Porto Seguro SA

BOVESPA:PSSA3

Earnings Call Transcript 2021-Q3

[Operator]

Good morning, and at this time, we would like to welcome everyone to the Porto Seguro Third Quarter '21 Results Conference Call. Today, we have with us Roberto Santos, CEO and IRO; Celso Damadi, the CFO; Marcelo Picanco, the Insurance Vice President; Marcos Loucao, the Executive Vice President of Financial Businesses and Services; Izak Benaderet, the Management, Director of Porto Investments; Lucas Arruda, Head of Strategy and Investor Relations.

We would like to inform you that this event is being recorded and simultaneously translated. And the slides are available for download at our site. The slides presented during the call are in Portuguese, but there is an English version available for download in the Investor Relations website of the company.

After the closing of the presentation, we will go on to the Question-and-Answer Session. To ask your question, please use the raise hand icon, and we will allow the participants to post their questions. When you begin speaking, please give us your name and the institution that you represent and ensuing this, please give us your question.

Now the forward-looking statements made during this conference are based on the beliefs and assumptions of Porto Seguro's management. And once again, they are based on information currently available to the company. They involve risks, uncertainties and assumptions as they relate to future risks, 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 cause results to differ materially from those expressed in such forward-looking statements.

I would like to give the floor to Roberto Santos, our CEO, to begin the presentation.

[Roberto de Souza Santos, executive]

Hello, Good morning to all of you, and we would like to thank you for your participation in the third quarter '21 conference call. We present the main highlights for the period.

Our revenues grew 15% in the quarter vis-a-vis the same period last year with a double-digit expansion in all the business verticals. Besides the revenue increase, we had a positive quarter also when it comes to the evolution of our customer base. In the insurance business vertical, we increased our insured fleet by 419,000 vehicles, obtaining 5.8 million vehicles insured at the end of the quarter. In life insurance, we had an increase of more than 300,000 lives covered. Besides adding 800,000 residences that are insured in our portfolio. The businesses together for the insurance vertical present an increase of 900,000 contracts for the period.

The health business vertical went beyond 1,100,000 lives covered, an increase of 18% in health insurance and 12% in dental insurance. In the financial business vertical, we reached 3.4 million contracts through the expansion of almost 350,000 businesses in the last 12 months. A highlight for the increase of 230,000 credit cards, 6,000 contracts for capitalization and warranties for lease, 27,000 active Consortium business and 27,000 contracts of funding for the period. In the service business vertical, we increased by 53%, the number of subscription clients reaching 39,000 contract, besides this we carried out 3.4 million service given to homes and vehicles in the first 9 months of the year. Now this figure has the potential to continue to grow very quickly by optimizing the management and use of services to third parties as well.

Regarding the operating performance, the total combined index reached 95.2%, and the loss ratio consolidated reached 55.3%, both in line with the pre-pandemic levels. The increase in the loss ratio vis-a-vis the previous year is associated mainly to the return of a greater circulation of vehicles with an impact on the auto business and in health because of the return of elective events and the costs that still relate to COVID-19 events. The default index of credit operations represented by NPL of 90 days was 4.4% for the quarter. This indicated recorded an improvement of 0.8 percentage points vis-a-vis the same period last year and is below the market average, reflecting a very efficient portfolio management and the positive impact of the measures that we adopted to mitigate risk throughout 2020.

The recurring financial result was BRL 54.7 million with a return on investments of 1.6% for the quarter, equivalent to 127% CDI in the period through the good performance of our allocations of security index to inflation and partially impacted by variable income assets. We also have a majority stake at present in Atar, a fintech that develop solutions for banking as a service to accelerate the process of digital transformation in the financial business vertical.

Another operation that we announced in November, at the close of the quarter, was the joint venture with Cosan for the creation of Mobitech to transform the experience of customers with mobility by offering a broader portfolio of solutions. Now this will be done through a partnership with a relevant player that has a competitive edge that is complementary to ours.

I would also like to highlight the recognitions we have received recently. We were awarded as one of the winning insurance companies in the Top of Mind of Folha de Sao Paulo and by the Estadao with Marcas Mais.

To close, I would like to thank all of our stakeholders for their confidence and highlight that we continue to work on fronts that will leverage the expansion of the business and enhance ever more the experience of our customers presenting -- preserving the focus of value creation for the company.

I would now like to give the floor to Celso, who will continue with more detail on the evolution of our revenues for the quarter, In Slide #5.

