Porto Seguro SA

BOVESPA:PSSA3

Earnings Call Transcript 2020-Q3

[Operator]

Good morning, ladies and gentlemen. And at this time, we would like to welcome you to Porto Seguro's Third Quarter '20 Results Conference Call.

Today, we have with us Roberto Santos, CEO; Celso Damadi, the Executive Vice President of Finance, Controlling, Investments and IRO; Marcelo Picanco, Executive Vice President for Insurance; Marcos Loução, Executive Vice President of Financial Businesses and Services; Izak Benaderet, Managing Director of Porto Investments; Lucas Arruda, Head of Strategy, M&A and Investor Relations; and Emerson Faria, Head of IR.

This event is being recorded and simultaneously translated. [Operator Instructions] We have a simultaneous webcast that is accessed through Porto Seguro's website at www.portoseguro.com.br/ri. There, you will find the conference call banner. This will lead you to the presentation. [Operator Instructions]

Before proceeding, we would like to mention that forward-looking statements made during this conference call referring to the business outlook and operational and financial goals are based on the beliefs and assumptions of the company management as well as on information currently available to the company. They involve risks, uncertainties and assumptions as they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Porto Seguro and lead to results that differ materially from those expressed in the forward-looking statements.

We would now like to give the floor to the company. You may proceed.

[Roberto de Souza Santos, executive]

Good morning. This is Roberto Santos speaking to you, and welcome to the Porto Seguro conference call for the third quarter 2020. We begin with Slide #4, where we will speak about our highlights.

We had an improvement in profitability, thanks to the operational results that were highly improved vis-à-vis the same period 3Q'19. Total revenues grew 4.7% in Automobiles, Health, Property & Casualty, Credit Operations and the Consortium. This advance shows the great resiliency of our business model.

The stability that we have is explained through the Auto segment that improved1.2% and also through the Health segment, that had an improvement of 7 percentage points during the same period. Now this improvement, of course, is due to the risk capital and the impact of isolation that was caused by the pandemic.

The consolidation of administrative and operational indicators continue to be reduced and, presently, are at the lowest level in the last 10 years and 0.9% accumulated for the year. And this is due to the efforts that we have set forth to enhance our procedures, especially through investments in process and IT.

The combined ratio stood at 87.6% in the quarter, with an improvement of 93.9% vis-à-vis the previous year. And between January and September, this combined index was 87.6%, a reduction of 5% vis-à-vis the same period last year.

We expanded our revenue by 27.5%, and we continue to have improvements in the Credit Card and Financing. The total number of Credit Cards increased significantly during the period. The NPL had an improvement during the semester, with a reduction vis-à-vis the second quarter and a reduction vis-à-vis the same quarter last year.

For 90 days, we reached 5.2% at the end of September, below the market average. And this, of course, reflects the management of Credit Cards and the positive impact of the measures we implemented for mitigation and risk. Now all of this is due to our profitability when compared to the benchmark that was quite high, reaching 350% CDI vis-à-vis last year.

Net revenues increased 4.7% in the quarter when compared to the same quarter last year, reaching BRL 400 million, with a profitability of 20.3%. In the first quarters of the year, the net revenues were BRL 1.3 billion, 27% higher than in the same period 2019 and annualized, representing 22%. Despite this very challenging period, our cash availability continues to be at a very comfortable level at BRL 5 billion.

We have initiatives in ESG. And besides the traditional ones, we have done a great deal. We are working with the solar panel consortium, the Meu Porto Seguro program, that has generated 10,000 temporary jobs, offering training so that people can resume the labor market with greater independence and qualification.

And during this period, we did launch some new products, and we offer warrantees to the owners and essential services of repair. And the proposal of this new product has offered very attractive benefits and has had high hiring rates. And we now have a network of laboratories and consultants. We offer discounts and very prompt attention.

And we also have the financing [ miles ] for autos, where owners can contract both things with financing for 18 months. And of course, the insurance always accompanies the period of the funding.

I would like to thank all of you for the partnership, enabling us to overcome this unprecedented moment. And I also wish everybody a great deal of health. We will now go into greater details about our results.

