Caixa Seguridade Participacoes SA

BOVESPA:CXSE3

Earnings Call Transcript 2024-Q3

[Operator]

[Interpreted] Good morning, ladies and gentlemen, and welcome to the video conference of Caixa Seguridade to discuss the results relating to Q3 2024. This video conference is being recorded and may be replayed from the company's website at ri.caixaseguridade.com.br, where you may also find the presentation for download. The presentation in English is available from the company's website. [Operator Instructions]

Before proceeding, we would like to clarify that forward-looking statements are based on the beliefs and premises, assumptions on the part of the management of Caixa Seguridade and on information currently available to the company. Those statements may involve risks and uncertainties as they have to do with events that will happen in the future and depend on circumstances that may or may not occur. Investors, analysts, and journalists should take into account the events related to the macroeconomic environment to the industry, and other factors may make results to differ materially from those expressed in such forward-looking statements. Today with us are Mr. Felipe Mattos, CEO; and Mr. Eduardo Costa Oliveira, CFO and IRO.

I now turn the floor over to Mr. Mattos to begin the presentation.

[Felipe de Vasconcelos Soares Montenegro Mattos, executive]

[Interpreted] Good morning, and thank you for participating in this presentation to present the results of Caixa Seguridade. I'm Felipe Mattos, CEO, and I am here with Eduardo Oliveira, CFO and IRO. I'm very happy to present the results of the company relating to the third quarter of 2024, where we saw record results for the company.

On Slide 3, you will see the indicators, which reflect the deliveries in this quarter as a result of actions geared to improve experience and retain clients. First, the number of complaints at BACEN in relation to our products, and this number fell from 228 to 38 complaints, an 83% reduction in the total volume. And this is due to our pursuit of improvement and customer experience, which includes actions, adjustments of information provided on the products when they are hired and that improvements in the client service. Then in terms of home insurance, our strategy to offer multiannual policies with an easy renewal has been presenting results.

The new policies last between 24 to 36 months, and we had an increase of 8 percentage points quarter-on-quarter. Also, the increase of renewal was by 5.5 points. Therefore, the improvement in the permanence of clients allows us to better write premiums, and we were able to have the best possible monthly performance. Also thinking about the optimization of the journey of the customers, we have improved the process for credit life insurance and increased approval rate by 2.5 percentage points. We are adjusting the flow of contracts, which resulted in over 3,000 policies per month, which before were rejected due to compliance inconsistencies.

In Private Pensions, this year, we had the cash -- this quarter, we had the cash back campaign to promote and encourage the transfer of funds into Caixa Vida e Previdencia through the portability. In this campaign, clients received a cash back of BRL 250 for every BRL 50,000 brought in up to BRL 2,500 per [ CPF. ] As a result, the funding through portability increased by 64% relative to the previous quarter. And to finish this slide, we highlight the increase by 28 percentage points in the share of monthly payment plans in the new premium bonds Capitalizacao sales in Q3 2024, a 49% increase as compared with the third quarter of 2024. This reflects the strategy of the company's focus on selling products in the monthly payment format, which brings us better operating margins because of the lower requirements relating to provisioning for redemptions.

In terms of sales performance in our main business lines on Slide 4, I will talk about the highlights. In Mortgage Insurance, we saw over BRL 922 million in written premiums, a 13.4% growth relative to Q3 2023. This attests to our leadership in the market and reflects the mortgage portfolio of Caixa. Home Insurance reached BRL 239 million in written premiums in Q3, a 13% growth relative to Q3 2023. This was the record in terms of written premiums in this product, which was the result of the stimulus that we provided to multiannual policies with ease of renewal. The Credit Life Insurance, which is linked to the origination of commercial credit at Caixa reached BRL 600 million in written premiums, a 13% growth as compared with Q3 2023. This result comes from a greater volume of payroll loans in the bank.

Assistance Services with BRL 51 million in revenues had an increase by more than 25% relative to Q3 2023. The revenues have been growing since the creation of Caixa Assistencia. I would highlight the performance of Rapidex, which is sold to consumers and which saw a 14.5% growth relative to Q3 2023. In the accumulation business lines, we reached BRL 168 billion in pension reserves, 12% above the volumes of September 2023, and we had BRL 471 million in revenues with admin fees in the quarter. That is a growth of approximately 12.5% in Q3 2023. In Consorcio credit letters, we sold over -- we sold nearly BRL 5 billion in credit letters, a 22% growth in the number of new proposals relative to Q3 2023. And this was driven by the campaign Sortudao and the campaign of the Anniversary of Caixa Consorcio.

