BB Seguridade Participacoes SA

BOVESPA:BBSE3

Earnings Call Transcript 2021-Q4

[Operator]

Once again, good morning. Thank you very much for joining us in our conference call for the fourth quarter of 2021. This conference call is being recorded, and there is simultaneous translation into English. [Operator Instructions]

Just as a reminder, we are going to have a presentation made by our CEO, Ullisses Assis; and our CFO, Rafael Sperendio. And this presentation that we are going to share with you is in Portugese. But if you want to see the English version, please go to our Investor Relations website. And there, you can see our materials in English.

[Operator Instructions]

Ullisses, good morning. You may start.

[Ullisses Christian Assis, executive]

Thank you, Philippe. Good morning, everyone. I would like to thank immensely everyone for being here with us to hear about our performance in the fourth quarter of our company and the year performance.

We are very happy with our -- the results of the fourth quarter 2021. Fourth quarter had the highest result ever since the IPO, and this is a result of the work that have been reporting to you, especially based on operational results that has been growing robustly year after year in spite of all the difficulties related to the COVID and all other impacts that we have suffered. We've been able to keep a quite robust growth in our operating results, which have made it possible for us to report consistent results.

Q4, in fact, was very successful. We closed the year with BRL 3.9 billion in terms of profit, 1.4%. And also, if you discount COVID, it was 4x bigger than it was in 2020 year. So we would have had a normalized result of about BRL 4.4 billion, and this would be the highest result in the history of the company.

So this result makes it possible for us to pay out BRL 2.9 billion in dividends. And if we analyze dividends, we are talking about 73% payout. If you analyze only the second half of the year, it's 83% in terms of distribution, which reinforces the fact that BB Seguridade is a very good payer of dividend. We are also able to grow, and our results have been growing on a very solid basis. And we are talking about the issuance of BRL 12.1 billion in the premiums, a growth of 16% vis-a-vis 2020.

And moreover, another highlight in our results is the percentage of pension plans reserves. In 2020, we had 11% in December, and now we have as much as 32%, which makes it possible to increase satisfaction, increase retention and as a consequence, also having a more relevant admin fee its related to these funds and portfolio, which has contributed to the results of Brazil rev.

Additionally, ever since I joined the company in the middle of last year, I have been talking about that one of the focuses of my office is also to put the company on a different level in terms of business performance. I have been talking a lot about that.

So one of our strengths is the distribution network of Banco do Brasil. We need to be more ambitious and distributed in other channels. This is something that we have been doing very well structured way in last year, and we implemented 3 different business models. And we are expecting to close at least 10 partnerships that will be very robust before the end of 2022. So this strategy requires maturity. It's not over it, but we are working very hard so that the impact of these sales is a representative in the overall result of the company in the short term.

And now I'm going to talk about the digital transformation and technological modernization. And so in our ambition of selling more -- being more efficient to have a better value proposition for our customers and also distribute in other channels, we need to make very robust investments in total transformation.

On the left-hand side, you can see that the company has been successful with its sales on the digital channels. And here, we're basically talking about Banco do Brasil app and sales. We have had a 24% growth from 2020, 2021, reaching as much as 12.8% of our total sales that are done through digital channels.

When we talk about the premiums, we are talking about a growth of 16% as compared to 2020 in terms of sales through digital channels. 65% of our customer base uses the digital channel. So we have a major opportunity of cross-sell and upselling to because our customers have this profile of utilization.

Last year, adding up [indiscernible], we have invested BRL 333 million in digital transformation. And this view, we are going to invest even more because, as I told you in our last conference call, in the past, we used to have slightly less than 30% of our products. We're 100% ready to be connectable to new channels for the new IP architecture.

By the end of 2022, we are going to deliver 100% of our digital transformation with regards to products for the new architecture. Today, we are at 35%. But as I said before, with very robust investments before the end of the year, our entire portfolio will be ready. This is a road map that we had until 2023. We have advanced this deliverable by 1 year because this is fundamental for our strategy.

Moreover, we have invested heavily in analytical intelligence. And we implemented many models during 2021 that have contributed for sales in excess of BRL 1.6 billion in premiums, supported by analytical intelligence. Our platforms have been developed or improved in the journey, which makes it possible to be closer to individuals covered offering a better value proposition.