[Celso Damadi, executive]

Good morning to all of you. Thank you for your participation. This is Celso Damadi. I will continue the presentation on Slide #5, where we show you the growth of our total revenues.

The total revenues once again had a growth, an evolution of 4.7% in the quarter, a growth of almost 5% in the quarter vis-à-vis the previous quarter. And a highlight here regarding the previous quarter is a growth of 4.7% vis-à-vis 2019.

Now besides growing in terms of employment, we also had a growth in our fleet and a 1.8% increase for the 9 months of the year, once again giving us positive figures vis-à-vis the year 2019. And this is interesting growth for the year. And up until the previous quarter, we had negative growth, despite all of the challenges that we have faced in 2020.

In the graph below, the CAGR of 4.2% and a growth of 11% in Financial businesses. And in 2020, the situation is not different. The Financial businesses had a growth of 11%; Services, 4%; and Insurance, of course, growing less this year, especially the Auto portfolio that was impacted until July, but that has recovered. Marcelo will speak about this going forward.

We observed here how our diversification for the growth of revenues and premiums is not only in Financial businesses, but in other insurance portfolios, such as Health, Individual and others, allowing us to put in place this diversification and to grow much more in other Insurance portfolio than in Financial businesses, where the growth has been for 2 digits in the last few years. And the diversification has been in place since 2015.

Porto Seguro has diversified its business strategies in the last few years. In the first quarter of 2020, the results show you how we have improved our pricing and our risk management, especially in terms of percentages on CDI. Since April, our model has already captured this greater mobility, and we have already captured this behavior of our clients, leveraging our renewal indices.

Here, we see the profit per business segment. Of course, the Auto segment in the third quarter has had a relevant share in our profit, not only in the second quarter, but also in the third, and the other insurance with 28%. The Auto business with a more relevant share in this third quarter, with profit greater than in 2018 and 2019, because the loss ratio has been lower in the last 2 quarters.

In the following slide, we see that the increase of net revenues in the third quarter can be explained by the growth resumption in written premiums and the reduction in loss ratio, leading to an improvement in operational results, offset by the lower financial results affected by the drop of interest rates. We had a very good profitability. But of course, the average rate of the CDI was lower than in 2019. The nominal financial result was lower, but the profitability over CDI was greater than in 2019.

The operational results, as we can see in Slide #7, in the second quarter, the result was BRL 327 million. And in the third quarter, an operational result also of BRL 327 million, which means that the operational results were very similar with a gain in productivity and a reduction in the loss ratio. The 2 quarters, therefore, were very significant operational results.

In the graph to the right, we show you the ROAE, the average return on equity. We work on the return of our business, reaching almost 28% of return on the equity of our portfolios. When we remove the capital surplus and remuneration of CDI, the return is 28% for the third quarter vis-à-vis 21% in the third quarter 2019. A robust return, therefore, in the third quarter '20 vis-à-vis 2019.

Porto Seguro has obtained consistent results despite the fluctuations in interest rates. The return on average equity of the third quarter was almost 7x greater when compared to CDI in the period, 689% of CDI. This is the indicator we prefer, and it shows you that our pricing model captures the reduction of interest rates through time.

Throughout this time, we have said that our pricing model captures the future reduction in interest rate. Based on our budget for the coming year, we do our pricing. And according to the reductions in financial revenues, applications, cancellations and the increase of installments and premiums, our pricing model captures all of this, and this combined index remain stable, as Marcelo Picanco will explain further ahead.

This combined index does not alter very much, according to our financial revenues. And of course, our gains vis-à-vis CDI are much greater than in the past, and they capture the dynamic of interest rates. And this graph clearly illustrates this to understand our historical profitability.

I would now like to give the floor to Marcelo Picanco to refer to the results in the Insurance portfolio.

[Marcelo Picanço, executive]

Thank you, and thank you for your attention. On behalf of the company, I would like to speak about the Insurance results.

I would say that this was a quarter for resumption. First of all, we had a growth in the Auto segment, a growth of 0.8% vis-à-vis the same period last year. We had a structural reduction in risk because of this scenario.