On Slide 5, we see 3 highlights. The first has to do with the simplification of our shareholding structure to -- in the pursuit of greater operational efficiency. We have merged XS2 into Caixa Vida e Previdencia, under Holding XS1. We now have just one company concentrating the operations of life, credit life insurance and pensions. This restructuring will allow us to have admin benefits, economic and financial benefits when operating the whole thing. Another highlight, which took place after the end of the quarter was the full divestment of our nonstrategic interest held by CNP Holding Brasil in Wiz Co Participacoes e Corretagem, which also has allowed us to streamline the shareholding structure of the company and reinforces our focus on bancassurance of Caixa.

In terms of sustainability, this quarter, we approved the Sustainability Plan for 2024-2025, which provides guidance on our sustainability actions in line with the strategic plan. The objective of this plan is to promote sustainable processes in the company and its invested companies and the improvement of insurance in line with sustainability with solidary actions, inclusive actions, low carbon and the preservation of biodiversity. The company has also become a signatory of the UN Global Compact, which reaffirms its commitment towards sustainability and social responsibility at the global level. As members, we will promote the engagement of the companies we have an interest in, in its operations and strategies to the universal principles.

Caixa Seguridade has also adhered to the Pact for Racial Equity and has committed to adopt practices that promote racial equality in the company and its invested companies. We aim to create a more inclusive and diversified work environment, greater employee satisfaction and reaffirm the company's commitment towards racial equality.

And to complete this first part, we move to Slide 6, where we see 4 important highlights. The first has to do with our profit. For the first time, and I'm proud to say we reached BRL 1 billion in net income in the quarter, our record ever, a growth by 10% relative to Q3 2023 and 13% relative to Q2 2024. The ROE of the third quarter was nearly 63%, a 6.1 percentage point increase relative to Q3 2023. As we have said in the last quarters and thinking in terms of the robust results that we are disclosing, the Board has approved the payout of dividends for BRL 930 million, that is 92.5% of the adjusted net income in Q3 2024. The payment should happen in the -- on the 17th of January 2025. That is in line with what we have in our policies. If favorable -- if there are favorable conditions, the company will continue to pay interim dividends based on the interim balance sheet.

And finally, Caixa Seguridade is now part of the IBOVESPA portfolio. IBOVESPA is the main indicator of the performance of shares on B3. It's yet another great achievement for Caixa Seguridade and its shareholders, and it attests to our pursuit of being more relevant and liquid in the market.

I now turn the floor over to Eduardo Oliveira, who is going to speak about the financial and sales performance.

[Eduardo Costa Oliveira, executive]

[Interpreted] Thank you, Felipe. Good afternoon to all. We will now talk about the performance. On Slide 8, you see the financial performance in the quarter. According to IFRS 4, the operating revenue was BRL 1.3 billion, a record number, that is a 10.5% growth relative to Q3 2023. If we look at the results year-to-date, the growth was 8.3% relative to the year of 2023. Of the total revenues, 57% come from the revenue of our interest in other companies, especially Caixa Consorcio, a growth above 100%; Caixa Residencial, 36%; and Caixa Capitalizacao growth by 14%. The other 43% come from distribution revenues, which include brokerage fees, which grew 12.2% in Q3 2024 relative to Q3 2023. Also revenues coming from Mortgage Insurance, which grew nearly 38%; Home Insurance grew nearly 16%; and Assistance Services, which more than doubled.

As Felipe said, the company in terms of managerial net income had a record BRL 1 billion. According to IFRS 17, the net income in the quarter was even greater, BRL 1.1 billion or an 11.7% growth relative to the same period of 2023. On the right-hand side, ROE reached 62.9%, a growth by 6.1 percentage points. Relative to the insurance segment, written premiums for BRL 2.5 billion represent a growth by 7.8% relative to Q3 2023 particularly in mortgage, home and credit life insurance, which all grew in the region of 13% quarter-on-quarter; and assistance services, which grew over 25%.

In the accumulated written premiums in 2024 were above 7.6% relative to 2023. Home insurance and with this strategy of multiyear policies with ease of renewal, we saw the record performance for the second consecutive quarter. Earned premiums for Q3 grew 6.2% relative to Q3 2023. And if we compare year-to-date 2024 to year-to-date 2023, earned premiums increased by 4.5%.