[Celso Damadi, executive]

Thank you, Roberto. You can observe the growth of our revenues and the growth of total revenues for the quarter reached BRL 5.6 million with a growth of 15.4%. Now the growth during the quarter was greater than the growth of the 9 months, which was 13%. Now the growth was more accelerated in the third quarter when we compare the growth of other business verticals. At the right of the graph, we see that insurance has a growth of almost 12%, reaching almost BRL 4 billion compared to 11.7% for the year. Once again, we see that acceleration in the third quarter in financial businesses, a very good generation of almost 29% of growth and BRL 1 billion of invoicing for the third quarter.

In health care, 20% of growth for the third quarter vis-a-vis 11% for the year. And in services, 46% vis-a-vis 28%. So we're underscoring that the third quarter had growth, much above the growth of the 9 months of the year. And in the third quarter, the growth was beyond that of the accumulated growth for 9 months.

In Slide #6, you can see our consolidated profitability that stands at BRL 2 billion. It shows us our resiliency despite the challenges. Of course, when we compare this with the 9 months of 2020, we have a drop. Last year, we had an extraordinary result, especially in the auto insurance portfolio as well as in the health portfolio, where we had extraordinary gains because of the pandemic that aided and abutted this portfolio. We will be speaking about this. But despite this, we had 9 months with a return of 13%. For the quarter, therefore, we had BRL 17 million recurring from the increase in auto insurance and health care insurance more specifically and because of loss ratios that are more elective. And once again, this will be explored further ahead.

On Slide #7, we show you historical profitability that we present here. In the 9 months, we got to BRL 1.011 million, 450% over CDI, showing you that this historical profitability is way above the CDI. And we got to almost 700% in 2020 above CDI. Now it is somewhat lower. But this shows you that our profitability background is very good.

I would now like to give the floor to Marcelo Picanco to speak a bit more about the insurance business vertical.

[Marcelo Picanço, executive]

Thank you, Celso, and Good morning to all of you. First of all, I would like to speak about the robust growth that we had this quarter vis-a-vis the previous month, double-digit growth, especially in the insurance market where we have a price flexibility. And in auto, for example, we reached almost 421 additional items, in P&C 183 items despite everything that we went through in the pandemic, with an impact on insurance, albeit temporary. And in insured members, 301,000 people covered. Now this is because of a not very common combination in a company, a strong scale, intelligence in which we focus with analytics and data to be able to work with our pricing with segmented and customized solutions even with the products where we have a strong skill such as auto and P&C, where we have the market leadership.

We always work with something that will set us aside in terms of the segmented products. We have different brands and products here and leveraging product innovation. For example, in this period, we launched [ Vida e ] life insurance for online use, much simpler, leveraging, telemedicine and more convenient services, leveraging our entire network. And this is the one example of what we are doing to set ourselves aside in the market.

Additionally, on Slide 9, I would like to speak about the results per se. The annual profitability is above 20% of return on capital despite the variations in loss ratio. And with the return of mobility, and yes, some inflation that has had an impact. We had a quarter that was somewhat better, but still below the pre-pandemic levels. We reached a total of combined ratio of 92.8%, below what we had in the third quarter '19, which was 93.2%. Now the combined ratios were quite low, especially because of the auto portfolio and mobility.

And this -- there is a positive factor here. An increase of vehicles when we go forward, the increase in the average premium, which will, of course, lead to an increase in the future. In the accumulated 9 months, we have a very robust situation of 90.2% when compared with 93.2% before the pandemic.

And if we go on to the last slide here, we give you a long-term vision. We know that you like to have this long-term vision for your outlook on our strategy. Since 2017, if we look at the auto portfolio in the insurance business vertical, which has a strong impact on the rest. This is very important for us strategically, and it is a highlight in this period of 18 months. Then based on the comparison of [indiscernible], we had a growth of 11.9%, while the market had a growth of 5.7%. In 2017, historically, we were growing 2% more than the market. There has been an acceleration this year.

And what sets us aside from the market was what we began doing in 2017, putting us in that position of leadership. Although in the historical average of 2017 to 2020, we do have 9 percentage points -- 9.2 percentage points, setting us aside in the loss ratio. This has expanded in the months, 8 accumulated months to 12.8%. Now this is a combination of scale, a very competitive pricing and a mix, which has enabled us to work with a relative competitive gain vis-a-vis the market.

