BB Seguridade Participacoes SA

BOVESPA:BBSE3

Earnings Call Analysis

Net Income Jumps 28.3%, Driven by Tech and ESG

In 2023, the net income reached BRL 7.9 billion, marking a 28.3% increase with insurance premiums up by 9%, and a significant drop in the loss ratio driven by aircraft insurance. Managerial net income also grew by 27.6% under the IFRS 4 standards. Pension plan reserves swelled to BRL 392 billion, a 14% annual growth, while net inflows surged, multiplying fivefold from last year. Investments in technology paid off, with digital sales growing by 39%, and the company established 83 new partnerships, expanding beyond Banco do Brasil channels, generating BRL 2.1 billion in premiums. Notably, ESG efforts led to supporting over 51,000 customers during catastrophes. The dividend payout to shareholders totalled BRL 5.7 billion for the year.

Performance Snapshot: Impressive Growth Amid Accounting Standards Change

The company greeted investors with robust financial results for the fourth quarter of 2023, reporting a net income of BRL 7.9 billion. This impressive figure reflected a 28.3% growth when adopting new IFRS 17 standards. However, the company continues to report under the previous IFRS 4 standard, given that not all Brazilian authorities have transitioned to the new accounting framework. Consequently, under IFRS 4, the managerial net income showed a healthy increase of 27.6% to BRL 0.7 billion.

Insurance and Pension Segments Fuel Growth

The company's insurance segment witnessed a 9% increase in premiums written, totaling BRL 17.2 billion. This growth spurt was significantly supported by a marked decrease in loss ratios, notably in aircraft insurance. The pension plans demonstrated an even stronger performance, with reserves ballooning by 14% to BRL 392 billion and net inflows escalating fivefold compared to the previous year. These robust inflows have translated into a generous dividend payout to shareholders of BRL 2.5 billion in the second quarter of 2023—BRL 1.23 per share, amounting to BRL 5.7 billion for the year.

Technological Investments Enhancing Efficiency

A significant capital injection of BRL 587 million into technology has reaped benefits for the company, leading to faster product development and substantial time savings in the operational domain. These advancements contributed to a 39% growth in digital shares of total products sold in comparison to 2022, underpinning the strategic importance of digital channels in sales and customer engagement.

Expanded Outreach and Customer Satisfaction

The company has expanded its reach beyond its traditional banking channels, forging 83 new partnerships, predominantly in the agricultural industry. This diversification strategy has boosted the company's earnings by BRL 192 million in 2023 and has impressively improved the Net Promoter Score (NPS) by 11.5 percentage points over a two-year period, reflecting a commitment to elevating customer satisfaction.

Social and Venture Capital Initiatives

A focused investment of BRL 51.7 million in social projects across Brazil and venture capital initiatives shows the company's dedication to sustainable growth and social responsibility. Projects encompass financial education and sustainable agriculture, targeting pesticide use reduction and aligning with larger environmental and social governance goals.

Operational Drivers of Profit

The company’s net income from operations climbed by 14% to BRL 2.1 billion, credited to the uptick in insurance premiums especially in rural and credit life segments. A steady financial income stream, accounting for 22% of the quarter's net income, has played a fundamental role in this performance, with operational drivers including an increase in premiums and brokerage revenues in key business lines.

Future Outlook and Guidance for 2024

For 2023, the company surpassed expectations in the noninterest operating result and pension plan growth, while premiums written were slightly below the projected 10-15% range due to agricultural insurance variables. Looking ahead, the company has set a guidance range of 5-10% for Brasilseg’s premiums, 8-13% for pension plans, and 8-12% for growth in premiums written, signaling confidence in continued growth for 2024.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning. Thank you for standing by and for attending our virtual meeting to present the results of the fourth quarter of 2023. This meeting is being recorded and you are listening to the simultaneous interpretation into English. If you want to hear the English audio, click on the language interpretation button on the lower part of your screen. We are going to show the slides in Portugese during the meeting. If you want to see the document in English. It is available at our Investor Relations website at the address www.bbseguridaderi.com.br/en.