On Slide 10, we see our performance indicators. Our loss ratio, we see it returning to the previous levels after the one-off events, which happened in Q2 2024. The indicator of Q3 improved by 1.5 percentage points relative to the same period 2023, which was impacted by the regulation and recognition of provisions for losses and reinsurance having to do with the floodings in Rio Grande do Sul. The dotted line considers the effects of variations in reinsurance over this indicator, which better reflects the loss ratio of the company and had a growth by 1.8 percentage points if we compare Q3 2024 and Q3 2023. This variation may be explained by the greater loss ratio in credit life insurance as a result of the new process for filing claim notices. The operating margin had the impact of these 2 one-off events, but has gone back to previous levels and grew 1.9% relative to Q3 2023.

In terms of the shares, we see a relative reduction of the risk business, which has to do with the increased share of accumulation business lines, especially Consorcio, as I'm going to explain later. Here on, we see the performance of the accumulation business lines, which increased by 8.2% in terms of the funds contributed in Q3 relative to Q3 2023. When we look at each segment in pension, contributions grew by 2.4% in Q3 relative to Q3 2023 and 12.1% relative to Q2 2024. And speaking of the revenues, our actions to increase portability in the quarter led to an increase by 20.4% in inward portability in relation to Q3 2023 and 64.1% relative to Q2 2024. And this has allowed us to reach BRL 1.1 billion in terms of net contributions in the quarter. And here, we see the results, which increased by 11% relative to Q3 2023 and 3% relative to Q2 2024 and reached BRL 167.6 billion.

In the year, contributions of funds in capitalization grew 6.9% in relation to Q3 2023 with a total volume of BRL 1.1 billion. In terms of the funding here, you can see more clearly what Felipe said about the monthly payment mode, which has an increased share in the total contributed. Capitalization reserves increased by 10.5% relative to Q2 and 71% relative to Q3 2023. The credit letters sold by Caixa Consorcio were in excess of BRL 28 billion in inventory in the quarter, a 57.8% growth relative to Q3 2023. Of this, BRL 4.86 billion refer to new sales in Q3 2024, which has been driven by the campaigns and very successful campaigns.

On Slide 12, we see about the -- more about the accumulation business lines. But as a group, the operating revenue in Q3 grew by 17.2% relative to Q3 2023, with a growth seen across the segments, especially Consorcio, which once again grew very substantially with 47.6% period-on-period. This performance of the revenues has impacted the operating margin, which grew over 22% relative to Q3 2023. In the accumulated vision, the growth was -- went to -- was by 21.6% between 2024 and 2023. The share of operating margin, which includes amounts contributed by the Risk and Distribution business lines, has increased to 27% in Q3 2024.

On Slide 13, we see the performance of our distribution business, which includes revenues related to access to the distribution network and use the Caixa brand and brokerage revenues, which are taken as a whole as -- under brokerage revenues. These increased 12.2% relative to Q3 2023 and 13.4% when we compare year-to-date 2024 to 2023. In the quarter, I would highlight the revenues originated by insurance, especially mortgage and home insurance. In terms of brokerage, 70% of the commissioning paid by the JVs was retained in the broker unit, 18% paid for prices to employees and partners and 12% paid service fees to Caixa. In terms of the operating margin of the distribution business, we saw an 11.3% increase relative to Q3 2023, especially in insurance, which grew 15%, while in the accumulated from 2024 and 2023, there was also growth. The operating margin in Q3 2024 was BRL 453 million or 28% of the total operational margin.

On this slide, we present the operational indicators as a group, considering the percentages of Caixa Seguridade in terms of share in invested companies. The IDA was close to its historical average. There were variations in the group of new partnerships where we saw this rise because of expenses relating to IT investments and incentives to culture and sports. In relation to these incentives, we clarify that these are funds allocated under the Rouanet Law in Caixa Vida e Previdencia, Caixa Residencial and Caixa Capitalizacao. If we exclude these incentives, the general indicator of the quarter would have been 10.3%, a 0.3 percentage point increase relative to Q3 2023 and a reduction by 0.2 percentage points over Q2 2024.