There already was a reduction in robbery and theft as a trend and because of the effects of the pandemic, all of this associated to a lower sale of vehicles impacting the economy. Therefore, this is a very positive result, considering the circumstances that surround this resumption in the Auto business.

I'm going to speak about the evolution of this portfolio in the last few years, enabling us to grow 4.6% in total premium vis-à-vis the same period 2019. The Auto business had a weight of 67% in 2015. Now it has a share of 61% in our total mix.

And the other portfolios are stronger, which is natural, because of the market share that the company has in Auto and because of the opportunities that still exist in other products that have a lower penetration than Auto. This does not mean that the Auto penetration is ideal. We still have room for growth. This will require innovation, new products and new channels, and we're working on this.

I would like to underscore that, despite the pandemic, we have a more sophisticated pricing model using our critical mass. We have been able to segment the effects of the pandemic. We have models speaking about isolation, by neighborhoods, by age. Of course, the market includes this in the price. We have a more refined pricing structure, and our gain and loss rates ratio vis-à-vis last year is natural.

We continue with percentages that are quite relevant. And I will speak about the outlook now in Health and Dental, double-digit growth in Property & Casualty, despite all of the impact on companies in terms of contracting insurance. We have obtained good figures because of the opportunities that exists, almost 8%.

And in Life, we have maintained what we had, and this is due to the mix that was impacted by traveling, by loans and short-term events. And we have Life Insurance that covers occurrences during events. For example, personal accidents during events, this dropped to practically 0 during the pandemic and is resuming very, very slowly.

In the next slide, Slide #10, when we speak about our combined ratio and profitability. Of course, in this quarter vis-à-vis 2019, we had a relevant drop of 93.6%. The main factor was, of course, the loss ratio. But we need to mention that, despite a severe compression in terms of growth below our historical levels, we still attained 0.8%. And we were able to have an expressive reduction, not that we believe that this will always be like this.

If we look into the longer term, comparing the 9 months with the last 5 years, there is a correlation. And we have indicated this to the market that the operational performance would have to offset the structural drop in interest rates. And we think that the combined ratio will be around 28%, below 95%. It was 92% in 2018, 94% in 2019 and 88% this year.

Now regardless of the pandemic, we would be below the standards of previous years, 76%, 79%, when we had double-digit interest rates, which is not the case today. We're very aware of this. As Celso mentioned, our pricing depends on the expectation of interest rates and the portfolios, of course, based themselves on CDI. And we price awaiting the interest rates and the market curves.

And the result in Insurance is the best result in the last 6 years, in this quarter, reaching 21.1% of return on investment and BRL 321 million. And for the 9 months of the year, we have gone beyond BRL 1 billion, BRL 1.69 billion, with a return on capital of almost 25% to 24.9%, of course, much above what we have had historically and very positive.

I will now give the floor to Celso to speak about administrative and operational expenses.

[Celso Damadi, executive]

Now simply to conclude the part about productivity that we have been harping on constantly, it is important and relevant for us, as Picanco mentioned. We observed that since 2015 to 2019, 2020, we went from 20% to 15.4%. This gain in productivity that we're showing you here is important, because it gives us greater competitiveness and the possibility of being competitive with profitability.

Of course, not all reductions here, GA and OE, are geared towards competitiveness, but we are able to gain more productivity in the future with growth. Part of our administrative expenses, part of them are still fixed costs, which we call structural costs.

And with our growth in the coming years, we have invested over BRL 1 billion in process and technologies in the last 4 years, preparing the company for growth. I believe that we will gain productivity as well besides reducing the cost. We will have productivity and a growth lever.

In the slide, to the right, we show you that our nominal administrative and operational expenses. Well, nominally, this figure was not present. It goes from BRL 2.6 billion to BRL 2.4 billion. And the inflation during the period was at 18.4%. If we bring this to present value, the nominal gain in this reduction of expenses is equivalent to BRL 650 million per year, enabling us to be more competitive in the future.