So when we are talking about the digital transformation, we are talking about a wide-ranging scope in terms of winning new customers and ensuring the sustainability of our business.

I also would like to talk to you about the channel diversification. And as I said before, this is a strategy that we have invested a lot in. And once again, Brazil is and has always been and will always be our main sales channel, but we also want to find businesses in other platforms.

So in 2021, we have added another 200 new partners in rural insurance that have issued. As we registered them, they started producing and they have issued BRL 58 million in premiums in the second half of last year. We have closed the partnership with a major distributor, [ Agro Galaxy, ] and this was announced to the market. And with our brokerage firm, to offer products to rural farmers, so because there's funding by BB. And additionally, we have also put in operation a partnership with [indiscernible], which is the network of banking corresponding agents of Banco do Brasil.

Considering January numbers, this partnership were closed along the second half of last year. But in January -- January alone this year, we are talking about more than BRL 3,300 million in premiums coming from these partners in January 2022 alone. So we really want to have a significant number of the company's performance coming from these channels.

So talking about expansion of partners for 2022, we want to continue growing in this line, growing with cooperatives and in retail, agro people who provide services to farmers in Brazil, and we expect having at least 5 big cooperative and retail sales in the rural segment. And we also want to get to 500 agro farmers producing in nonfinancial areas.

In addition, talking with [indiscernible], we started with credit life insurance, and we are expanding it. We have a network of transactional partners. So we are talking about business. Transactions that are -- another 14,000 transactional banking correspondence of BB, and we are in the final phase of that -- these (14 )transactional banking correspondents can also distribute our products, especially the lower ticket. So we are talking about 19,000 points of sales that we want to increase once [indiscernible] is operational that we are going to add this quarter so that we have more arms selling our products.

Additionally, we are also moving towards providing a different value proposition to the wholesale of segment. And we are going to seek agreement with specialized partners to increase businesses in BB's Wholesale and Corporate segment to distribute large risk insurance and transportation segments that will complement our portfolio. So this is a strategy that is part of our ambition. In addition to the partnerships that we are already discussing with many digital banks and portfolios. These are not businesses that we can make operational overnight, and we've started some of them last year, and some of them are already closer to becoming operational. And we hope that very soon, we are going to have good news.

So this strategy started small. It started in the second half of last year effectively. But in the midterm, we hope that we'll have a representative share in the company's portfolio.

Now I'm going to give the floor to Rafael to talk about our numbers.

[Rafael Sperendio, executive]

Thank you, Ullisses. So ladies and gentlemen, this is a little bit what Ullisses said. So if you look at these numbers and see, in terms of the lagging time or time mismatch in the index, which is the add up of this effect is zero in time, and this affects only the comparison basis.

The impact of COVID that, hopefully, we are close to the end of the pandemic and the increase in social contribution over net income during the quarter, if we eliminate these effects to see what would be the structural performance of the company in 2021, you can see here on this chart that it would be BRL 4.4 billion, the highest net income in the history of BB Seguridade.

And so with a breakdown that is almost 100%, only based on operational results, the contribution of the net investment income is very small. So if we took out this effect. The growth instead of being just 1.4% as compared to 2020, it would have grown 7.9%.

On the next page, the dynamics of operating results and net investment income is really clear on this chart, as I said on the previous slide. So net income is very close to what we generated on average in recent years, with a contribution coming almost exclusively from operations. And financial net investment income is only a very minor share of the company's results.

So here from this chart, you can infer the dynamics for the current business year. Once we are over that interest rate reduction time, now we are close to a time we're not going to have an average Selic rate, which is very similar to what we had between 2016 and 2017, a period when we generated BRL 1.2 billion to BRL 1.3 billion in profit. So another BRL 1 billion in net investment income as compared to what we had in 2021.

Now moving to each one of our operations. In terms of insurance, we have grown 14% in terms of premiums written in the quarter -- in 4Q '21. In the business year, we delivered 16% growth in premiums. And the main drivers for this growth overall, all major lines except for credit life, have had a very strong commercial performance with a highlight of life and rural. And so Q4, there was a sharp increase in all main lines in rural insurance, agricultural, rural lion -- being sorry, and all other -- in crop insurance. They were between 35% and 38% growth.