Looking at the combined ratio, after the one-off events of the floodings in Rio Grande do Sul and also those events related to the credit life insurance notices, the combined ratio has gone back to the previous levels. If we compare Q3 2024 to Q3 2023, we can see that the group new partnerships was driven up by the loss ratio on the credit life insurance business, and we also saw an impact of the administrative expenses. Just like the combined index after the extraordinary events in Q2, the expanded combined ratio has also gone back to levels that we have seen in previous quarters and was positively impacted by the financial results of the quarter, which I will talk about shortly.

On the left-hand side, you can see the financial and operational income and its share of income net of taxes and considering the interest of Caixa Seguridade in each invested company. The financial result accounted for 28% of the management net income in Caixa Seguridade in the quarter with 5 percentage points relative to Q3 2023 and Q2 2024, which reflects an improvement in the operating performance of the company. When we assess just the financial result of Q3 2024, we see a nominal reduction relative to the same period of 2023, but a growth by 9.7% relative to Q2 2024, which reflects the variations of the SELIC rate and the return of the portfolio.

On the last graph, we see the portfolio of the holding and the portfolios of each company invested according -- weighted according to their respective shares. In September '24, the portfolio had grown 5.5% relative to Q3 2024 and 4.1% as compared with June 2024. Of the total BRL 13.4 billion in investments, 44% was invested in post-fixed investments, 38% pre-fixed, 13% were inflation-linked and 5% were invested in other types of funds. Annualized quarterly return was 10.9%, which is 98.8% of the average CDI.

And with this, we end the presentation of the results of Q3 2024, and we will open for the Q&A session.

[Operator]

[Interpreted] [Operator Instructions] Our first question comes from Mr. Daniel Vaz from Safra.

[Daniel Vaz, analyst]

[Interpreted] Felipe, Eduardo, congratulations for the results. I have a question in relation to Mortgage Insurance, which grew 13% and even more in the last quarter. The duration is longer. We are not likely to see a dramatic increase or decrease in the product. So what about this level of 13% we saw 10%, 11% before. So is it going to last this increase by 13%?

[Eduardo Costa Oliveira, executive]

[Interpreted] Good morning, Daniel. Thank you for attending this video conference. We received this question over and over again, especially if we take into account how important housing credit is important for Caixa Seguridade. It also allows us a lot of cross-selling. If we think about the changes in parameters for granting mortgages, we have to say that these measures taken by Caixa have been adopted before, and they happen when more credit is being granted than what is allowed in the budget. And the plan is to balance the concession of credit with the ALM initiatives in the bank.

And these are only for SBPE, which use savings accounts and LCI and which accounts for 1/3 of the new mortgages. So the effect of that, those measures is mitigated because there are other concessions of mortgages that are linked to FGTS and Minha Casa, Minha Vida. So when we think about these effects of these measures in the credit of Caixa and the trends in mortgage insurance, what we see is that mortgage insurance will continue to grow although we will probably see less growth in Q4 because of these measures.

And remember, the idea is to balance the speed of concession of credit with the bank's policies relating to ALM. These measures will hit part of the mortgages, but not all of it. And when we look at the effect for Caixa Seguridade, we should also remember that mortgage insurance has to do with the inventory of credit, not with the new concessions of credit. So the flow is a lot more sustainable and perennial in terms of written premiums.

[Operator]

[Interpreted] The next question comes from Mr. William Barranjard from Itau BBA.

[William Buonsanti Barranjard, analyst]

[Interpreted] Felipe, Eduardo, thank you for taking the question, which is not so much about insurance, but has to do more with the accumulation products, Consorcio, Pension, they are all delivering good results with growth. So the first part of my question, and I think about Consorcio and cap. How do you see this going forward in terms of sales production, which is going well, operational leverage, improvement in margins? How is this going to be going forward for these 2 operations? And then thinking about accumulation going forward, if all of these improvements have been achieved. How do you see the operating margin in the share of each operation in terms of the total margin? Accumulation was 27% relative to 24% last year. So what I want to understand is whether you're expecting this to grow or if we have reached a level of stability.

[Felipe de Vasconcelos Soares Montenegro Mattos, executive]

[Interpreted] Thank you for your question. It was quite a long question, but this will allow us to delve deeper into certain aspects. In terms of accumulation, we have made a decision. In terms of cap, this product may not have a lot of revenue, but we expect a better and more robust result in the next few years. We made an option, and we think this is going to grow. The accumulation products can grow a lot. If we compare cap with the network that have the lottery network, which is typical for the distribution of this product, we are still doing our first steps.