[Operator Instructions] The presentation today is going to be led by Rafael Sperendio, CRO -- CFO and our CEO -- acting CEO right now. Mr. Sperendio, you may start. Thank you very much.

[Rafael Sperendio, executive]

Thank you very much for attending our conference call. And before starting the presentation, I would{ UHjust like to emphasize that the new CEO has been elected by the Board of Directors on January 26. He is retiring or rather discontinuing the other operations that he used to do in the U.S. related to the bank's operations and his term in office is going to officially start on February 20. So he will join us in our next call for the first quarter of 2024.

So now going straight to Page 2 with the highlights of the year. Our net income was BRL 7.9 billion. Formally speaking, considering the effects of the new IFRS 17 standards with a growth of 28.3%. And here, I would like to emphasize once again that even though officially, we are reporting our numbers in IFRS 17, we keep in parallel the previous standards according to IFRS 4, and because our Brazilian authority has not yet accepted the new standard and this affects the whole group and the other companies of the group are not doing, but SUSEP has not yet received the new standard, meaning that the flow of dividends that we get from those 2 companies is still based on the previous accounting standard. So we are publishing our information according to the previous accounting standard, and we are going to keep on doing that along 2024.

So according to the previous accounting standard, our managerial net income was BRL 0.7 billion with a 27.6% growth. And in terms of insurance, we have BRL 17.2 billion in premiums written, a 9% growth. Loss ratio was the main highlight with a significant drop of 4.1 percentage points, driven especially by the aircraft insurance that is at a record low in terms of loss ratio. And in terms of pension plans, we are at BRL 392 billion in reserves, growing 14% year-on-year. Net inflows, almost BRL 9 billion, 5x greater than the net inflows that we delivered in 2022.

In terms of premium bonds, we have a collection of BRL 6.4 billion, a growth of 8% in the year. The reserve balance is BRL 11.3 billion with a growth of 18%. And closing in terms of dividends, they totaled in the second quarter of 2023, BRL 2.5 billion, which is equivalent to BRL 1.23 per share, totaling BRL 5.7 billion allocated in terms of payout of dividends for our shareholders.

Now on the next slide, I'll talk about our mid- and long-term strategies. So here, going through the first pillar of digital transformation. We have invested BRL 587 million in technology. So you can see what this means and most of the funds were invested in architecture, a service-based architecture in the development of new products according to the new architecture takes 67% faster and offer in definition of parameters and then we can save almost 90% in time. We have improved our model too in terms of billing and collection according to credit -- checking account debit, credit kind. In voice, we have expanded [indiscernible] in terms of sales, the share of digital in the total products sold, taking up those related to credit is 15% of the total, with a [ 1.3 ] percentage points year-on-year increase in terms of the digital share as compared to 2023. In terms of growth, this number has grown 39% compared to 2022. The main highlight of the premium bonds that grew more than twofold in terms of premiums sold in digital channels and considering the exclusively dedicated digital products. We have made 77,000 sales, especially low-ticket products that are only available in digital channels.

In terms of the use of analytical intelligence being applied to business, we got to the number of BRL 13.4 billion. And in terms of new products that were launched in 2023, either new products or expanding the addressable market for existing products, we have gotten to BRL 240 million in 2023.

Now on the next Slide, #4, going to the distribution model, diversification on Page 4. Here, we delivered BRL 2.1 billion in terms of premiums in channels that are not Banco do Brasil. This has contributed with BRL 192 million for the earnings in 2023. We have 83 new partnerships in the year. Most of the production is still focusing on the rural or agricultural industry.

In terms of customer experience on Slide 5, we're in a constant pursuit to improve the satisfaction of our customers. The NPS has improved to 1.2 points, totaling in the period of 2 years, a significant improvement of 11.5 percentage points. The highlights were pension plans that was better by 9; premium bonds, 4 points; term life, 2.4 points; and rural, 1.4 points. And this is also reflected when we see the flows -- the outflows. And then the complaints are down by 18%, a 16% reduction in the churn -- term life insurance, 1% reduction in the churn of credit life insurance and 1.1 percentage points less redemption ratio for pension plans.

