. But in answering your question about Brasilcap, we are not expecting any negative effect arising from our protection strategy, much to the opposite.

As to Brasilprev, we have the traditional structure. And so in the current scenario, and also considering the past, it's important for us to bring this topic to a discussion. Our main concern in managing this portfolio is much more in matching the duration than in the index, even though the index gets more attention because of the volatility. But economically, it makes more sense for us to match duration and we were able to use well the opportunity in terms of negotiations with real rates where actual rates with 15, 20 years paying more than 6% in terms of the actual rate. We brought this into our portfolio. But going back to your question in Brasilprev today, in terms of index, we have about 80% matched, but with a shorter duration. For the next 3 years, 5 years, no more than that is the duration of the hedging of the index.

Ullisses, please?

[Ullisses Christian Assis, executive]

Well, talking about any possible changes. Well, we are not worried about that. Because if they happen, the company has quite robust governance, very well-defined strategic documents, very well-designed planning for the next few years in the case of BB Seguridade. All of us are employees of Banco do Brasil, so these changes do not depend on elections. I was the Director of the bank, then I came to Brasilprev.

So along our careers, some changes occur, obviously, not because of the change in government. And any change to become a member of the Board, whether CEO and Director of any area, you need to be an active employee of the bank. You need to have technical expertise that needs to be approved by the company, so there is governance. So you shouldn't be worried or concerned about that. And the company's corporate structure is very well designed. And if any changes happen, there is no risk for continuity, much to the opposite.

[Felipe Peres, executive]

Our next question comes from Kaio Prato from UBS.

[Kaio Penso Da Prato, analyst]

So on rural, there are a few regions. And in some lines, you're operating alone on the rural front. So I would like to understand, why do you think you are the only ones, who can operate on those areas? But looking on the downside, if there is any effect in terms of loss ratio similar to what we had earlier this year that you would suffer a stronger impact as compared to what we had this year? In these renewals on higher penetration, you have had some increase in terms of reinsurance that could offset this factor.

[Ullisses Christian Assis, executive]

Well, Kaio, I will say the following. We do not have a concern and can assure you that we are not operating and assuming unnecessary risk because we want to grow, but with quality. So why are we still operating? Because we have more reinsurance capacity. As our loss ratio in the first quarter this year was 1/3 of that of the market, it's easier for us to discuss with reinsurance companies any capacity. So the risk with us has demonstrated to be much lower.

And we are still growing in all regions. We have this advantage of the capillarity. We're still growing quite robustly in every region. But we have the analysis capacity per municipality. For example, in Rio Grande do Sul, we analyze subregion in the state, not the state as a whole. We have historical data. We know farmers for a long time. And so we have people working, giving advice to those farmers out in the field. So this improves our subscription or underwriting capacity.

So we are growing but in a very, very careful and responsible way, and we are operating in initiatives and regions where we think risk is acceptable and also considering our negotiation capacity with reinsurance companies considering that our loss ratio is well below that of our competitors. So rest assured that we'll be very careful in this growth, and we are monitoring the risks that we think that are absolutely acceptable.

[Felipe Peres, executive]

The next question comes from William from Itau BBA.

[Unknown Analyst]

I have a follow-up regarding pension. So we have 30 average contribution in market share. And you think you can gain share in contribution in some segments of the market still. So thinking of your new share and what you see in comparing it to your current share, where do you think your total share will be in terms of total contribution?

And also in terms of redemption, it's been growing. It was 11.9% this year. Do you think 11.9% is a stable level? Or is it going to still go up in future quarters?

[Ullisses Christian Assis, executive]

I'm going to go first, and then Rafael may complement, William. Well, what we see in the market today in terms of pension is that in terms of redemptions, somehow, the behavior is kind of not really at what we consider normal levels in the past, considering the economic conditions. We have a very robust follow-up of funds that are redeemed. So we monitor what is being transferred to other players, to the competition. We measure what is being redeemed to buy real estate, what is being redeemed for costing. So we still have a strong share of our redemptions is being redeemed for costing. It slowed down a little bit, but it's still resisting. It continues and it's going to be like that until the end of this year.

As to our sales capacity, so where do we think we can increase our portfolio? So even though we've been selling a lot when we talk about BRL 40 billion in 9 months, this is collection well above the second runner. So we think collection is going to remain strong. I wouldn't say growing, but as we see, we are going to exceed BRL 50 billion in terms of collection for [ a year ]. It's not easy to sell that much. We do that because we still have a lot of room to grow in the network of Banco do Brasil.

But as I said shortly ago, we are going to get closer and closer to customers with an investment strategy that will make sense, that they can relate to. So customers that redeem for consumption for costing, we can't do. They need the money. Now those customers that we deem and transfer the funds to a competition, well, then yes, we have something to do. So what we are doing is that with product improvement, even products from other organizations with open architecture, with a closer relationship, we've been able to drive down redemptions. And this is translated into positive net inflow, which is something that hadn't happened in a long time.