We have been doing this for 3 years, and we are already one of the market leaders. But because of our size, we have a lot of room to grow. And our Consorcio includes property. And this is a portfolio that allows us to give options to the Caixa customers when they look for credit. They have some money, but they don't need. And they can also go for the Consorcio. So it's complementary to the strategy of Caixa. Consorcio is a product that can grow a lot. We had record numbers in terms of letters sold last year. We are going to do this, this year, I hope. And we can think that this is going to grow more.

So cap is growing a little bit slower, but growing, and we expect major growth for Consorcio. We have a high level of reserves, but they are not as large as we expected relative to the size of the bank. We have a network of distribution. And what we see is that there is a lack of traction in Brazil in terms of thinking about the future. And Caixa has a very strong social focus and we expect to bring 2 customers the most appropriate products for them to think about the future. And pension -- our pension plans is the right product for our customers to think about their retirement, for example. So accumulation products tend to grow more strongly, although this is -- they had a lower ramp up relative to insurance products, but we do have a good outlook ahead.

[Eduardo Costa Oliveira, executive]

[Interpreted] And just to add to what Felipe said, when we bring together all of these elements, we see a gain in terms of the relative share of the accumulation products relative to the other products. This is something we expected, especially now. And these segments are growing more strongly because they have a lower base relative to the insurance base. And especially in terms of pensions, it is the second year that we close where the pension scenario is very challenging. The bank has to fund to sustain mortgage credit. So the dynamics for pensions in the last 2 years was quite difficult.

But going forward, what we see is that Caixa has been taking measures to increase the funding, especially LCI, through other channels and not the internal channels of the bank. That is pension products will be made available through other platforms. So as to decrease the need to fund pension funds within Caixa. This will make the pressure on pensions to decrease. So, for next year, the outlook is better in terms of pensions. We believe that the measures that Caixa has enacted to fund LCIs outside the bank will decrease the focus of the network on funding pensions and this should improve next year. This business line accumulation should increase its relative share in time.

[Operator]

[Interpreted] Our next question comes from Mr. Shirazi from Citi.

[Arnon Shirazi, analyst]

[Interpreted] Congratulations for the results. My question has to do with mortgage, but with the loss ratio. In Q2, the loss ratio was very unusual and this in the third quarter, we see still the effects of Q2. What can we expect in terms of loss ratio for the mortgage insurance? Should it go back to the historical levels?

[Eduardo Costa Oliveira, executive]

[Interpreted] Yes, that's what we expect. The loss ratio for mortgage insurance has been going back to the previous levels. In Q3, we saw a level that was closer to the normal level. So this loss ratio is a good proxy of what we expect going forward. We don't expect structural changes in the loss ratio of mortgage insurance. And I feel confident to say it because of a strategy of our insurers which is very conservative. They maintain policies for reinsurance, for climate events at a level that gives us comfort in terms of the operation of the insurers. The idea is to mitigate against the effects of potential climate events, which might drive the loss ratio above the levels that we see today. And this is what we expect going forward.

[Operator]

[Interpreted] Our next question comes from Mr. Tiago Binsfeld from Goldman Sachs.

[Tiago Binsfeld, analyst]

[Interpreted] I would like to go back to mortgage. The penetration of mortgage is now 10% approximately in relation to Brazilian GDP. What could drive this even higher to close the gap relative to developed countries? It might have to do with the per capita income, the level of interest, but is there anything you could do -- the industry could do to increase the penetration, sorry, of mortgages, and this would in turn allow your industry to grow?

[Eduardo Costa Oliveira, executive]

[Interpreted] Your question is very complex. This should be directed to the bank to Caixa, which is the bank that knows the most about mortgages in Brazil. But having said that, I think the increase of the relative share of mortgages relative to the GDP is inevitable. There is a structural challenge in Brazil relating to the funding of mortgages. And Caixa, together with the federal government have been working on that front to try and find alternatives for mortgages to increase its share of the GDP.

As we see in developed countries, there is a macroeconomic issue that is there. And the relative share of mortgages is going to increase as the interest rate goes down. We also have savings accounts and LCI that provide the funds, and this may allow the rates to remain lower. This is a very complex question. The causes for the small penetration of mortgages in the GDP has to do with structural issues in the country. I'm an optimist. I think these issues are going to be resolved. And there are many people at Caixa and at the federal government looking for alternatives to expand mortgages.