On the right-hand side, you can see our program in terms of protection. We had 19,000 new customers in the category that we call overprotected. We offer benefits and advantages for the customers that have a full product portfolio with us. The satisfaction rate of these customers in this segment improved 6.4 percentage points and the NPS retention increased 3% and we had 9,000 benefits that were redeemed as part of the program.

Now on the next page, to close this part before we move to the discussion of the year and then a brief overview of our work in terms of ESG, in terms of sustainable -- our social dental products offered 2,000 dental care visitor appointments provided. In terms of home insurance, we had 6 tons of sustainable disposal associated to our home insurance. We kept our support in terms of disasters that took place during the year and the disasters, catastrophes in Sao Paulo and Santa Catarina, in the 2 states in Brazil. And we are close to our customers, offering expanded services in addition to what they had contracted with many different assistances. We offered priority flows in terms of claims, and more than 51,000 customers were served in terms of the catastrophes that took place in 2023.

So in terms of social projects and investments, we had BRL 51.7 million in terms of social investment throughout Brazil. In terms of our financial education projects in Brasilprev and Brasilcap, we have 131,000 people that were included in these projects. In terms of agri business that we call intact investments, we invest through our venture capital initiatives that are focusing today. They use -- the reduction of the use of pesticides and chemical fertilizers, there are 2 companies that are part of our venture initiatives working along these lines.

Now moving to the next page, rather, Slide #8, talking about the financial information for the fourth quarter. And then from then on, I'm going to focus on the comparisons for the results of the year. So in Q4, the net income was BRL 2.1 billion, a 14% growth year-on-year, supported especially by the growth in insurance premiums, more specifically in terms of rural and credit life. So looking at the financial income. So it's kind of flat even though the mark-to-market gain, especially in November and December, offset the lower Selic interest rate. So financial is flat, accounting for 22% of the net income of the quarter.

Now on the next page, here, looking of the BRL 1.7 growth in billion, in the net income along 2023, BRL 1.1 billion came from operations, BRL 500 million came from the financial. So in terms of operations, the main drivers were the growth of -- were in premiums, as I said, especially in credit life and rural combined with the reduction in agriculture and also the increase in brokerage revenues in the main business lines, they were the 3 main drivers for the growth of the net income in the year.

Looking at the net investment income. So we have BRL 251 million coming from volume and rate change, especially Selic change in the last segment here of this variation. The second main driver was the marking to market that was positive. It was down by BRL 122 million in 2022. But in 2023, we saw that it's closed -- the structure closed, especially the actual interest rates to which we are most exposed in Brasilprev led to a gain of BRL 149 million. So this is an accrued or added effect contributing with BRL 271 million in the quarter.

Now going to Slide #10, talking about our insurance operations. As I said, premiums grew 9%. Rural accounted for 50.5% of the premiums grew 7% in the year with our highlights to rural and term life with a share of 21% was kind of flat. We had an impact of deflation of IGPM going through the renewal of policies, and this kind of affected the premiums that was flat year-on-year and credit life accounting for almost 20% of the premiums, very strong growth of 24%, very much in line with the strong growth of the origination of consigned loans.

So here on the lower left-hand side, we see an improvement of 5.7% in the combined ratio with an improvement that is quite significant in terms of loss ratio going from 30.8 to 26.7, with a focus very much -- focus on agricultural commission went down from 29.8 to 27.6. There is a specific factor in addition to product mix very much focused on the renegotiations that took place at the end of 2022 that changed the accounting dynamics, and we went -- we had incremental brokerage for credit life was the further along the life of the risk. And then this explains this reduction in the commissioning. On the other hand, it significantly increased the unearned expenses or -- and here, we had more personnel and third parties in terms of IT investments and then expansion of personnel and also in terms of the channels. And the net investment income increased 27% in the year with a share in the average balance and average Selic along 2023 that was higher than in 2022. So this had an impact on the investment income. And as a result, with premiums growing 18%, the combined 5.7 and net investment income growing 27%. The net income of the insurance operations grew 45%, getting to BRL 4 billion.

