BB Seguridade Participacoes SA

BOVESPA:BBSE3

Earnings Call Analysis

BB Seguridade sees growth despite challenges in insurance and financial markets.

In Q3 2024, BB Seguridade reported a 9.7% year-on-year rise in net income to BRL 6.4 billion. While premiums written grew by only 1%, retained premiums rose by 8%. The loss ratio improved to 25%, down 3 points. The company anticipates revenue growth slowing from earlier estimates of 8%-13% to a more modest 0%-3% by year-end, driven largely by agricultural insurance performance. Despite these adjustments, innovation in products and a solid operational foundation position BB Seguridade for long-term growth. Overall, the company remains focused on enhancing customer experience and expanding its product portfolio.

Growth in Net Income and Performance Overview

BB Seguridade reported a strong net income of BRL 6.4 billion for the first nine months of 2024, reflecting a year-on-year growth of 9.7%. The managerial net income reached BRL 6 billion, representing a 5.7% increase and a record-high for the firm. Throughout this period, the combined operating results, net of taxes for all companies under BB Seguridade's umbrella, grew more than 10% annually, showcasing robust operational performance amidst challenges.

Premiums Written and Retained Premium Growth

The company saw its premiums written increase slightly to BRL 13.2 billion (1% year-on-year), but retained premiums were up by 8% to BRL 11.4 billion. This growth is attributed primarily to the more profitable segments, such as credit life and crop insurance, highlighting effective business strategies. However, it's important to note that the pace of growth in premiums written fell short of previous expectations.

Operating Efficiency and Loss Ratios

BB Seguridade maintained a historically low loss ratio of 25%, down by 3 percentage points compared to the previous year. This efficiency in managing claims against premiums has been a key contributor to the overall positive financial results. The partnerships with Banco do Brasil proved lucrative, accounting for BRL 167 million, confirming the strength of their collaborative efforts.

Pension Operations and Net Inflows

In pension operations, BB Seguridade successfully attracted BRL 422 billion in reserves and saw net inflows reaching BRL 7.9 billion, marking an 11% year-on-year growth. This segment has been a significant driver of overall performance, reinforcing the firm’s strategic advantage in this space.

Brokerage Growth and Revenue Streams

The brokerage division also performed well, generating BRL 4.1 billion in revenue, which translates to an 11% increase. Additionally, corporate insurance premiums reached BRL 110 million through strategic partnerships, indicating BB Seguridade's intent to deepen its engagement in corporate insurance markets.

Customer Focus and Innovation Strategy

BB Seguridade places great emphasis on customer experience, as evidenced by improvements in its Net Promoter Score (NPS) and a 9% reduction in complaints year-on-year. Notably, there has been a 15.2% improvement in customer retention and a 9.5% increase in customers holding four or more products, showcasing enhanced cross-selling strategies.

Future Growth and Guidance Adjustments

Looking ahead, BB Seguridade has adjusted its guidance for revenue growth, projecting written premiums to grow between 0% to 3% for the remainder of the year, down from an earlier forecast of 8% to 13%. This decision was primarily influenced by weaker performance in agricultural and rural insurance sectors, with crop insurance written premiums down 32% year-on-year in the third quarter.

Investment in Technology and Sustainability Initiatives

Investments in digital transformation reached BRL 368 million year-to-date, with a focus on enhancing analytical capabilities and customer engagement. BB Seguridade also launched innovative products, such as insurance for preserved forests and crop insurance tailored for small producers, emphasizing the company’s commitment to sustainability.

Conclusion and Shareholder Returns

BB Seguridade remains committed to delivering value to its shareholders through consistent dividends and strong operational performance. The firm continues to navigate challenges within the Brazilian insurance market while capturing growth opportunities through strategic partnerships and innovative product offerings.

Earnings Call Transcript 2024-Q3

[Felipe Peres, executive]

Hello. Good afternoon. Thank you for attending our virtual meeting to present the results of the third quarter of 2024. This event is being recorded, and there is simultaneous interpretation into English. [Operator Instructions]

The event will be divided in two parts. First, the CEO, Andre Haui, and then our CFO will make presentations about the results. Then there will be a Q&A session. The company presentation is available at the company's Investor Relations website, www.bbseguridaderi.com.br. [Operator Instructions]

Now I would give the floor over to our presenter, Andre, and then we'll come back for the Q&A session. Thank you, please.