And additionally to this, we had very disciplined work that began before 2021 to improve our SG&A and enabled us to gain more competitivity in the market, where we work with very tight margins and price because the market is very sensitive to purchasing decisions. So here, we have that competitive edge that has expanded further. I'm not saying that it will always stand at 13 percentage points, but this does explain the market share and the competitiveness that we were able to attain.

Having said that, I would like to give the floor to Sami, so that he can speak about the results of the health care vertical.

[Sami Foguel, executive]

Thank you, Marcelo Picanco. A good day to all of you. The health care vertical, as mentioned before, had a growth and increased vis-a-vis previous periods. We have reached 1.1 million year-on-year, 11.2% growth year-on-year and 18% in health insurance clients year-on-year. And the highlight here is that beginning in the first quarter of 2021, approximately 10% and in the last quarter an increase of 25,000 lives, showing us that, in fact, the growth has been constant throughout the third quarter and speeding up.

In the next page, another topic already mentioned by Celso, the loss ratio. Now this is because of the return of elective events, which is, of course, very healthy through time. A lack of elective events in the last few years could bring us a more severe case that had an impact on the loss ratio. And additionally, what's predominant in our operation is that we are in Sao Paulo, and we are able to follow-up on the number of hospitalization, on the cases. As the vaccination progresses, we see a decrease in the number of cases and hospitalization. This quarter already, going from 170 million to much lower figures.

And as everybody knows, as has already been announced in Sao Paulo, we have not had any thefts in the last few days. If everything remains as it is, if these good news continue on, we can understand that we will have a gradual return of the loss ratio to the normal levels, to a situation of normalcy.

It's interesting to highlight the civic issues. We had a loss ratio of 78%, 79%. The loss ratio in this vertical was quite competitive if we compare ourselves with our larger peers. Now throughout the period, since the beginning of the pandemic, we can see that it has gone down, it has returned. And throughout the cycle, we remain with the same loss ratio. It is important to bring you that vision throughout the period. It is a more realistic vision that the quarterly vision, which is a onetime effect. And we see what happened in the second quarter of 2020.

And now -- I will now give the floor to speak about the financial business vertical.

[Marcos Loução, executive]

Well, here in the presentation, we have separated this into 2 blocks: Credit products and others. Well, in terms of contracts, we had 3.4 million contracts, a growth of 11.3% year on year with 2.9 million. We had a growth in credit cards. We continue on with our strategy of increasing the customer base for credit card. And so this gives us an opportunity to present other products in the company. We still have a very strong generation of revenue, 14% vis-a-vis the second quarter and 28% vis-a-vis last year.

A highlight to credit card revenues and Consortium with a growth of 29% vis-a-vis last year. In terms of the accumulated amount from revenues, it's BRL 1.5 billion compared to BRL 1.1 billion last year. Our result this quarter was below the BRL 100 million of last quarter because of a specific credit portfolio of vehicles and because of the service. But of course, we are following-up on this very closely, and we are ensuring that it goes back to its normal levels for the fourth quarter. But this is not outside of anything that we have observed.

When we observe the accumulated result, its BRL 298 million compared to BRL 179 million last year. If we speak about the credit business, which is a business where we analyze risk and we charge an interest rate to be able to manage this, especially in our credit portfolio, we have BRL 12.5 billion, which is quite important for us. This is where most of our revenues come from and we are able to monetize our contracts. This portfolio has BRL 8.4 billion of purchases of credit, we are referring to credit card, BRL 1.4 billion, exaggerating a bit in the revenues of what is paid for in installment within interest and a highlight for the funding and loans of BRL 2.7 million in the portfolio. Now this funding portfolio, part of this refers to vehicles, 90% refers to vehicles. We have grown very well in that portfolio, and we have been the leaders in vehicle funding of almost BRL 1 billion.

Now the highlights for this quarter is BRL 2.7 million in cards ready-to-use that are very important for us. This is a short-term measure. Clients that make one transaction per month represent 16% of our revenue, is a very expressive figure. We have an addition of 10,000 credit cards this semester. We have others using other sales alternatives, total transaction amount of BRL 10 billion this month and BRL 27 billion for the entire year. This quarter, we had 17 million transactions with average values that are quite high and that, of course, aiding a bit our revenues.

We also had the implementation of our app. We presently have the SuperApp that brings together the credit card and autos. We are able to present our products in a more organized way to consumers. We have 90% of our customers who already have financial experience, which points to that opportunity of being able to speak about other opportunities. In PIX, we are leaders, and it represents 20% of payment for credit card. This, thanks to the release of the limits instantly, and we are attempting to, once again, enhance the experience of the user that has been very successful and to enhance the quality of our services and extend this to the financial products as well.