In terms of pension on Page 11, contributions grew 8% in the year to BRL 57 billion. In terms of quality of the net inflows, we saw a drop of 1.1 percentage points. In terms of redemptions, leading to a net inflow, as I said in the beginning of the presentation, that was 5x higher than the one that we saw in 2022.

As to the reserve balance, our reserves grew 14% year-on-year in 2023, with a share of multi-market going down to 20% and is very much pressured by the risk aversion of our customers, and this is reflected in the drop of the 5 basis points in average management fee with the management fee grew 6%. Net investment income the year was very, very favorable, the deflation of IGPM and the gain in marking to market. The net investment income tripled or more than tripled with all the combined effects with the growth in revenue. And then the net income of Brasilprev was up by 28%, getting to almost BRL 2 billion.

Now going to Brasilcap. The premium bonds, reserves grew and also collections in terms of draws paid, we had an increase of 10%. Net investment income was up by 35% with almost twofold increase of 4 basis points in the financial margin, very much focused. An increase of the return of financial assets along '22 and '23. We've been buying pre-fixed slightly longer positions at better rates than what we used to have before and we keep them until maturity, and this drove up our financial margin in the period. And then obviously, the investment is the main driver for the growth of net income with a growth of 23% as compared to 2022, getting to BRL 268 million.

Now in terms of brokerage, brokerage revenues growing 8%, getting to BRL 5 billion. All lines increased, and the highlight is for credit life, which helps not just in the breakdown of the revenue in terms of times -- this is very clear on the chart on the upper right-hand side, the increase in share of insurance, but it also contributes greatly for the midterm performance. And as I said, the balance got to BRL 4.7 billion, growing -- so the net margin or -- had an improvement of 0.6 percentage points, with an improvement in the investment income. And net income grew 9%, getting to almost BRL 3 billion in 2023.

Now about the guidance. First, we need to render accounts in terms of the guidance that we published for 2023. For the 3 indicators, we exhibit 2, the noninterest operating result and the pension plans. So in terms of operating result, as I said during the presentation, it came especially from a lower loss ratio than we were expected in Q2. In terms of pension plans, the growth was caused, but a much more favorable movement in terms of redemptions and portability, so increased our balance and assets coming back, driving the performance. And so the performance was beyond the range for our guidance.

On the other hand, in terms of premiums written, we're below our estimated range with 8.9 and the range was 10 to 15. This is explained especially because of the performance of agricultural or crop insurance. Even though we haven't delivered this insurance, so we retain only 20% of the crop insurance in the company and the other 80% goes to reinsurance. So what really happened, this variable is not so sensitive. The most sensitive is our earned premiums that has grown and is right in the center of this range here, if this -- the range here was for written premiums.

And then here with the guidance for 2024. So we had here, the range is from 5% to 10%. Premiums written of Brasilseg, the range is from 8% to 13%. And for pension plans, the guidance is from 8% to 12%. This is the main highlight for our performance of 2023, and now I am available to answer any questions you may have.

[Operator]

[Operator Instructions] Our first question comes from Leandro Leite from UBS.

[Leandro Leite, analyst]

I have a question about rural insurance. What do you expect in terms of growth and loss ratio for 2024? And if you could remind us of your exposure per region? And this comes from El Nino, what is the impact in the first half of the year?

[Rafael Sperendio, executive]

Thank you very much for your question. As to rural insurance, I'm going to start with the loss ratio in terms of actual numbers. As I said in the beginning of the presentation, we have had a very favorable performance for this indicating 2023. The loss ratio was 34%, which is very similar to the loss ratio that we delivered to life and credit life, which are modalities where we have much higher stability. The highest volatility was during the pandemic. It was very specific, very much a one-off event. So 34% is a very, very low level.