So when we look at the results of Brasilseg, you can see that for the year, there was a decline in the combined ratio. This is related to increase in loss ratio because of the impact of COVID-19, which had a severe impact in the second and third quarters of 2021. But as you can see here on the chart, this trend reverses, especially after the third quarter. And we closed the fourth quarter with a loss ratio, very much in line with what we used to have before the pandemic around '20, which is quite reasonable in terms of loss ratio.

Other factors that have had an impact on index. We had an improvement in acquisition, which -- if we compare to the fourth quarter and the year, there is a lower rate of performance bonuses. So the performance -- a weaker performance in credit life and increase in rural insurance that has a lower conditioning than under life, that's why the commission rates dropped comparing the fourth quarter year-on-year and also the whole year.

And also lower SG&A, with a strong component of earned premiums that was superior to revenues and also the adaptation that we have implemented in the accounting model for rural insurance, that is no longer accounted in 2021 in a cash -- and now it's more based on competence and then matched to what we are reporting in provision of claims to settle.

So there was a drop if we compare year-on-year. And last year, we had a stronger volume of reversals of provisions because we won some lawsuits. Favoring the insurance company and other lawsuits, ended with effective loss that was lower than our provisions. And this ended up providing a benefit for Q4 2020. And now affected, if you look at the effect for a comparison basis, in Q4 '21, year-to-date numbers, we had a high in net investment income of 2% and growth in year-to-date numbers due to lower financial expenses because in 2021, we had a higher volume of reversals and because we settled the lawsuits at an amount that was lower than a provision because of the revision of the entire basis of lawsuits.

Based on the recent history of successes, this ended up providing a benefit to financial expenses along the business year of 2021. Net income has grown 31% year-on-year in the fourth quarter. And as a result of the growth of burn premiums and the result of a lower loss ratio and has dropped 2% in the whole -- for the whole year. And this was especially because of the increase in CSLL, which affected the performance of Brasilseg. And this net income would have grown 1.6% in spite of an increase of almost 9 points in loss ratio as compared to the year before.

On the next page, in terms of pension, we have had an increase in inflow -- net inflow of 11% and getting to BRL 46 billion. This is in terms of contributions 4Q year-on-year with a marginal increase of 1%. But then on the other hand, net inflow was negative. But this is around the DA number, but was slightly less than BRL 1 billion in Q4 and BRL 1 billion down for the whole year. And this is clear on the chart that even though there was an increase in inflows, the increase in redemptions, this is very much in line of what we had been reporting in the previous conference calls. Very much concentrated people trying to have access to their pension funds forecasting, especially because of the some time, especially in major centers.

Customers were redeeming more, withdrawing their funds, especially to invest in real estate. This is what we could identify from some of the customers that have redeemed their funds along 2021 and the net redemptions of funds along 2021.

In spite of that, reserves have grown 2% in the last 12 months. And the main highlight here in the same chart, there's an increase in the share of multi-market funds from 11% to 32% at the end of the year of 2021. And here, leading Brasilprev to a share of multimarket under the total assets under management that is more in line with everything that we see in the pension industry, especially with major players.

Because of this increase, in allocation in multi-market, seeking to add more value in the management of our customers' assets, we were able to increase the management fee. And the revenue from these fees has grown 7% in the fourth quarter compared year-on-year and 8% comparing the whole year, 4x higher than the growth of the total assets in terms of average balance. And this increase in average management fee was a very important driver for the growth of the operational result along 2021.

In terms of net investment income, IGP-M, had the benefit for the temporal mismatch, 279 positive in Q4, even though the mismatch between the indexes had an impact of strong IGP-M still in 2021. Taking the year as a whole, we closed with a financial negative by BRL 234 million as compared to the negative by BRL 279 million approximately in 2020.

Despite of that, with this worsening in the net investment income, the net income has grown 11%, very much in line with what I had. And so revenues from management fees, because of the risk change in the risk profile of the portfolio and higher operational efficiency, especially in services with third parties, which has helped the net income to grow to levels even higher the growth of revenues, even though we had a worse result.