[Andre Gustavo Assumpcao Haui, executive]

Good afternoon, ladies and gentlemen, my friends. I'm very pleased to talk about the results of BB Seguridade year-to-date for the 9 months. But before continuing, I would like to thank our associates, our shareholders, customers for all the effort and the support in the recent months, and we'll keep going.

So as already disclosed, our net income in the last 9 months was BRL 6.4 billion, a growth of 9.7% year-on-year. Our managerial net income has grown by 5.7%, totaling BRL 6 billion, another record-high. Our combined operating results, net of taxes for all the companies, has been growing more than 10% a year, which more than offsets the increase. And so far, we've been having a great operational performance.

When we look at the insurance business, the volume of premiums written in the last 9 months amounted to BRL 13.2 billion with a growth of 1%. But it's important to highlight that retained premiums amounted to BRL 11.4 billion, a growth of 8%. We continue to grow strongly in the more profitable insurance such as credit life and crop insurance. And we assign this reinsurance, most of our credit insurance, and that's a strong part.

Also, the loss ratio remains at historically low levels with a reduction of 3 percentage points up until September, being at 25%. The partnerships with BB Seguridade have grown with BRL 167 million, a contribution of partnerships. In terms of pension, we're able to obtain BRL 422 billion in reserves and BRL 7.9 billion in the net inflows. And reserves increased by 11% year-on-year.

At the premium bonds business, we collected BRL 4.9 billion with a growth of 4% and reached reserves of BRL 11 billion. When we look at the distribution business in brokerage, there is a brokerage revenue of BRL 4.1 billion, plus 11%. Also, there were BRL 110 million in premiums written of large risks and transport insurance with partner brokers. That's more for corporate insurance, and we intend to grow more and more in this segment.

Now one of the pillars of our strategy is to have the customer experience at the center and innovate. NPS remains at the quality zone, growing year-on-year. And there was a reduction of complaints of 9% year-on-year, also showing the quality of our services. And it's important to say that our churn has improved by 15.2%. And when we look at the strategy with the customer that's overprotected, meaning customers that have 4 or more products within our portfolio, there has been a substantial increase of 9.5% in the number of customers like this. And also their NPS improved by 9.3 points.

It's important to highlight the innovations that BB Seguridade brings. In recent months, we're able to launch insurance for preserved forest for rural producers or those who own lands in the area of environmental conservation. That's important because it allows companies to protect the biomes within several areas of Brazil by purchasing this insurance, especially right now when there have been too much wildfires and fires in general, and we show our commitment to sustainability.

We also developed a crop insurance for Pronaf for small producers of sugar cane, rice, soybeans and coffee. We launched an insurance for non-financed machinery and equipment focused on the legal entities. So that will improve the access to our portfolio and increase our revenues.

We're able to increase sales of personal protection insurance that, in addition to the digital channel, is also available in our BB branches, focusing on different niches. And in the last 9 months, we invested BRL 119 million in the third quarter of '24 and BRL 368 million in the 9 months of '24 in digital transformation and analytical maturity. So I would like to thank Banco do Brasil, our controlling shareholder, and also the trust of our shareholders. And we are available to society so we can continue to increase the culture of insurance and protection in the whole country.

Now Rafael will talk about the financial results.

[Rafael Sperendio, executive]

Thank you, Andre. Now moving on to Page 5. I would like to talk about the results in the third quarter and year-to-date. I'll also talk, from the managerial point of view, adjusted that does not consider the IFRS 17. We continue in the same situation because this new rule has not been adopted by SUSEP. So most of our dividend flow for shareholders is based on IFRS 4.

So focusing on the concept that we reported up until '23 and started now reporting on a managerial basis, our net income for the quarter, BRL 2.3 billion in profit, with a growth of 10% year-on-year. If we look at the pink bars, there is an adjustment as usual where we separate the effect of the temporal mismatch of the update of IGP-M for defined benefit plans. There is 1 month of lag in this, so it's neutral effect that adds up to 0, but it generates volatility.