And we do believe we have further space to gain productivity by gaining scale and the growth of premiums. So this is what we believe. This is what we're working towards the future. And our G&A and O&E ratio will have to be lower.

I now give the floor to Marcos to speak about Financial and Service Businesses.

[Marcos Loução, executive]

Good morning. To speak about Financial and Service Businesses, in the third quarter, we had a resumption, which is important. The growth was 17.9%, 0.4 percentage points better than the third quarter '19, thanks to the Credit Operations and the Consortium.

Regarding the revenues, the Consortium grew 27%, and with a sound growth scenario during the third quarter. We implemented several models and new products, and we're highly satisfied with the performance in the third quarter.

In Rental Cars, the growth was good of approximately 22%. When we compare the 17.9% in the third quarter, we have a much better result for the 9 months of the year. Now Credit Operation, which is also a very important operation.

When we go to Slide #13, we see the evolution of financial revenues in the third quarter, going back to a 2-digit growth, 2 percentage points for the 9 months of the year. And the Credit Card portfolio, above BRL 8.5 billion, quite expressive. And of course, all of this concentrated in the Credit Card, with approximately BRL 2 billion in loans, generating financial revenues.

Total Credit Cards, with cards growing, as Roberto mentioned, 16.3%, totaling 2.5 million cards that can be used, a significant growth when it comes to active cards. And the first transaction that we call a shorter transaction of 30 days. Now the transaction for 90 days, for comparison with the market, are superior to 60%, and they're quite desirable in the credit card market.

In Slide #14, we will speak a bit more in terms of the NPL, the default. We observed a resumption in the third quarter, with the miles for the entire market. And when we look at the third quarter, it is better. And we see that the curve is setting itself far from the market curve, and with a coverage rate at 142% and the cost of risk at 44%.

This is the information we wanted to underscore for you, and I would like to give the floor to Izak to speak about the investment results.

[Izak Benaderet, executive]

A good morning to all of you. Thank you for this opportunity. I will speak about our performance and investment. This was an investor with 1.3% nominal points, 345% of CDI. And I would like to highlight the positive contribution of our inflation-linked bonds, the IGP-M, and our portfolio of shares. That had an interesting performance vis-à-vis the BOVESPA Index and compared to our credit position that had a recovery that it had, had in the second quarter. This is a relevant resumption.

And finally, I would like to draw your attention to the change in the makeup of our portfolio. The [ post-fixed preço ] and an increase in the [ pre-fixed share ] with all of the other indexers unchanged.

This is all from me. I would like to return the floor to Celso now to end our presentation.

[Celso Damadi, executive]

And before we open to questions, I would like to speak about ESG and our initiatives in this field.

Every quarter, we disclose what we have done in the environmental, social and governance spheres. Now this has become a business strategy of the company to generate a positive impact on the environment, for society and eventually for Porto Seguro.

Now we have the first electric tow trucks in Brazil. We have acquired 5 of these. The first has been in operation since September. And along with our electric cars and bicycles and public transportation to better service our customers, we are able to reduce the CO2 emissions by all of this.

We also have the Consortium for social (sic) [ solar ] energy panels for companies and homes to have the minimum energy of solar energy with social and economic benefits. This makes it possible to reduce the value of electric bills by 95%.

In the social field, we generated work positions through Meu Porto Seguro program. We have 2,000 people receiving a monthly payment of BRL 1,500 for a 3-month period. These people are being trained and qualified to return to the job market with greater qualification and independence.

The program will no longer take enrollment, but we do want to generate 10,000 temporary jobs, add [ forcing ] for the program. These are the financial and other highlights that we wanted to share with you.

We will now go on to the question-and-answer session. Thank you.

[Operator]

We will now go on to the question-and-answer session. [Operator Instructions] The first question is from Thomas Peredo from BTG Pactual.

[Thomas Peredo, analyst]

And I have 2 questions. The first, what is your vision on the recovery of new cars? And how has this impacted the sale of new insurance, simply to have an outlook for the coming year?

Of course, this year, there was a drop in the accumulated figures. But do you think that we will have a stronger recovery in the coming year, based on this comparison? Or if the market will take longer because of the macro issues?