We don't think we are going to stay at those levels also because this is a result of remnant of an impact in the last cycle of La Niña affected a very small share of Brazil. It affected more the extreme south of South America. We don't think this is going to happen again. So naturally, we should expect an increase in the loss ratio in 2024. Is it a very significant increase as the one that we saw in 2022? No, it's not. We had a loss ratio of 1.09. So our loss ratio is going to be more or less in the middle. So we see El Nino impacting the south of Goiás, Paraná, Mato Grosso do Sul. So this is concentrated in this region. We had some effects. And this is enough to increase the loss ratio in terms of what we saw in 2023. But it's not so significant that we will get close to what we saw in 2022.

So when we see the segment, loss ratio is 69% at historical leverage, if I'm not mistaken. There is a natural trend for the convergence, but it's still too early to say. So we will have a clearer vision -- view in March or April, more or less. But for now, we are working with something in the middle between '22 and '23, may be converging towards historical average.

In terms of sales, we are expecting a better year for crop insurance than we had in 2023. In 2023, we had -- this portfolio shrank because there was a big increase in 2022, almost 50%. So we think that this is going to grow again. Thank you so much. Have I answered all your questions?

[Operator]

Our next question comes from Tiago Binsfeld from Goldman Sachs.

[Tiago Binsfeld, analyst]

Good morning, Rafael and Felipe. I would like to talk about your performance in 2024. You talked about the rural loss ratio, but what about overall loss ratio? And also, if you could talk about your investment income. So do you think the bottom line is going to grow in 2024? Is that possible?

[Rafael Sperendio, executive]

And so as to loss ratio, so we expect to see an increase in agricultural. But for other lines, we are not expecting anything more significant. So the lines that are the most representative, so it is a rural credit life, we have 90% of the portfolio. And so the lines that don't have such a significant share we've been working to improve our loss ratio. But those are lines that are small. They are not so significant. They do not affect our indicators so much.

In terms of investment income, we have increased the margin and our exposure in terms of pre-fixed, we are being very careful within the limits. And we are controlled by a bank. And banks know well how to work with market risk. It doesn't make any sense for us to retain cash and to have the risks of the market. We want to make money in operations. That's why we have such a high payout. Obviously, we are going to adopt for the companies that allow it in terms of pre-fixed tactics. That is going to be slightly bigger, but it's -- it agrees with our long-term insurance. We want to generate operational results.

So yes, we are going to be slightly more sensitive to the drop in the Selic rate on one hand, and the tactic positions that we have assumed along 2023 will help us to reduce a little bit the impact, and we are going to work to deliver results in terms of investment income. Is it going to be as big as we had in the last 2 years? No, I don't think so. In 2022, we're coming out from the pandemic. There was a contribution for the drop in loss ratio for life products. And we also had revenue coming from investment income and everything that was stronger after the pandemic and the post-pandemic.

Now the investment income is no longer so favorable. So I have mentioned a few events that helped to mitigate part of the drop in the investment income. But then on the other hand, we have very good expectation in terms of the growth of volumes. So this scenario here in terms of increasing the volume of pension plans and insurance that we are very optimistic. But credit life, we are very optimistic for 2024. And historically, we are likely to have falling interest rates, and then that's when credit life does well. So we spend a lot of time working on our long-term plan. So the low interest rate environment is the most favorable environment for us to develop the insurance industry in the world. No country globally has a high penetration of insurance in the GDP. If you have high inflation, high interest rates. If they have a high penetration of interest rates in the GDP, they have a controlled inflation and low interest rates. This is the most favorable environment for the growth of the insurance industry in the mid and long term. So we have a little bit less investment income. But once the interest rate stabilizes, of course, the income will converge with the growth of the operation. This is what we saw happen in the last 2 years.

[Tiago Binsfeld, analyst]

Thank you very much. Just a follow-up in terms of investment income. Is it directly related?

[Rafael Sperendio, executive]

Well, just a number coming from the top of my head, BRL 100 billion, and this is going to be the gain due to the marking to market. Ballpark number, okay? And then we saw this happening in November and December, something that we did not expect. Well, we were expecting 7.5 income. And then 7.5 became 7.7 because of the favorable trend in terms of closing the curve, which accelerated the events. Thank you so much.