So the results of the third quarter was highly benefited for this because it added BRL 146 million in the results of the third quarter. This year was the opposite. It decreased by BRL 11 million. So at normalized basis, this growth of 10% that we reported would have been even greater at 19%, which is very good given the challenges, especially in the financial result.

In year-to-date, in the last 9 months, it's a longer period. So this mismatch does not play such an important role, a growth of 6% and a growth both in the quarter and year-on-year, year-to-date as well, came from operations, more than offsetting the loss in financial results, which was expected.

We were even surprised that we're able to offset that loss or that decrease with the increase in volumes from insurance. But something we did not expect in this year and has happened and impacted the financial revenue significantly was the opening in the interest rate structure that caused the mark-to-market to be negative in assets that are linked to inflation at Brasilprev to ensure defined benefit plans. So on the right side of the slide, the financial result decreased by 16% year-on-year and 19% year-to-date, which accounts for 16% for the profit of the first 9 months of the year, where it represented 21% last year.

In the next page, we break down the net income for the first 9 months of the year, separating between the main components and the main factors that influenced this change when compared to the same period of last year. So operations added BRL 15.44 billion, while finance used up BRL 221 million. So as I mentioned, all the growth comes from operations, and a part of it is used by the decrease in the financial revenues.

So on the left side, it shows clearly that there is an excellent performance on premiums written, either from new sales of this year as well as transfers from the excellent performance in the last 2 years, which helps this growth in revenues from brokerage. And there's also a component of mix that collaborates to that. So all operations had a composition in terms of sales with higher commissions, so more concentrated in products or payment methods that have a higher-percentage brokerage fees, which increased in terms of brokerage revenues at BRL 238 million.

Another fact that contributed with a direct effect was pension funds with a growth of BRL 112 million in management fees, in line with the growth of reserves. Another very important factor that has helped the results of this year was the result in the loss ratio, BRL 177 million coming from reduced loss ratio, especially in crop or rural insurance. And a part of this gain is used up by the increase in expenses or due to the offsetting effect from the increase in commissions that is good for the brokerage firm and not so good for the insurance firm. But on a conglomerate view, it's positive.

And then in other components, the financial part, with the drop of Selic, the increase in the average volume of operations, there is a component of financial expenses, especially at Brasilcap, with the liabilities linked to TR, so the Selic interest rate has a direct impact on it. That's helpful.

The temporal mismatch with its effect. A good portion of this BRL 120 million in net investment income change came from mark-to-market with a loss of BRL 117 million, whereas last year, there was a positive gain by BRL 97 million. So last year, the context was very favorable. The interest rate in the first 9 months was very high, around 13% with the curve going down and low inflation. So all were tailwinds. Now it's the opposite situation. The interest rate is going down, the curve opening and inflation rates higher than last year. So this year, there's a concentration of not-so-positive effects.

In the next page, we break down operation by operation. So on the upper left corner, on the premiums written chart, in the third quarter, there is a reduction of 5% year-on-year, in the light blue bars. On the right side, we can see that most of this drop of 5% was in the rural segment that accounts for half of premiums written, especially in crop insurance that was reduced by 32% year-on-year in the third quarter.

Looking within the rural insurance, there is a very strong performance in other lines of insurance. The rural insurance has grown, especially for livestock. And so that's not sufficient to offset everything, but a good portion of agriculture insurance.

Another product that was reduced year-on-year was life insurance. We understand that it's something that refers to the third quarter, and October has improved. And in the third quarter, again, credit life, that has grown by 9.2%. Year-to-date, premiums written have grown by 1%. The dynamics is the same because year-to-date reflects the same contribution factors that I mentioned for the third quarter. I would like to emphasize that this 1% in growth in premiums written does not reflect directly what has contributed to improve the results of the company.

Within the rural insurance premium and crop insurance, [ 17% ] goes to reinsurance. So what ends up being in the company's reserves is just a net of commission between what is paid for the broker and what we receive. What's important to add up to reserves is the retained premiums, that has grown by 8%, which is within the guidance interval.