For the quarter, if we compare with the Q4 2020, the main driver what's the high in the financial results. And the dynamic that I mentioned in operational is the same, but the higher contribution came from the increase in the net investment income in Q4.

In terms of capital management, it's always good to give you an update. So along 2021, we have BRL 3.4 billion in assets in IGP-M added to the portfolio, increasing the hedge of traditional plans reserves to 84%. So just a little bit smaller than 84% because of what we received from the NTNs, and we are reallocating the assets. But even so, it's around 80%, which makes us much more confident that we were 2 years ago.

On the next slide, we have Brasilcap savings bonds. A drop in revenues, if we compare both the fourth quarter year-on-year and also quarter-on-quarter and then year-on-year. And this is because of products -- with monthly products, the net investment income was negative in the fourth quarter. And also for the whole year, it was also negative by BRL 38 million, and this is very much related to the new environment.

So the new economic environment of interest rates and inflation. So because we have this match between assets and liabilities, we have a large concentration of pre-fixed bonds. So the option here was to reduce exposure to risk of the portfolio and to reduce the duration because in the current environment, it's not necessary to do the same as we were doing until the beginning of last year.

There was also a change in the regulation, defining a few minimum capital regulatory percentages implemented [indiscernible]. So every insurance company needs to comply with that. And in order to adapt to this environment, we needed to make this change in the risk profile of the portfolio to reduce a little bit minimum regulatory capital. And we had a capital increase in the total amount of BRL 100 million because of this.

And then as this depends almost exclusively on net investment income to operate and a negative impact of the sale of this portfolio that was available for sale. And this negative marketing was included or booked in the bottom line of the operations and ended up affecting then the net income, which is down by BRL 126 million in Q4 and closing the year at BRL 4 million positive for the year as a whole.

In terms of dental plans, we have had an increase in revenues, but a worsening EBITDA margin because of higher utilization frequency of procedures, which ended up leading the profit to go down by 3%.

In terms of distribution, on the next page here, brokerage and revenues from brokerage grew 10% year-on-year in Q4 and 8% in accumulated during the whole year. And then especially in life rural and pension, gaining slightly more share of the total pie and taking some of the share of the premium bonds and year-to-date numbers because an increase in Selic rate, because the management of assets in the brokerage firm is very conservative. And the net income has grown marginally slightly above the revenues in terms of the whole year number growing more or less at the same level.

Now talking about our guidance that we have announced for the business year of 2021. And as I said, in terms of the operational result was very close to the top, unless except for the negative surprise coming from COVID. We wouldn't have had to review the guidance. The volume of claims was almost 4x higher than what we had in 2020, which was completely unexpected. And this was the context we had to review, the range -- and we closed very close to the top range going from 1 to 16 premiums written.

We have exceeded our range, which was 15%, and we reached 16% in terms of reserves of pension. Hence, we were at the center of the range with 0.9% in this range between 0 to 2. For 2022, we are expecting a stronger growth in terms of noninterest operating results, coming basically from the assumption of reduction of loss ratio for 2022 as compared to 2021.

We are expecting to have a growth in premiums written that is very much in line, continuing what we have -- what delivered in 2021, a growth between 10% to 15% in insurance premiums. And in terms of pension plan reserves, very similar to what we delivered last year between 9% and 13%. So these were the main highlights that I had to mention to you in terms of our results and our expectations for the business year of 2022.

And now we are available to answer any questions you may have.

[Operator]

[Operator Instructions] The first question came from Antonio Ruette from Bank of America.

[Antonio Gregorin Ruette, analyst]

Congratulations on your results. I would like to have a little bit more details of your guidance. So first, in terms of your operational guidance. What are you incorporating of normalization of loss's ratio? And what comes from better commissions, because the operational results includes the operations of all subsidiaries of our brokerage?

So this is slightly more stable in terms of credit life insurance. So what is related to loss ratio? And what is related to commissions? Still in the guidance, I would like to understand the assumptions for pension in the growth of technical reserves. So the growth, if we assume an average Selic of 10% or 11%, the guidance would be meeting your estimates. What is your assumption for inflows for the year?

[Rafael Sperendio, executive]

Antonio, thank you for your question. Well, the first one, the main driver here is reduction in loss ratio. Commissions are important, but it's much smaller in terms of sensitivity and the dynamics. So the commissions, 75% of those expenses go through equivalents and 100% goes through the brokerage. So there is an annulment of the commissions. So this is related to performance bonuses.