My second question refers to the sale of Consortium, which is the performance of this? And the annual growth, which was 27% this year, how much represents new sales? And how much refers to the recognition and sale of past inventory? And if we can expect the Consortium to keep up this pace in the coming quarter?

[Marcelo Picanço, executive]

Thomas, this is Marcelo Picanco. Thank you for the questions. I will answer the first question in terms of the recovery of new vehicles and the outlook for the country.

Well, if we look at the figures of September, the recovery is 9% or 10%, approximately. Of course, people are holding back, but we're optimistic going forward. There has been a certain holding back this year, but we believe that all of this will resume.

We had a credit contraction. This is over with. This will release the market somewhat. The banks are showing the quality of their credit as well as of provisions. So this should not become a problem.

And I do believe that the resumption will be stronger, and this will help the Auto Insurance markets once again. All of this has been held back, but it will return at levels above what we would expect.

People, of course, expect to be able to move around more easily, and they want to change their cars. And there will be a decrease of the average age of cars and a greater penetration of insurance. This is beginning at present, and we do think it will resume more in 2021.

I'll give the floor to Marcos Loução to speak about the Consortium.

[Marcos Loução, executive]

Now to speak about the Consortium per se, we had the frank expansion of a program that we have, where we stopped our sales force to work, especially on the Consortium, to attract new salespeople and to stimulate our brokers to incentivate the sale of the Consortium. This happened last year in October. And this year, we did this again in May.

Now I would like to complement my answer, saying that, regardless of all of this, we are resuming the application of the product. We have simplified the sales process. What does it mean to simplify the forms where the customer have to register and submit themselves for a Consortium?

We are the first Consortium that accepts credit cards as payment, total payment, not only the first installment, as some others do, but fully. Customers will be able to pay for the Consortium using their credit card.

And besides this, we have a much more aggressive offer that is highly present on social network. The 2-digit growth in sales that we have in installments and in terms of the credit volume that is being released represent the new level that we hope to have further Consortium going forward, not the 27% that we had, but a stronger growth vis-à-vis last year.

[Operator]

Our next question comes from Mariana Taddeo from UBS.

[Mariana Taddeo, analyst]

I have 2 of them. First, referring to the loss ratio in the Auto segment. We still see an impact of this drop in mobility. Now what has been the behavior of the loss ratio in the fourth quarter? And will it return to normalcy?

My second question refers in the rules for the solvency law for insurance companies. Do you have an estimate of which would be the impact on Porto?

[Marcelo Picanço, executive]

Hello, Mariana. This is Marcelo. I will answer the first question. Regarding the loss ratio and returning to previous levels, the situation is somewhat complex.

The first aspect, we do have a pandemic with social isolation. We speak about this broadly. But we also have a silent change of habits in terms of mobility that has happened at a very fast pace because people are in home office.

So we think this process will be somewhat slower, and we don't think it will depend on price. Nobody knows when we will have a resumption in this. But if we look forward 12 months, what we believe is that what we have will be very representative of what we will have in the year. And we're pricing by believing that the pre pandemic situation will no longer be the case.

And this process of adjustment is longer, more extended because we need to work with a highly segmented and sophisticated pricing. Now for a reasonable period we will have this burden, perhaps for another quarter or a semester. We have a bonus. We also have a certain room. The isolation will tend to disappear. And of course, we will occupy this space with new prices.

It's very difficult to speak about the competitive dynamic. We don't think that competition will assume a new price level during the pandemic to then have -- to make readjustments of 25% when everything resumes. This would not be sustainable. Therefore, this process of working with a loss ratio below historical levels will continue for some time, perhaps with better adjustments in the second or third quarter 2021.

It all depends on what will happen with mobility. Now mobility in a continental country like Brazil with a different revenue levels, will, of course, be very complex. We do have customers with higher income. Their mobility standard is different, and we're studying this in-depth to have adequate pricing. I don't think the impacts will be the same in all companies. This is our own measurement, and we are monitoring this.