When you look at the lower left of the slide, we have the main performance ratios. The result that has quality, a reduction of the combined ratio, the light blue or light green line has been reduced, especially in rural insurance, higher commission ratio reflects what I just said, this mix of written premiums more concentrated in agriculture insurance that increases average commissions, but it's good for BB Corretora. And reduction in G&A ratio was a reduction of 60 basis and 40 basis points in accumulated year-to-date. That's in line with investments in technology.

And the reclassification we made, as I mentioned in the second quarter call, some investments in technology that were being classified as CapEx now are being recorded as OpEx, and we made an adjustment in the second quarter and now we report according to the new methodology in the third quarter. That's what explains the increase in G&A ratio.

Net investment income drops 18% year-on-year and 10% year-to-date. This is a company that's post fixed, so Selic plays an important role here. That's partially offset by the increase in volume.

And finally, net income has grown 13% year-on-year and 9% year-to-date with the growth of premiums earned in the third quarter, which amounted to 7% and 9% year-to-date. With the reduction of the loss ratio, the combined figures are better. These were the main drivers plus the offsetting of net financial income.

Now pension operations at Brasilprev on Slide 8. Contributions are stable year-on-year. In the third quarter, there have been a drop in net inflow, less withdrawals. There is an effect of volatility of interest rates, people who are risk averse. When you reach volatility period, redemptions increase. So this is an effect concentrated in the third quarter. But in year-to-date, this effect is diluted.

So we noticed that in net inflows, there is a growth. Reserves grew by 11%, reaching BRL 423 million in September. Management fee grows at the same level, basically, despite the drop in the average management fee due to the higher concentration in vehicles that are more conservative where the fee is lower. This has impacted the average management fee for the company as a whole. So basically, the average fee drops, but revenues grow at the same pace.

And the net income grew 13% year-on-year. So basically, when we look at the third quarter and year-on-year, due to the increase in management fee, also the reversal in coverage ratio, that's partially reverted by the negative effect of IGP-M. So year-to-date, the drop of 11% reflects the drop of net financial income. That's associated to the fact that last year, IGP-M accumulated for inflation, our traditional plans are adjusted by IGP-M. This year, the inflation in the 9 months has increased our financial expenses, pulling net income down.

In Brazilcap, premium bonds have grown 6% year-on-year, 4% year-to-date. Reserves are stable. Draws paid grew 28% year-on-year, dropped by 9%. Still a relevant value, BRL 43 million in the first 9 months of the year. The net investment income has dropped by 8% year-on-year in the third quarter due to the compression of financial margin, 60 basis points. And in year-to-date, the restriction of margin is lower, but it's offset by the increase in volume. And the net investment income grew by 8% when compared to the same period of '23. And this dynamic of financial revenues and expenses explains that net income had dropped year-on-year by 5% (sic) [ 4% ] and increased year-to-date by 6%.

BB Corretora, we have a 10% growth year-on-year, in the third quarter, in brokerage revenue, 11% year-to-date, not only from new sales but a mix of sales more concentrated in products that have higher commission rates. The net margin is stable, and therefore, the net income grows at the same level of growth of revenues.

And to wrap up in the last page, our comparison to the guidance for the year. Noninterest operating result goes up from 8.8% to almost 12% in year-to-date for 9 months. Loss ratio is certainly an important effect to justify this increase. Premiums written, there was an interval from 8% to 13%. We delivered 1% year-to-date. And here, we chose to review this range here. So 8% to 13% growth, we expect to end the year from 0% to 3%.

I would like to remind you once again that if our guidance was for premiums written, we didn't need to review it. But in premiums written, agriculture, rural insurance plays an important role, so we had to adjust that. And finally, the PGBL and VGBL pension plans reserves indicator has grown above the interval considering this scenario that I talked about, scenario of volatility, of interest rates, we are growing even more than we expected.

So these were the main points I would like to highlight, and now we are available for the Q&A session.

[Felipe Peres, executive]

[Operator Instructions] The first question is from Guilherme Grespan from JPMorgan.

[Guilherme Grespan, analyst]

This is for Andre. Congratulations on the results. I would like to focus on life and credit life in the medium term. It was mentioned that life insurance recovered in October. But thinking about 12 to 18 months forward at the top line of these 2 products, in life insurance, I would like to understand whether you agree that the penetration of number of customers is mature? And how could we think about the increase in life ticket in the medium term? And for credit life insurance, in what credit product is the cross-selling divided? I think consigned credit and working capital. But if you could give us a breakdown like x percent of sales from this product and so forth so just for us to understand how this will correlate to the credit origination appetite at the bank.