[Operator]

Our next question comes from William from Itau BBA.

[William Holmes, analyst]

Good morning, everyone. Good morning, Rafael. Thank you very much for the opportunity. Here on my side, I would like to understand the dividends that you announced today. And the payout this quarter was slightly lower than the payout that we've seen in the last quarter. So could you comment a little bit on the reasons lying behind this movement? And now thinking about 2024, if you can effectively deliver the results indicated by the guidance, what will be the payout this year? What can we think?

[Rafael Sperendio, executive]

Well, William, just as a reminder, we have a slightly different situation this year. Historically, the company has been paying out 80% to 90% of our net income. And there's something that we need to stress. When I talk about payout, I'm not considering the IFRS 17 net income. And then the percentage would be slightly smaller. I'm going to stick to the previous accounting standards, it's something between 80% to 90%. And now as we launched the buyback program, the return for shareholders has 2 components. The more direct, which is the cash flow in terms of dividends, and the other one from the share program in terms of the buyback program. So we spent about BRL 600 something million.

And in addition to everything that we approved in terms of dividends and everything, and we only published the calendar so far, but the total amount to be paid out has already been approved by the Board of Directors in December, and now the company has a surplus of BRL 600 million. Because we are conservative, we always opt to approve at the Board the amount of dividends that we already have in cash available at the time of the [indiscernible], so that we are not counting in future flows even though that payout is going to be in February. So for 2024, we are not expecting anything much different from the 80% to 90% that we've been historically paying out, maybe with a bias towards the top half of this range because this is -- we think about it. It's not just dividends. It's dividend and increase in the share due to the buyback program.

[Felipe Peres, executive]

Rafael, I would just like to add something in terms of the buyback program and take the opportunity. We have a question in the chat. So what are you going to do with the shares that are in treasury, the shares that you have bought back?

[Rafael Sperendio, executive]

Well, we need to wait, how much of the program that we are going to realize until our next shareholders meeting and the allocation is going to be defined by the shareholders. The program was launched to keep the treasury or cancellation. And then once we have our shareholders meeting, we are going to decide what we are going to do with those.

[Operator]

Our next question comes from Eduardo Nishio from Genial Investments. Nishio, please, you may ask your question.

[Eduardo Nishio, analyst]

Hello, good morning. Good morning Felipe, Sperendio. I have 2 questions. The first one regards expense rate of BB Seguros. You have had a significant increase this quarter of 3.6 percentage points, 1.5 year-on-year. So the level that you have reached, is it a new level? Do you think we are going to increase that rate in 2024? Or was there a nonrecurring event? If you could also talk about 2024? 2023 had an increase. Do you think that this number is going to get better in 2024? So this is about expenses.

My second question is about rural insurance once again, going back to the rural insurance. So your crop insurance has gone up significantly this quarter, went from 4% to 30-something percent. So what happened this quarter? Are we going to see the reverse trend? So in 2023, it started higher and then it dropped. How do you see this trend of loss ratio along 2024?

[Rafael Sperendio, executive]

Well, Nishio, thank you very much for your question. As to expenses, so I'm going to think in terms of expenses, we have BB Seguridade insurance and the brokerage company. The company that works at state level, so to speak. Yes, we have had an increase, and this increase took place especially because of vacancies were filled. We had an increase -- a limit of 200 people that the government has approved. And they define staffing and headcount, but there were many dismissals of employees during the pandemic, which reduced significantly the headcount. And it was only in the second half of last year that we were able to fill the vacancies and to have full staffing. So new employees. This is what had an impact in the growth of expenses. So the number of people, but we still have the limit of 200. It still applies, and we build those vacancies.

And in comparison to 2023, we also have the collective bargaining process. As to other companies, yes, the structure became bigger or grew. But in terms of new business prospection and also in terms of IT. For 2024, we are working with a very restrictive assumption in terms of expenses for all companies in our holdings. So our focus is going to be much higher on monetizing all the investments that we have made along the last 2 years.