Well, this is important in the net investment income, but it's much smaller than what comes from changes in loss ratio. And this is the main driver is the loss ratio. As to your question about pension, yes, this is true. This is going to be the scenario for 2022, even though -- we have a significant percentage of assets allocated to fixed income instruments and long-term businesses as it is natural.

For this to happen, and this is a decision we have made to be more conservative, especially in the beginning of the year, considering the volatility that the market will have, especially in the second and third quarters. Because of this event, we might have a higher volatility in the interest rate curves, which may impact the return of what we are expecting in terms of reserves.

In addition, to the scenario itself of increase of redemptions, which led to the level of 20% in the fourth quarter, we cannot yet see a significant improvement in the profile of income that is available. So this is important in January.

We can't precise it yet. But as the year goes by, we will be able to have more accuracy. For now, this is the interval that in our understand is appropriate in terms of expectation of the growth of reserves for the year of 2022.

[Antonio Gregorin Ruette, analyst]

If I may follow-up my question. How do you see the strategic positioning of pension products, especially considering the competition?

[Rafael Sperendio, executive]

[Foreign Language]

We worked very intensely to improve our portfolio as a whole and also in the way we work with our customers. So today, with Banco do Brasil, which has a distribution strength focused exclusively in investments, pension especially, we also have a change that was produced in the product portfolio, bringing in new customers, expanding.

It's until the middle of 2020, more or less or even less 2019, because this strategy got stronger in 2021. The portfolio of investment funds for pension plans was exclusively concentrated on our own portfolio. So this open architecture became stronger in the end of 2019 and became stronger in 2020, 2021. And we ended with BRL 8 billion in open architecture, BRL 6.4 billion investments overseas in December.

So the strategy focused on having a more specialized consultancy. In order to improve our position and our competitive advantage as compared to other players, this was important with portability to accelerate in '17, '18, and then it stabilized at around 2% of the total assets under management.

Today, with an increase in Selic rate, going back to the 2-digit level, we expect competition to be slightly less intense.

[Antonio Gregorin Ruette, analyst]

How much?

[Rafael Sperendio, executive]

Well, we can't really tell. Only time will tell, and we are going to see. So there has been a historical trend of similar movement as we have seen. But that we are expecting is a level of 2 digits that was less intense than what we had over the last 2 years.

[Operator]

[Foreign Language] The next question comes from Tiago Binsfeld from Goldman Sachs.

[Tiago Binsfeld, analyst]

My first question is about net investment income. I know you don't give guidance for net investment income, but especially because of the expectation of a higher Selic rate, could you quantify how much the net investment income is going to grow, especially considering a higher Selic rate? I would like to have some color on that.

Second question about loss ratio, more specifically, loss ratio of rural insurance. There is a draft in the south of the country. Are you expecting a more challenging first half of the year because of the effect of the draft? Or this is not -- this expectation has not yet been included in your guidance?

[Rafael Sperendio, executive]

Thank you for your question. As to the financials, we don't have a guidance, but we compare. Today, there is an expectation there is a market consensus as announced by the focus ability of the Central Bank. So this is very similar to what we had in '16 and '17.

First of all, there is an additional variable. And as I said, in my answer to Antonio, this is related to curve movements and this may cause some uncertainty in the net investment income. But today, we are seeing a scenario that is very similar to what we had in '16 and '17 when we had 3 billion in the financial -- in the net investment income. And even though we don't have a guidance, the scenario is very similar. It's hard to say it's going to be exactly the same. But what I can tell it's -- well, it's highly unlikely that we are going to repeat what we had over the last 2 years. And the scenario is much more favorable now.

As to loss ratio, yes, it is already in our assumptions for guidance of operational results. And it's been incorporated. Today, we have information in terms of actual and forecast for 2022, the effect, especially in rural insurance.

For now, the Omicron variant has not yet had an impact in the trends of loss ratios because the assumption, and we talked a lot about this, to design the range of operational performance, especially considering the loss ratio in rural insurance.