If we look at the characteristics of the credit products, we have financial allocation solutions that I have included in credit because of the analysis that we carry out. We have BRL 19 million in this portfolio that we are able to guarantee. BRL 17 million are allocated to warranty for lease, and we are leaders in this segment in Brazil. During the pandemic, we advanced a great deal with the product that presently refers to 37% of the release that we have in the lease business, and it makes us very competitive with our customers. We have a portal for the announcement of real estate called [ OYO Magical, Magical Eye ], where we have several partner companies, and we are able to better compete with other solutions for lease. We have 15,000 buildings already registered and several million more to include in the platform. And of course, these are initiatives that enable us to speak about the products that we have in terms of finances. And presently, we have 15% of these active real estate cards and buildings available for lease.

In the next page, to speak about capital accumulation business, where the customers make deposits and trust in the Porto Seguro management. And this is extremely important for us, thanks to the profitability and the potential of the market. I'm referring to the Consortium, where we have a credit portfolio of BRL 30 billion. It grew 35% vis-a-vis the last year. We have 80,000 clients in the vehicle Consortium portfolio and 19,000 in the real estate Consortium, an important characteristic that we have identified and that draws our attention is that we continue to grow very well in the sale of the Consortium. And we carry out a credit analysis. This is what the market does. And we have lower voluntary cancellation, which means that we can contemplate ever more clients. And this is what gives a positive image to the Consortium portfolio.

Now to speak about capitalization that has a unique bias in the market. Basically, it guarantees the lease. The amount is made profitable. And if there are no debts with the owner, the leasee will receive his money back. Now this portfolio has had a growth of 27%. Now because of this combination of products, we have a range of offerings for the client in terms of lease. And I think we have the most complete portfolio when it comes to guaranteeing the payment of the rent for the landowners.

With this, I conclude the financial business vertical and I would like to refer to the services vertical. We have been preparing for 2 years to work with a subscription. We have a broad range of products. We are working with 38,000 clients that have contracted our services for home repair, technical repair and others. We have a revenue of BRL 92 million with a highlight for Carro Facil and active contracts of Reppara. Now less important than the revenue is the breakeven of these operations.

Now thank you very much for your attention.

[Unknown Executive]

Thank you, Loucao, a good day to all of you. We're now going to speak about investment performance. Now for the quarter, we have 1.60%. And it is marked by the excellent performance of our securities indexed to the IPCA. And this time, the IPCA is quite high. And we have also made investments in variable income. This portfolio has had a drop of 12%.

What is important is that this insurance always is based on a longer term. And the goal is to have a better diversification in our investment portfolio. Regarding our movements for this specific quarter, we had a reduction in our investment. You'll see that it is returning to the levels of the fourth quarter 2020. And with the new parameters of the CDI rate, this assignment means that we're going to increase our post fixed investments. And we have increased our -- well, we had a drop from 6% to 4% in investments in variable income. And once again, we are impacted by the drop in the Ibovespa indices for the semester.

[Roberto de Souza Santos, executive]

On Slide 18, and this is Roberto Santo speaking to you again, referring to ESG. I would like to present to you some of our social initiatives for the quarter. Highlighting some of the projects that are focused on education. In September, the process to return to classes began again, areas such as IT, beauty and handicraft sponsored by the Porto Seguro Institute. And we expanded the programs that increase the employability of our students, our project. Entrepreneurship school offers free technical training and sewing and works as an incubator to generate income. We launched a new catalog of products called Bora Ser Feliz, Let's Be Happy. And the invoicing was returned to the entrepreneurs of the program.

Another highlight is the program Acao Educa that began to operate beginning in August, bringing back to the classroom 170 children in a situation of vulnerability in the region of Campos Eliseos, which is where we have our offices. The classes have come back with all of the safety protocols against COVID-19, and we have also had remote classes where children are still at home.

So these have been the main operational, financial and ESG aspects that we wanted to underscore in our presentation. We can now go on to the Question-and-Answer Session.

[Operator]

[Operator Instructions] I would like to ask Kaio Prato to begin with his question.

[Kaio Penso Da Prato, analyst]

This is Kaio Prato from UBS. And I would like to speak a bit more about the auto insurance performance. In truth I have 2 questions, let me post the first one. That refers to the loss ratio. There was a growth year-on-year and you mentioned this in the presentation. And this is because of the return of the traffic after COVID. I would like to know that if additional data base you have seen an impact of the [ FIPE ] pricelist or these impacts will appear going forward in the coming quarters and which is the loss ratio level that you foresee for the coming year?