We know our customers' profiles, and we know how these profiles were changed during the pandemic. The changes were not significant. We do think we will have good results for some time. This is a characteristic of our portfolio and the dynamic of this mobility just -- adjustment through time.

I will give the floor to Celso to answer the second question, the impact of the rules on solvency.

[Celso Damadi, executive]

Thank you, Mariana, for the question. I still don't have a very clear answer to give you. We're still calculating this impact. The impact for us will probably be positive. It's very complex. But it depends on having cross-analysis in terms of other risks, volatility and much more.

We have a working group studying the minutes, but the outlook is for a reduction in the need for capital. Now how much and which will be the impact of this is something we still do not know. In a few days, we should have these figures estimated.

We believe that the impact will be possible -- positive, except if there is a surprise. So we're studying this new standard in-depth and working on calculations. We have several portfolios, several different businesses, and we're working with an analysis of the context as a whole. Once we have these figures, of course, we will convey them to you.

[Operator]

Our next question is from [ Alexandre ] from SSA Investments from the webcast.

[Unknown Analyst]

If you could speak more about the Porto initiatives to improve the use of the Auto Insurance.

[Marcelo Picanço, executive]

And I will begin with the initiatives to enhance the Auto penetration. This is Marcelo Picanco.

For our growth, it is critical to increase penetration in the Auto fleet. We look at different countries and the market shares, 27% or 30%, and this, of course, is very relevant. We're working on initiatives, therefore, for more accessible products, more digital offers, an easier facilitated communication, perhaps, and working on this in partnership with our channels, with our brokers.

And we believe that we truly need to innovate to have access to this. And we're going to work with the entire chain of loss ratios, spare parts to reduce the cost of insurance. This is important to work on, the part of coverage is also important.

But there is that part of the offer of how we package the product. This product is not properly understood by most of the population. We need to enhance quantitative and qualitative issues, working with channels, through partnerships and communication fronts as well. And very soon, we should have some novelties regarding this topic.

[Operator]

Our next question is from Guilherme from JPMorgan.

[Guilherme Grespan, analyst]

My doubt in the financial segment points to the following: we see a significant drop in NPL, but the system is polluted by the number of negotiations that you will have. And there must be a relevant goal for the banks, considering the amount of negotiations.

Now which was your negotiation activity? And do you think that the metric that you use is valid going forward? If it is not valid, if you could give us a new figure regarding the number of negotiations and how much more you need to negotiate in terms of your portfolio?

A second question. We observed a drop of provision on the financial side. So having a level somewhat lower than the previous quarter, will this be normal going forward?

[Marcos Loução, executive]

Thank you, Guilherme, for the question. Marcos Loução here. Our renegotiation portfolio focus more on the vehicle segment. This is a smaller portfolio, but important for us, and we got to approximately 17% or 18%. We have a somewhat higher default in this renegotiated portfolio.

So what I can say is that we will not have any surprises going forward, unless we have a second wave or something unknown. What we went through March, April and May was extremely cumbersome, and we observed that we had more people protecting themselves and asking for a postponement more than not being able to pay. And these people are back to paying their vehicle funding.

Now when we consider what we have at present, we have very few contracts where we will have the first installment maturing 60 or 90 days. And this represents 20% of the contracts we renegotiated. So I would say that I am comfortable with this.

And when I look at our figures compared to the market, our figures are real, and we can depend on them. We have an indicator that I like, what is called over 30, and I have followed up on those negotiations very carefully.

And I compare this with our present-day sales terms, and the default is better than when we entered the crisis. And when we speak about renegotiation, somewhat higher, but much below what I had expected. So I'm quite comfortable with this CDC.

Now when we speak about our credit portfolio, we have a larger portfolio and, of course, consequently, greater concern. I was concerned with the postponement of the invoices to pay it 1 month and postpone it up to another month. And our risk models pointed to delays in payments. So we did offer the possibility of paying the invoices in installments.

We began this in June. And in September, these levels dropped 30%. So clients are paying in installments, and they have resumed the use of their credit cards. Now during the pandemic, the activities where they use the credit card, we know the credit card is being used broadly. And the number of transactions -- what we do is to follow up on the possibility of default.