Just as a reminder, we had a very conservative assumptions. And so the market seeking protection in a secondary. But in answering your question directly, yes, it is -- it has been included in our forecast for the operational results.

[Tiago Binsfeld, analyst]

And just another question, with information you have today about rural, should we expect that the first quarter of 2022, should we expect a growth in loss ratio? Or is it still too soon to say anything?

Time being the indication is that the home mesh and volumes the dynamics of roll, which differently from other lines, especially with regards to COVID, practically everything that we provision in terms of the claims -- and so this is -- what really actually happened was very close to our forecast of claims to settle.

The rural is different. The natural dynamics is the time the claim is filed. There is an over provisioning, and we do field work and inspections, There is a reversal. But this work takes 2 to 3 months after the claim has been sent to us -- so the trend is for a high.

So here, especially in terms of rural, I'm not talking about loss ratio as a whole because this will depend on COVID. In 2021, we had a lower rate of claims in January, but it grew gradually along the first half of the year. So we are expecting an increase. But how much is it going to increase? It's hard to tell. It will depend on the field work to investigate and to identify the actual amount of claims.

[Operator]

Our next question comes from Daniel Vaz from Credit Suisse.

[Daniel Vaz, analyst]

Well, first of all, congratulations on your results. I would like to ask 2 questions about Brasilseg and another one about Brasilprev. In credit life, there has been a drop of 16% in premiums in the year. So I would like to understand this number. So I understand that the change in the regulation, premiums over balance had a significant impact in the comparison between the 2 years. How should we think about the growth of credit life?

[Rafael Sperendio, executive]

Well, Daniel, what credit impact to regulation? It was more a micro issue here internal. We launched the product in late 2020, adapting levels of coverage and price. This product used to be cheaper. It used to be 15% cheaper than the previous product. Along 2021, as we fed back our underwriting system and recalibrated this pricing level along the year, especially in the fourth quarter.

So we were able to keep the same penetration. And it is natural to have an increase in premiums written. So this is the volume of credit, especially for individuals from Banco do Brasil. So this is the expected dynamics. So everything is going to be more constant, keeping the same penetration as we had last year and we are likely to have an increase in sales.

[Daniel Vaz, analyst]

So if I could continue asking about prev. As we have said, we mentioned the level of redemptions which is natural, once there is a higher inflation pandemic to the macroeconomic scenario. And I was most impressed by the portability ratio that was close to 2%, 3%. And now do you think it should be closer to 3%, normalizing from now into the future?

Or do you think it should go back more closer to 2? Is there any retention strategy, not just in terms of offering more funds and controlling the exit of customers and they are come asking for portability? There is any kind of retention action that you can implement at that time?

[Rafael Sperendio, executive]

Thank you. So I'm very briefly going to tell you why there's been an increase in portability. Yes, there was an increase in the quarter, but this has been very specific, very one-off situation.

It's hard to give you an exact answer, but there was a strong opening in interest rate curve in the third and fourth quarters. This ends up creating a higher impact in customer profitability. And sometimes, they transfer their funds to another segment -- to segment that is performing better, even a total redemption.

So the first option, directing it to another company with a higher profitability. Ended up going to the companies where there's private credit. Especially in the second half of the year, the funds performed well. And our exposure to private credit in Brasilprev, it's small. It's been increasing. It's much higher than it used to be in the past. But as compared to the industry, the percentage is still quite low, and this ended up having an impact on portability.

But we can see that in December and January, these numbers improved considerably. So I don't think there is a trend for this level -- this level of 3% persisting.

[Ullisses Christian Assis, executive]

Daniel, good morning. Let me talk to you about our retention strategy, which is very important, not just a Brasilprev. And also because of my commercial features, and I talk to the CEOs of the company, we need to increase revenue and also business profitability, but we need to focus on customers because this is a fast factor of growth.

So customer retention is addressed almost like an obsession in all companies with very robust strategy. Now more specifically about Brazil prep because I was there talking to the commercial department. And then we have invested on a few things that has helped Brasilprev over the years.

Number one, specialization. In the past, I was the head of the retail operations of the company when we created verticalization of segmentation, and we created the expansion of our customer relationship, network, Tilo and other initiatives. And as part of this specialization would create a specialization of this personalization. So branches only for high retail with an investor profile so staff dedicated to this type so that we could be more efficient, both in terms of inflow and retention.