[Andre Gustavo Assumpcao Haui, executive]

About credit facilities, in general, 80% of premiums today are with individuals and 20% with legal entities. Legal entities, I'm talking about working capital and small and medium-sized companies. For individuals, all the lines of insurance, except for revolving credit and the credit cards, all the others already have credit life. But a significant amount comes from consigned credit, personal credit. Just removing the consigned credit, as I said, that's a payroll loan, the bulk of it comes from payroll loan.

And in terms of what we expect from these two types of the people segment, there is still a lot of room for penetration for life insurance. And not only at Banco do Brasil, but in Brazil as a whole, the penetration is about 0.5% of the GDP. Whereas in other emerging countries, it's 2% of the GDP. So there is room to grow. The main challenge we face is how can we occupy that space. For example, there is a niche that we do not operate in, and we are studying options to go there, is the life insurance with an accumulation factor. Our product is purely risk-based.

Another possibility that would help in penetration are low-cost products. For example, personal protection insurance, let's say, BRL 8 million, it's a small ticket. I would say that there is an opportunity, considerable opportunity, to increase penetration. But in addition to these challenges that I mentioned, also an important thing we must take into account, to increase penetration nationwide is to have available income.

For credit life, we've been able to maintain a good performance. Penetration in credit is at the same level with no changes, but life faced some difficulties in the third quarter because this is a product that needs a very active approach in sales, more than credit life, because credit life comes within the context of the origination of credit. In the third quarter, there was an influence from the negotiation of salaries and of bank workers. So last year that didn't happen, so that changed the performance of the third quarter.

And another point that's important to consider, the third quarter '23 was the strongest quarter ever in the history of Brazil. So it's a high comparison basis. In the fourth quarter, we see a recovery in this fourth quarter. As of October that life insurance is recovering.

[Guilherme Grespan, analyst]

And in credit life, is it fair to think that the disbursement of insurance would go in line with credit disbursement? Or do you think it would be greater?

[Andre Gustavo Assumpcao Haui, executive]

Well, today, I have no reason to believe that it would be greater. We do not have that many options to expand in terms of addressable audience. What we had to do was done.

[Felipe Peres, executive]

Thank you, Grespan. Our next question comes from Tiago Binsfeld from Goldman Sachs.

[Tiago Binsfeld, analyst]

Tiago Binsfeld. I would like to understand the pension, how the update of participant basis and the update by IGP-M. How often is that done? Will there be more frequent reviews from now on?

[Rafael Sperendio, executive]

Thank you, Tiago. In regard to the update of basis, part of the test of liability adequacy testing that's made every 3 months, this movement now reflects the result of IGP-M that's becoming positive. At Brasilprev, the guideline is not to reduce the benefit of customers. So when IGP-M accumulates a negative value, we do not transfer that negative factor to the benefit of the customer. But when it becomes positive, we reduce this increase that I added. It's reverted when the IGP-M becomes positive.

So the adjustment made was due to the fact that at the end of the last quarter, the index became positive, and we started to reverse the increases we made not to decrease the benefit of the customer with a negative inflation rate. So then we made the adjustment with the basis of September for the liability adequacy testing. With this new rule from SUSEP, this will be done every quarter.

Well, when it's a negative IGP-M, if IGP-M does not become negative year-to-date or 9 or 12 months, we won't have that effect from now on. What will happen with a neutral effect will be a change in provisions because this was a reversal in the complementary protection provision, and that will be incorporated in the mathematical provision for benefits to be granted. So I can reassess that one provision is lower than it should be, the other one is higher than it should be, so I change the provisions, like swap the provisions, but it will be a neutral effect.

It's not so easy to understand, but we provided a summary that describes this in detail. And the idea is not to apply the negative inflation rate to the benefit of the customer. But then when the IGP-M goes back to positive, the customer gives me back that amount so that year-to-date, the right IGP-M adjustment can be made. So there is a small mismatch there.