If a customer buys home appliances very much, it is different from a customer that buy things at a drug store or buys fuel at gas stations. And we see that default has already been controlled in Credit Cards, which was an additional concern that we had, the financial revenue. Default is important in Credit Cards .

And this is important because of our financial revenues. If a customer pays 100% of the invoice, that's good. And the levels are higher when compared to before the pandemic. So the concern at this point is only with financial revenues.

[Operator]

Our next question is via webcast from Pacifico Research Management.

[Pedro Gonzaga, analyst]

Congratulations for the good results. How much of your surplus capital is in real estate? And could this be part of an extraordinary payout? Or will the company try to maintain its liquidity and keep this surplus for opportunities, M&A opportunities and others?

[Roberto de Souza Santos, executive]

Thank you for the question, Pedro. In the last 3 or 4 years, we have had a reduction of our fixed capital. We have sold more than BRL 300 million, reducing, of course, the number of real estate that we possessed. We still have some buildings of ours that are for sale on our balance. Now the asset of real estate is much higher than it was in the past. And this is a policy that we have been working on for the last 4 years.

When it comes to our solvency base, our appetite for capital is internal. We're quite satisfied with our cash generation this year. It was somewhat difficult at the beginning of April. But we do have a great deal of appetite for growth in the financial area, credit cards and others, and we have not stopped growing in these fields. And this enables us to maintain growth in these business lines because we depend less on liquidity crisis and fundraising crisis that the market has and to focus on what is strategic for us. So this capital surplus for us is strategic.

We have several in-house processes to invest in, regardless of the M&A. In M&A, we do have additional projects underway. And in 2021, we will have an appetite to do a great deal in this area, both in-house and externally. We're always seeking opportunities with a very good cost-benefit ratio, and we will maintain our normal practice.

This is not a policy, but it is a practice to pay out 50% of dividends. We don't have the outlook of paying any additional dividend this year. In August, we should pay a complement up to December, because our results were somewhat above what was expected as well as our cash generation above what had been expected.

So we anticipated the payment of this dividend complement that we had decided to pay in December, but paid this in August. We paid 50% dividends this year, and probably we will maintain this practice for this year as well. Thank you, Pedro, for your question.

[Operator]

Our next question is through via webcast from Mr. Rahmani from Reach Capital.

[Mauricio Rahmani, analyst]

If you could speak about the growth expectation in the Health segment and new formats for this segment?

[Marcelo Picanço, executive]

Mauricio, this is Marcelo Picanco. Yes. We do have the expectation of having stronger growth, double digits in Health. And we want to accelerate the growth we have had, with a higher focus on P&E.

For many years, we had a greater focus on the corporate market, but now we're thinking of working with the small and medium-sized businesses. We have decreased the minimum number of lives to 3 lives, which has increased our capillarity significantly.

Our partners, our brokers had requested this, and we agreed to this. We have several quotes for products and offers. And we're also investing in alternative products, something that was launched a little less than a month ago. It is a service. It is not a Health plan. A service for health exams, which increases the visibility of Health Insurance.

And we believe that it is necessary to innovate in this segment. Only 25% of the Brazilian population has complementary Health plans. And we need to facilitate access, digitalize their journey, and we're making significant investments in this, with international partnerships so that we can attain this in a more sophisticated way with excellence and with the necessary speed.

Health for us, once again, will become an important focus for us. But with that strategy of having a regional focus, São Paulo and the Southeast, and a focus on companies and a focus on smaller businesses. But we're still not speaking of individual Health plans. But for us, once again, Health is something that we are focusing on more for expansion.

[Operator]

As we have no further questions, we will now return the floor to the company for their closing remarks.

[Roberto de Souza Santos, executive]

I would like to thank all of you for your participation in our results conference call, also thank you, especially for the questions and for the content of your questions. I would like to reinforce that should you have additional questions, please contact our IR team at www.portoseguro.com.br, and you can speak directly with our Investor Relations team. Once again, thank you very much for your participation.

[Operator]

The Porto Seguro conference call ends here. We would like to thank all of you for your participation. Have a good day.

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