So we are delivering effective value proposition so that we lose less and less those customers that are going to migrate. In the past, it was easy. They came to us, well, take from fixed income, give it to me that I'm going to give you that -- well and sometimes they go and then they do not receive or see what they were promised.

So considering our diversification of strategies through communication with customers, we see the value proposition. We offer a diversified portfolio and we build an investment strategy. They are much more susceptible to attacks. And that's why we have reduced transfer out. So it goes through product improvement, we have process improvement and close relationship with customers. And this is already strengthening our retention and thereby reducing transfer with the outflow of funds.

So all in all, I would say that our sales capacity, we are sure that we have a very strong sales capacity and considering everything that I told you, we can see that our retention capacity is also better.

[Felipe Peres, executive]

Our next question comes from Matheus Amaral from Banco Inter.

[Matheus Amaral, analyst]

Congratulations on your results. I was wondering about the diversification of distribution. You put BRL 800 million in terms of premiums written. So is this related to the growth platform? And can you explain this number better? And also the impact in terms of contribution and this is related to the strategy that you were building in terms of reducing exposure? And how can you expect the strategy in the future?

[Ullisses Christian Assis, executive]

Well, I'll tell you about the diversification. Well on diversification, so in the sales of the group, we do not compute open sea. We compute that in the digital sales, what comes through the bank's app sales. So you have -- you will note that we have a corporate movement with bank. We are creating a new company to monetize. So this depends a lot on Banco do Brasil. It attracts the customers and there's a whole appropriate value proposition. And we go in with insurance and the exclusive model, as it goes up, so we really believe on this strategy as a whole.

But thinking in the midterm, what we have in terms of strength of our diversification strategy are the partnerships with cooperative, with agronomists, so we have almost 500 technical analysts that are on the day-to-day with farmers that we used to work and banking correspondents of Banco do Brasil for credit, but not with insurance. So they have an additional portfolio for them to work with and also considering resales.

For now, we think that we should build a business that can escalate as fast as possible and can provide results. So our main focus was that -- our focus on that is going to continue. At the same time, we are closing many partnerships to distribute our products in our portfolio. And of course, each one of those partnerships requires adapting systems and sales force training, adaptation of sales force, many different things because each one of those partners have specific needs. That's why we need to accelerate the digital transformation so that we have adaptability to each partner's needs because sometimes the new partner comes, well, I need to sell home insurance with X, Y and Z coverage. So a while ago, it took us a while for us to build that product. Our products are very easily customizable.

So next, we are going to have hyper customization or personalization. So the new partnerships require some time for adaptation. That's why we give priority to those ones that we thought had more capacity for the business to advance faster, but all the 40, 45 that I mentioned. Plus the ones we are still working on, each one has specific products that -- for which we are going to develop sales strategies along the next few months.

[Rafael Sperendio, executive]

As to reinsurance matters, until 2018, if I'm not mistaken, we used to have a panel that was very much concentrated on just 2 reinsurers. Since then, we have built a reinsurance panel. Now we have 5 reinsurers. So we don't want to be focused to not on one specific reinsurance. We want to [ polarize ], not to focus on a single reinsurer. As to IRB specifically, and this keeps until the end of the cycle. Between next year, Q1 or 2, this is when we are going to sit down with insurance and talk about commissions, composition, distribution of the risk with our reinsurance panel.

Maybe we could add someone else and everything is still open. Nothing has been defined yet in principle. And obviously, we are going to consider this discussion with capital, service provision, in very good service provision and considering the payment flow. And all of this is going to be discussed and the decision is going to be made for next year. Nothing has been decided yet.

[Felipe Peres, executive]

Now we have time for one last question, and there's a question on the chat from Thiago [indiscernible] from BTG. He wants to know about investment prospects and the growth of OpEx and the digital transformation in Q4 and especially next year.

[Rafael Sperendio, executive]

As to investments, so for 2022, there were no significant changes for OpEx. Most of them is on CapEx. And we are not expecting any significant changes in Q4. And next year, we're still discussing. But most of the investments that should be made has already been made in the technology transformation in terms of improvements, then will be implemented along '23, but most of the investment has already been made.

And I would like to take the opportunity. There's a question on the chart by Navarro about reinsurance. I think this is clear, so negotiations already took place in the first half of the year. So we are not seeing any major impact. So he was asking about the renegotiation of prices for agricultural reinsurance, and I said, yes, we did it in the first half of the year.

[Felipe Peres, executive]

So in this manner, we finalized our conference call for the third quarter of 2022. At the end, you will see a link. If you could please answer the questionnaire and give your opinions. Ullisses, Rafael, any final remarks?

[Ullisses Christian Assis, executive]

Once again, I would like to thank everyone for being with us to hear about our results. I'm very happy, but I'm aware that we still have a lot of work to do for the company to become increasingly strong, robust and sustainable, and we are working towards that. Greetings.

[Rafael Sperendio, executive]

I would like to thank again for your participation, for your questions, and we are available along with the Investor Relations team for everyone. Thank you all very much.