[Tiago Binsfeld, analyst]

[Interpreted] And also if you allow me a follow up, there are 2 regulatory measures. The change in the time to redeem LCIs and the reserve requirements or the requirements rather for savings. Can you imagine when these 2 measures are going to take place?

[Eduardo Costa Oliveira, executive]

[Interpreted] Just like you, we follow, we monitor these discussions in relation to regulatory measures that may have an effect on mortgages. Be then changes in the time to redeem LCIs or changes in the requirements, they could increase the funding for mortgages and increase the bank's ability and capacity to grant credit. But in terms of time lines and possibilities and when those measures might be enacted, we have no information whatsoever. We only know what is said in the news.

[Operator]

[Interpreted] Our next question comes from Mr. Ruette from Bank of America.

[Antonio Gregorin Ruette, analyst]

[Interpreted] I would like to talk about the distribution business. What is your take today on the use of the network of distribution, the branches, the lottery stores in terms of distributing accumulation and risk products? Also, if you could give us a little bit more color about this quarter and the last few quarters in terms of the penetration of credit for the 4 main business lines. Has this remained stable? That would be very helpful.

[Felipe de Vasconcelos Soares Montenegro Mattos, executive]

[Interpreted] We are both going to take your question. Thank you for your question. Antonio, we always say that Caixa has fantastic distribution channels, and these are multiple channels. It could be the branches, it could be bank correspondents, lottery stores and also digital. We have to think about that as well. So how does this distribution happen? The world is heading in a certain direction in terms of having less branches and a greater outreach, a greater footprint. So we have both possibilities. We have banks. We have branches. We have lottery stores, but also the digital channel is extremely important, digital sales.

And specifically in terms of our brick-and-mortar facilities for capitalization, Capitalizacao and assistance services, microinsurance, life in general. We still have a gap in terms of people taking out insurance, and we have to leverage the lottery network. The challenge is for us to make this journey more simple, easier. If I go to a lottery store, I might want to pay a bill, I might want to place a bet. So selling insurance is more difficult because it involves some persuasion and the journey has to be easy. So that's our major challenge. We have to make this journey for the customer easier in these sales channels. In terms of our digital channel, we are implementing the structure.

[Eduardo Costa Oliveira, executive]

[Interpreted] In terms of distribution per channel, really we see that as going hand-in-hand with an increase in penetration. In our institutional presentation, we talk about the penetration of each of our products, and this varies among the Caixa client base. It varies between 1% and 4% for individuals and for companies, it may reach 15%. We are going to see a big leap with the expansion of digital channels of the other distribution channels, such as lottery shops, exclusive correspondents, because Caixa reaches lower income people, and we are unparalleled there, so we can reach out to this low income clients. And this is what is going to allow us to increase our penetration at a faster speed.

The increase of penetration is not going to happen straight away. It is going to happen slowly. It's hard work. It's going to be very time consuming because it depends on many complementary actions in terms of channels, in terms of product improvement, which will allow us to find the right product in the right channel for the right client. And this is what's going to allow our penetration to gain traction. So yes, we do see an increase in penetration in the last quarters. In the last few years, we have been increasing our penetration, but we still have a lot of room to grow within the Caixa client base.

[Operator]

[Interpreted] Our next question comes from Mr. Kaio Da Prato from UBS.

[Kaio Penso Da Prato, analyst]

[Interpreted] I have 2 questions actually. Could you talk a little bit more about the potential for top line growth next year? You talked about accumulation products. Could you talk a little bit more about the risk products, life, mortgage, credit life? What are the potential drivers? Is it more penetration, cross selling? What level of growth can we expect?

And my second question is about your finances. You made approximately 99% of the CDI. And given the breakout, the composition of your portfolio and the expectations of the SELIC rate in the market, are you expecting that kind of return? Or what can we expect for next year?

[Felipe de Vasconcelos Soares Montenegro Mattos, executive]

[Interpreted] Thank you for your question, Kaio. In the first years of 2024, the revenue from insurances was nearly 8% higher than last year. In this quarter, it was nearly 8% higher than in Q2 in terms of written premiums. And this has to do with the dynamic of credit at Caixa, which is stronger this year. So we had more premiums for mortgage and home and then also more premiums for the credit life because of the payroll loans. So our commercial performance reflects the performance of Caixa. That's why this strategic alignment is essential so that we can build on the distribution of Caixa, which covers 150 million customers.