[Tiago Binsfeld, analyst]

Okay, Rafael. That's clear. If I could ask a second question. Looking at the dynamics of premiums written and premiums earned, when you think for 2025, do you think this current dynamic can prevail? I'm trying to imagine how these 2 lines could increase, also sending policies for reinsurance.

[Rafael Sperendio, executive]

In terms of premiums earned, this dynamics of growing above premiums written is likely to remain, provided that we continue with a favorable credit origination environment. So in payroll credit and working capital for small and medium companies, if the environment is positive, this will remain. Otherwise, there will be a rebalancing effect. So premiums earned will go back closer to premiums written. I transfer results from the past, so that brings a higher growth in premiums written or earned.

In terms of agriculture insurance, our retention is still below the optimum level. But this is a process that we are increasing this retention slowly because, in the past, it used to be 10% and it increased to 20%. And this year, we are 22%. So we intend to converge to the point that we believe to be optimal, but this is quite dynamic. So it's revised often.

[Tiago Binsfeld, analyst]

Congratulations on the result.

[Felipe Peres, executive]

Thank you for the question, Tiago. Next question from Antonio Ruette from Bank of America.

[Antonio Gregorin Ruette, analyst]

Antonio Ruette. Congratulations on the results. I have two questions. First of all, rural insurance, if you could give us more detail about the trends that led to this weaker growth due to crop insurance, talking about demand. And the expectations, what do you expect for the next quarters? And how has that impacted the loss ratio? We see loss ratio much lower. So how would be the trend for loss ratio and premium growth for the next 2 or 3 quarters?

And also if I could ask a question about 2025, what's your expectation for 2025 in general terms? I know it's early, you haven't yet given any guidance. But if you could just mention your general expectations for loss ratio premiums and finance.

[Andre Gustavo Assumpcao Haui, executive]

Thank you for the question, Antonio. I'll start, and you can add to it, if you want. In the agricultural sector, after the pandemic, all the supply chains, everything, and supply and demand, is being rebalanced and that is also true for agribusiness. Also, there was a weather issue that influenced the schedule for purchase of inputs and making loans. That affected our performance during this year, in addition to international factors such as commodity prices, exchange rate, all of that influenced our sales of crop insurance. So it's a period of rebalance and there's nothing to worry about, but that is also true for the adjustment after the pandemic.

In terms of loss ratio, both in realized up until now and the future, there's nothing indicating a major concern with any weather event. It is now raining, so the areas highly affected by drought now have the humidity levels of soil, higher, now more favorable for planting season. So we don't see any problem in planting and new planting. In terms of what is going to be harvested, we also didn't face any issues. Now from 2024/'25, you mentioned about the likelihood of occurrence of La Nina, El Nino. Some reports show a prevalence of La Nina, but not as severe. Some weather reports are neutral for next year, which would be extremely favorable in terms of output. So at first, there's no source of concern for us in terms of increase of loss ratio in that segment.

In the other lines of insurance, we are making adjustments to the underwriting policy. Agriculture has higher volatility. But home insurance, we implemented a strong program to reduce loss ratio. That's having good results this year. And we're also working on credit life to bring loss ratio to a lower level. The current level is not something we're pleased with. But in the aggregate, I'd say that the trend for loss ratio is very positive.

It will depend on the economic context, however, and how successful we'll be in placement products, especially those that are linked to credit. So it's still early to make that estimate. But something we are more comfortable in saying that is the main concern we had for 2024 was the financial result is not something that we'll have in 2025 because we expect interest rate Selic to grow up until the end of the year. But next year, it's likely to decrease, maybe not with so much volatility in the interest rate curve, and that will help to maintain the company in the trend of bottom line growth. But it's too early to make estimates.

[Felipe Peres, executive]

The next question is from Kaio from UBS, Kaio Prato from UBS. I'm sorry I cannot hear him well. It's choppy. I think we can move on to the next question. And then when Kaio is back, he can ask his question.

The next one comes from Pedro Leduc from Itaú BBA.

[Pedro Leduc, analyst]

Congratulations on the team. My question is a prospective one, about the delay in planting and, therefore, led to a delay in purchasing credit and insurance. As you revised guidance downward, it seemed that there was a movement. Maybe in the fourth quarter, everything deadlocked, and the third one will happen. Now thinking about penetration of insurance within credit, was that reduced price charged? And in terms of reinsurance cost, how do you see that for the next cycle? I'm trying to understand whether we could increase penetration of agri insurance maybe through price or whether there was resistance of purchasing insurance in this cycle.