So we are not going to see any increases in expenses that are significant when we see all expenses, personnel, administrative, operation and CapEx in 2024. Our performance is going to be more moderated because we are focusing much more on monetizing all the investments that we have made so far.

In terms of crop insurance, the loss ratio dynamics for the year ends up having a higher concentration between the first and second quarters of the year. And why is that so? Well, we have a period of harvesting our main exposure, especially soy and corn in the South and Southeast of Brazil. So usually, the claims start between December and February in those states of Brazil where we have the highest exposure. That's why the loss ratio is bigger in the beginning of the year and then it drops in the second half of the year. In the second half of the year, loss ratio only goes up when there is something very specific affecting the interim crop. So it's not common for us to see a high loss ratio in the second half of the year.

[Operator]

Our next question comes from Silvio Doria from Safra.

[Silvio Doria, analyst]

Good morning. Thank you very much for taking my question. It's about reinsurance. What about reinsurance for 2024? Do you see any changes in the strategy for the year? Another question about insurance. In terms of written premiums that will grow about 18%. In terms of mix, would there be any changes between -- considering what we saw in 2023?

[Rafael Sperendio, executive]

Thank you for your questions, Silvio. The audio was not so good, but I think I understood it. In terms of reinsurance, we are constantly improving our risk dilution strategy. So we have expanded our panel. We got what we expected for the year, and we avoided the concentration of risks that we had in the past. So we are working today with more than 10 reinsurers, considering our reinsurance panel.

In terms of premium mix, as I said during the presentation, we expect term life to get better. It suffered the impact because of the IGPM deflation, and we do not expect it to have the same impact this year. We are very optimistic with credit life. As I said before, credit life will be the main driver for the growth of premiums in 2024, just as it was in 2023. And rural insurance, especially crop insurance, we are expecting good performance. We've been expanding the product that we offer. So there were some changes in the regulation in terms of collaterals and guarantees. So we had this type of event, especially for rural lien insurance.

[Operator]

We have another question coming from Antonio Ruette from the Bank of America.

[Antonio Gregorin Ruette, analyst]

So the question is about the guidance, especially in terms of pension plans. The guidance to increase your reserve here, if we compare the guidance to the average Selic, close to 10% for the year. So somehow, it indicates that growth might be even lower than the average Selic. So what are your assumptions in terms of inflow, the overall overview for 2024 for this line of business?

[Rafael Sperendio, executive]

Well, Antonio, as to the guidance ranges for pension plans and in terms of operating results, if we were to look at those ranges as distribution of probability, it is asymmetrical and more concentrated on the right-hand side. So the low tail of the guidance was designed to accommodate some extreme scenario, both in terms of operational performance. The more sensitive variable is loss ratio, whether in pension plans, some movement, some stronger movements in terms of fund outflow or something that will need reserves to decrease, to go down. If there's something wrong affecting the curve, it affects not just the return on assets, but it triggers the outflow of funds. So customers don't have to have negative flow in fixed income. So this is to accommodate extreme scenarios.

It can happen. But in our perception, it's low, and the highest probabilities to be on the top half. And we have a good -- we are expecting good flow that's favorable in terms of redemptions without any major volatility in terms of interest curve. In terms of fixed income, this is very favorable. And investors are not yet -- so seeking risks, and this will lead to a lower increase in terms of flights due to redemption or portability. And this is what is included in our assumption.

[Operator]

We don't have any other questions. The questions in the chat have been answered. There was a lot about the buyback program. So now we end our conference call for the fourth quarter of 2023. Rafael, any additional comments to make?

[Rafael Sperendio, executive]

I would just like to thank you once again for your participation in this conference call to announce our earnings, and I am available to answer any questions that I may not have answered. So thank you so much, have a good day, and once again, emphasizing, please answer our questionnaire giving us feedback, the questionnaire that you see at the end of our meeting. Thank you all.