So having said that and considering the guidance for mortgages and commercial credit of Caixa, we expect a growth in the insurance as well. In the last quarter, we should see what we saw throughout 2024. The curve is going up, but for 2025, we still expect to grow. Whenever the base increases, the percentage of growth is lower, but we still have the expectation of growth as we have seen in 2023, 2024, and we see an outlook which is favorable for the penetration of our products in 2025.

We have a lot to do and we have to provide the right products for our customers, but we want to grow in a robust way. We will have sales strategies that are appropriate for the customers and in line with the strategies of Caixa by streamlining our portfolio of products and by improving the experience of customers in different platforms, we believe we will be able to reach results which are in line with Q3 and in Q4, as we expect. 2025 will be in line with what we saw in 2024, although the base should be larger. So our expectation is good for 2025.

[Eduardo Costa Oliveira, executive]

[Interpreted] To take the second part of your question, in relation to the financial results, you're right. We have been gearing efforts for over a year to increase the profitability of our investment portfolio. The result is very clear when we look at the history of our financial results. SELIC is going up now, but even when SELIC was going down, our financial results remained stable. And this is a result of our strategy to increase the average yield of the portfolio, especially the pre-fixed yields. And for the future, we are going to maintain a conservative strategy of our financial portfolio so as to maintain the return close to 100% of SELIC.

Nearly half of our portfolio is a floating rate portfolio. So it's going to benefit with increase of SELIC and the pre-fixed portion has an yield above 10% because it was contracted before the drop of SELIC, which happened in the beginning of this year. So for next year, we expect the financial results to be in line with SELIC or 100% of the CDI.

[Operator]

[Interpreted] Our next question comes from Mr. Arnon Shirazi from [ Citibank. ]

[Arnon Shirazi, analyst]

[Interpreted] Just one more question. This week, the House of Representatives has created the insurance legal framework. What do you make of it?

[Felipe de Vasconcelos Soares Montenegro Mattos, executive]

[Interpreted] We are still trying to understand this law. We have lots of questions. Our associations have participated and given input for the law. But we still need to carry out more analysis.

[Eduardo Costa Oliveira, executive]

[Interpreted] Just to add, Arnon, the effect should be positive. These are measures that promote the insurance industry. So ultimately, we believe we are going to benefit from this new legislation. We are assessing the type of practical effects that we are going to see, but we are optimistic. Changes and updating of legislation reduces legal uncertainty and the industry as a whole becomes more attractive for new customers. We think this was very timely. This law relating to insurance had been discussed in the legislative for a long time. So, we think the impact is going to be positive.

[Operator]

[Interpreted] Our next question comes from Mr. Angelo Cardoso.

[Unknown Analyst]

[Interpreted] Congratulations for the results. When will the follow on take place? What is the number of shares and the value of the whole operation?

[Felipe de Vasconcelos Soares Montenegro Mattos, executive]

[Interpreted] Thank you for your question, Angelo. The follow on, as we said in the material fact, has -- the decision has been made. We still don't have the window when this would take place, and this is given by Caixa. But what Caixa said is that it would be 2.75% and this will allow us 20% of float to maintain the number of shares, which is needed under the Novo Mercado IBOVESPA, 82.5 million shares, and this depends on the value at the date of the operation.

[Eduardo Costa Oliveira, executive]

[Interpreted] And just to add that this follow on when it happens, which depends on the market situation, is a secondary operation. So this is Caixa selling these shares. This will not affect the distribution of dividends to the shareholders. It won't affect the company's capital. It's a secondary offer. This is extremely important. We have many individuals that invest in us, and we saw some news which made people feel that this was a primary offer that would dilute the shareholders. But no, that's not the case. This is a secondary offer that will have no impact whatsoever on the minority shareholders in the company.

[Operator]

[Interpreted] The Q&A session is now ended. I now turn the floor over to Mr. Mattos for his final remarks.

[Felipe de Vasconcelos Soares Montenegro Mattos, executive]

[Interpreted] Thank you very much for watching our video conference. And this is the longest video conference ever which attests to the interest that the company raises. We have been delivering results to society. Thank you, Arnon, William, Antonio, Kaio, Tiago, for your questions. Thank you to all of us who watched us, and we hope to see you in the next video conference, and we hope to present even better results. We for the first time, reached over BRL 1 billion, and we also had the chance to be included in the IBOVESPA index. Thank you very much.

[Operator]

[Interpreted] This video conference is now ended. Have a lovely afternoon, everybody.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]