[Andre Gustavo Assumpcao Haui, executive]

Thank you for the question, Pedro. We assess the penetration in credit with no change. It remains stable. What you mentioned in the end of your question, the penetration remains the same. In terms of conditions for reinsurance, for this crop season, I think customers obtained favorable conditions, so it has not impacted. For 2025 market, we conditions to even improve.

In Antonio's question in terms of maybe people are expecting a severe weather event, La Nina, at first, there's nothing that doesn't worry us because La Nina is prevailing now but at low intensity. And most weather reports expect some neutral effect. But this will reflect in the loss ratio, potentially at the same level. Or if there is any change, it will be small, not significant.

So in terms of price, this is a constant concern. We see today that the penetration of crop insurance in the impacted area of Brazil or in the planted area of Brazil is still very low compared to other markets such as the United States, which is 10% here compared to 80% there. I mean a ballpark figure, of course. And we still have work to do in terms of developing products, especially for lower-risk areas. Our products are good for high-risk areas, but are not so appealing for low-risk areas. And this is a great challenge we have to increase penetration in Brazil as a whole.

[Felipe Peres, executive]

Thank you, Tiago (sic) [ Pedro ]. The next question comes from Daniel Vaz from Banco Safra.

[Daniel Vaz, analyst]

Congratulations on the results. Going back to rural insurance, we see an increase, an acceleration, of planting in the center of Brazil. The south still has an issue with the weather. Could you look at the scenario and compare the southern region with the center of Brazil and seeing how farmers are behaving regarding insurance? So in the fourth quarter, are they getting insurance for costing and also making crop insurance at the same time? And how is it in the south?

[Andre Gustavo Assumpcao Haui, executive]

As for the current stage of planting, you summarized it well. In more recent data, we saw an increase in rainfall, especially here in the southeast and south of Brazil in the month of October. And that helped farmers to advance with planting, especially soybeans and corn. With regard to getting costing financing and buying insurance, there has been an advancement but below what we expected in-house, and that is why we reviewed the guidance. And this is not only an issue from the origination but the components that are part of credit.

Costing is a result of several variables, the amount insured, if I'm going to buy insurance for sales or only for costing. And in costing, there is an important variable, which is the input price. If the planted area is reduced, so there are less need for input or seeds, this reduces the cost in general. If the level of soybeans is reduced, there is a reduction in the amount to be insured and, therefore, the premium paid in crop insurance. So there's several factors that compose that. So there has been an advancement with the increase of interest rates and with planting, but that was below what we expected. And this is why we reviewed the guidance interval.

[Felipe Peres, executive]

Thank you for the question, Daniel. The next question now is from Kaio. Can you hear us, Kaio?

[Kaio Penso Da Prato, analyst]

Can you hear me now?

[Felipe Peres, executive]

Yes.

[Kaio Penso Da Prato, analyst]

Great. Sorry for the previous problem. My question is also related to rural insurance. And here, I look more retained premiums. When you look at the growth in retained premiums, agricultural has been lower than expected, but other life has grown between 15% and 20%, and both account for almost 90% of these retained premiums. So what explains this mismatch between the performance among products whereas, in theory, there should be some cross-selling among them? And looking forward, what do you expect for these 2 products in addition to agriculture insurance? And in the next 12 months, what do you expect in terms of growth? And finally, any metric for profitability among these 3 products? Which one is most profitable?

[Andre Gustavo Assumpcao Haui, executive]

Thank you, Kaio. That's a good point. So just adding, in terms of the last part of your question, not only lien and life had a good performance. Lien grew by 25% year-to-date and life by 15%. But these insurance lines are much more profitable than crop insurance. Crop insurance, there has been a positive loss ratio, but that's not normal. The average loss ratio for crop insurance is around 69%. That's our historical behavior. But rural lien and life for rural farmers have a lower loss ratio and this is why we don't assign that to reinsurance companies.