This has had a direct impact on Brasilprev. So our investor network has grown a lot in recent years. In parallel, Brasilprev has been investing more and more in our own network in terms of us having consultants where we in-source the consultant. So customers with more funds get in simultaneous advice from specialized consultants that in addition to the banks.

So we are giving them more options for investment. In combination with the advice, we are adding a more appropriate portfolio as [indiscernible] platform and many improvements that we have implemented in the portfolio that has helped us to combine the strength in sales specialization with a more appropriate portfolio being more efficient in retention.

Also 2 very important points that have helped us. With our strategy of expanding the multi-market, portfolio and obviously, respecting the features of each individual customer and our main quality here was to bring the portfolio -- upfront portfolios, it's not necessarily a Modimarket, but the fund portfolios would not easily take on volatility.

But this has made it possible for us to increase the volume of reserves and on that are multi-market customers in the strategy that I created, I can provide stronger and stronger advice showing that we are managing the portfolio. And as a consequence, the eviction of these customers smaller, almost 25% lower than other customers.

So this has helped us a lot and these customers are less sensitive to changes to go into different companies for any rumor in the market. Not to mention, that in case of Brasilprev, we invested intensely in expanding our customer portfolio. Brasilprev increased by -- added more than 200,000 new individuals. So we had an eviction, but we also had a growth of more than 200,000 new customers, which accounts for almost 10%.

As part of our strategy of being more efficient in terms of retention, we have a strategy of expanding our customer base so that we can make the pension product more popular, and we think there is still room. And we want to change the way Brazilians save, and this is very much in line with the company's strategy.

[Operator]

Thank you, Daniel. There are a few questions here that came through the Q&A that are more related to strategy and competition. The first question wants to know about open finance, insurance and what the impact? And then whether we see this more as a risk or opportunity? And digital, can we say anything else about it? About partnership? And even our work with cyclic, our digital brokerage company.

[Ullisses Christian Assis, executive]

Thank you very much for the question. I think that this is a very significant and interesting issue. This is part of our day-to-day discussions. And I really enjoyed talking about that.

I'm going to tell you about my vision, of course. So I see many opportunities with open insurance. Of course, there are risks. Yes, but -- and this is a very clear vision on this.

Products, they are commodities no matter how innovative. Financial banking products and insurance products are commodities, and what will make a difference in terms of open insurance and open finance is relationship, it's customer relationship adding something probable to customers.

And we have been doing something in that direction. Ever since we launched our new line of life insurance, but in -- with many benefits that customers can use during life, we have had a growth even above the market with a higher NPS and lower eviction.

In the same line, the new portfolio of home insurance, there's the same movement where we value the use of the services by the customer. The customers have positive experiences. So one point that we have been investing heavily on -- we'll continue to invest in improving product processes, relationship, rules and communication with customers.

And then on the other hand, as a consequence, IT. That's why I talked about our decision of advancing it by 1 year the delivery of our products in the open platform so that we are more efficient in communication so that we can distribute products in a more seamless way, both in channels, in Banco do Brazil and outside Banco do Brasil.

We have been monitoring the margin in terms of digital. We've been monitoring the market to identify how much we can grow. These things do not happen overnight, and these are partnerships that require adjustments in systems that parties are not always ready to implement in the short term.

But we are an advanced level of discussions. We have also been investing in venture capital. But our focus here is something that can add something to our business, and this is the main issue. How much intelligence can we add in terms of customer relationship? And distribution strategy that has been the main focus. We do not say no to any partnerships, both in terms of distribution and bringing intelligence to the business.

Additionally, another point that is very important is our ambition of integrating CRM, the brokerage CRM integrated to the company's CRM, which is being implemented for the companies so that we have increasingly seamless communication with our customers.

At the end of the day, I think that we have lots of opportunity considering other channels, and this is going to help us. The improvement in products and processes is already helping us. And I believe in many opportunities, but always customer-centered.

The winner of this game is going to be the person who will invest in relationship in practice, and this is what we are seeking.

[Operator]

Our next question comes from [indiscernible] from JPMorgan.

[Unknown Analyst]

One, my first question is related to costs. We have seen a significant increase increasing between BRL 40 million to BRL 100 million in terms of expenses and revenues, and this was well divided between the lines. There's admin expenses, tax expenses and other expenses.

Could you quickly go over the main points of pressure during the quarter? And what we should consider as a new level? And then the second question, regarding rural insurance. This year, we think that the subvention is going to be slightly lower this year than it was in previous years. And what is the contribution of subvention, both in terms of revenue? And if you could tell us anything about profit? And I think most of it is related to a higher loss ratio.

[Rafael Sperendio, executive]

[Foreign Language]

In trying to answer your question, in terms of the increase in expenses, especially in insurance and brokerage or any of the conjugates, consolidated, it was BRL 30 million and then it went to BRL 120 million this quarter.

This is something that came from the brokerage house and we had an effect last year related to the return of commissions to Brasilprev. So the impact is minor, but what happens -- and our process in terms of return of commissions to Brasilprev is not automated. There is a periodical adjustment.

Whenever from 1 advice, a pension plan. So this increase in redemptions of pension funds led to a review of the return parameters and it took place in December. That's why this increase in expenses very much concentrated on our brokerage firm, especially in terms of Brasilprev because of redemptions that taking place in periods less than 12 months -- sooner than 12 months.

As to grants, well, last year, if I'm not mistaken, we had a record of funds allocated to brand, something like BRL 8.2 billion. This year, we might expect a slightly lower volume, but we will only be able, in fact, what will be invested by the government along the business year, especially close to the second quarter when the total volume is clearer.

Currently, these subsidies are at a lower level of contribution in the total profit from premiums closer to what we had in 2016. Approximately today, about 20% of the premiums of rural insurance had some kind of subsidy from the government.

So this is a scenario that we have currently today. We don't expect this to have a significant impact in our origination of premium growth in Brasilseg. And rural even so has been having the same behavior in recent years, and this is what is going to grow more, considering the main lines of businesses of our insurance company.

[Operator]

There are a few questions that have been posted. Regarding the payout of 2022, what does the company expect? And is it going to go back to historical levels? In the second half of the year, we paid something similar to what we used to pay until we had these issues of capital. So they want to know the expectation for 2022?

[Rafael Sperendio, executive]

Well, naturally, we have a higher capacity for payout than what we paid in 2021. Of course, there was an allocation in Brasilprev because of the scenario. So the actual curve was closing significantly, led to a higher need of capital in that company.

Along the second half of the year, we observed an opening of the curve. And this opening of the curve, reduced our capital requirements at Brasilprev, but we made a decision of not taking out these funds. And once the business year ended, we saw that the allocation made in the first half of the year would not have been necessary. And the company was going to end the business year as an appropriate level of solvency even above the risk appetite even if we hadn't made the allocation in the first half of the year.

But that was not the scenario once we did that. And out of caution, we decided to keep it. As you saw in the materials that we have published at Brasilprev closed at a very good level of solvency in a scenario of uncertainty. We do not yet have intention of reducing the capital for Brazil private lease, not for the time being, it came at skipping it at the same levels so that we have a buffer of solvent. But everything indicates that in 2022, if we do not identify this need of reinvesting in our operations, we may have a payout in line with what we used to have before until 2019 on a level that was superior to 2021.

Just as a reminder, in the second half, there were not any major impact in cash flow and distribute -- we paid out 83%. So we don't have a percentage that has been defined and approved for 2022, but the trend is that it will be higher on the whole than what we had in 2021.

[Operator]

Thank you, Rafael. I think that we have covered all the questions that had been posted, at least most of them. We don't have any other questions here to be asked by voice. I think that we can close today's conference call.

Ullisses and Rafael, any final remarks that you would like to make?

[Ullisses Christian Assis, executive]

No, I would just like to thank everyone for your presence here today. We are very happy with our performance in the fourth quarter, and we certainly expect a very good year for 2022 with our results growing on a very solid basis. And we hope that we can meet the expectations of our shareholders. Thank you very much.

[Operator]

Thank you very much for your participation. And we are available to answer any questions you may have in the future. You can contact our Investor Relations team. Thank you, everyone. If you could please just answer a survey that you're going to get once we close our meeting. Have a good day.

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