There were some adjustments, in the addressable portfolio increased, we add coverage for livestock that could be given as collateral for credit. This is something that we did not used to have. And in life for rural producers, we had an increase in the eligible audience and the insured amount. So that explains the mismatch of growth in the rural lien and life insurance compared to crop insurance. For 2025, the trend is for these lines to grow more in line with crop insurance. Today, we don't expect any major adjustments that needs to be made in these 2 portfolios that would continue to cause these lines to grow in a mismatched way compared to crop insurance.

[Felipe Peres, executive]

Now a question from Eduardo Nishio from Genial Investimentos.

[Eduardo Nishio, analyst]

In terms of agreements that you are reviewing with Banco do Brasil, and Bank of Brazil has also reinforced the type of this insurance that would be a perennial contract, do you have any updates about that? And if you could share the type of this renewal, whether it will be more automatic, the renewal of the contracts, to decrease the volatility as the contracts expire and that is created? And do you see the contract with Caixa as a parameter in terms of Caixa Seguridade?

[Andre Gustavo Assumpcao Haui, executive]

Eduardo, thank you for your question. I'll answer that. BB Seguridade is Bank of Brazil so it's only natural that we will continue to be the insurance broker and the insurance company of Banco do Brasil. In terms of contracts, we talk about it. It's been discussed. But this is not a concern because we will continue to exist, to be strong and continue to grow. So it's natural that this discussion takes place and that renewal comes at the right time with some changes in parameter for both parties.

There are strong partnerships. These are strong companies. So it's part of our daily activities. So this is not something that we consider because we think that this is a strong share. We've paid a lot of dividends since the IPO. The bank is a controlling shareholder. So we're always talking. And at the right time, we will disclose any news. This is something that's been discussed. I just don't remember the other part of your question.

Well, we're always looking outward to the models, not only from Caixa but to the market as a whole, in the global market. We are a different entity because we're owned by a government-owned company, so we're mixed in that sense. But we still have many contracts with our partners, with the bank. So now we're focused on getting the portfolio more modern, generating results, making the access to the pension market more available to people as a whole, and pay more dividends to shareholders. This is a small market in Brazil still so we do have a lot of room to grow. So this issue of the contracts will be addressed, and it's part of the business.

[Felipe Peres, executive]

Thank you, Nishio. The last question from the Q&A was sent in writing, regarding dividends. Is there any plan to change the policy quarterly dividends? And is there any updates on the repurchase program and any opening of any new program?

[Andre Gustavo Assumpcao Haui, executive]

As for the repurchase program, I'll ask him to answer. But in terms of dividends, we always enforce a policy of paying dividends. There's no adverse scenario or contrary policy, so we always look at the best option, trying to reach the highest levels. That's it. What about you, Rafael?

[Rafael Sperendio, executive]

Yes. In terms of frequency, the Corretora, the brokerage, always pays all dividends. We have to pay dividends every semester, every 6 months, not less than that. Most of our available cash flow comes from the brokerage, the Corretora. And then the insurance companies, we are very conservative in terms of paying dividends. We prefer to retain cash throughout semester and make an assessment at the end of 6 months to see how much we have available to pay in dividends to shareholders. So far, don't plan to increase the dividend payment.

In terms of repurchase, the program has been almost totally executed. We need to manage the cash that arrives at BB Seguridade and to all other companies that I mentioned. So this is the main factor that limits somewhat the calendar of dividend payment, but it's been almost totally executed. In terms of launching a new one, we first need to fulfill the formal requirements to cancel. So far, we cannot cancel a new one until we have fulfilled the entire cancellation requirements.

[Felipe Peres, executive]

Okay. This is it. There are no further questions. With this, we end our virtual meeting for the earnings of the third quarter. I'll ask you to please give your feedback on the form that will be sent after this conference call is finished.

Would you like to make any final remarks, Rafael and Andre?

[Rafael Sperendio, executive]

Just saying that Investor Relations team and myself are available to answer any further questions you may have, and have a good afternoon.

[Andre Gustavo Assumpcao Haui, executive]

Well, I would like to thank you for your trust and especially our customers and our team. Without our team, none of this would be possible. No results could be delivered. So this is a group effort, lots of love and dedication involved. So thank you all from the investees, Brazil Bank, all the companies, and thank you all very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]