[Marcelo Picanço, executive]

Thank you, Kaio. This is Marcelo speaking, and thank you for the question. The impact of the FIPE list price is relevant when it comes to vehicles. We have had one of the greatest increases of 20%, the highest in more than 20 years. And of course, this will have an impact on pricing. This is already impacting the loss ratio as of now. Now looking forward, not only this has been included in our new pricing levels because when we capture this, well, last year, this was not there. But lately, it has been included. Now on the other hand, we see an increase in average premium, that is very interesting going forward. The entire market has a great deal of movement in terms of prices. The increase in average premiums will bring growth and perhaps a more normal situation. Perhaps not normalization because there is a short term pressure, but all of this will be diluted when it impacts most of the portfolio. Yes, we do have the FIPE price list impact. There will be a normalization of loss ratio. Well, we can't compare with the year 2020, where we had very limited mobility. The comparison is almost impossible. But we still have a very interesting profitability level for 2022. Now the impact of the FIPE price list basically happens for total loss and theft and robbery. The spare part change has been lower. It could have a stronger price increase going forward. This has already been included in the price because of the new dollar exchange. But this has not been happened yet. If I could add an important point, this impact on the past portfolio is somewhat softened out by a positive impact in the evaluation of your inventory that can be used for sales. And you are assessing this based on the same indices that you use for your indemnity portfolio as well. So there is a positive look upon the increase in the price list of the FIPE. But we're also looking at our expenses and operating expenses.

[Kaio Penso Da Prato, analyst]

Secondly, referring to the premiums that you have already mentioned, there is a new price because of this FIPE price list. If you could give us a general overview of what you're expecting the coming year in the sale of new vehicles and the competitive scenario as a whole? If you have already seen this movement of a higher price in other players at present? And what it is that you expect the coming year as the scenario will be more challenging with the higher interest rate that will favor those that are more aggressive?

[Roberto de Souza Santos, executive]

Kaio, first of all, and as a fact, the price increase is already happening and has been happening for the last 2 or 3 months. And there are several players that have been under pressure. Even during the pandemic, the pandemic did bring about a certain bonus. It was greater for us on the average of the market. And the market has undergone a great deal of pressure and is acting quite rationally, which is one of the positive sides. We look upon this with optimism. The market is rational. It has pricing that is being restated because of the FIPE price, spare parts and an increase in mobility. On the sale of vehicles, there is an issue of supply. There is a very important demand that would like to buy vehicles and people are searching for vehicles. And perhaps because there was a forced saving, people haven't spent on traveling, going to restaurants, or services. Now once again, people want to spend on durable goods. They want to refurbish their homes. And we have had an increase in residential services because of this and this search for vehicles. But worldwide, in the supply chain, there is a scarcity of chips of semiconductors. And I think we will see the true impact of this going forward. We truly can't say which will be the amount of growth in new vehicles, and we're monitoring this with a number of associations. But we are optimistic for the year 2022 in general. This is what I can say.

[Operator]

The next question comes from [ Matheos ]. Perhaps he had some problem. I will continue with the next person on the list. [ Antonio Aggie ], you can pose your question, please.

[Unknown Analyst]

I have 2 questions on my side. One, referring to health care. If you could better explore your strategy, were highly involved with market strategy of more verticalized players and some have a semi-verticalization or virtual verticalization. If you could further explore your strategy, that would be interesting. A second point, an update on the integration initiatives of the portal applications to facilitate cross-selling. You had almost 15 apps at Porto and how has the cross-sell index evolved?

[Unknown Executive]

Thank you for your questions, Antonio. I will respond to the first part of the question. It's important to speak about the moment for the health care vertical. It is a moment to structure this vertical for the growth. A growth that we observe and for future growth. We have made significant investments in technology and processes and personnel in the commercial area, significant investments because of this future view that we have of an accounting growth. Now from the objective viewpoint to respond to your question, our vision is that this growth will not go through hospitals or outpatient centers. Well, they are important, without this vision of verticalization, but we do believe that the interconnection between different actors is important for this scenario. And what you call the virtual verticalization is also very important. It is based not only on a different model. We have just launched [ Saude Mais ] which is primary attention, the door of entry to a physician and health care. And of course, it is connected into a chain offering a very good journey to our patient. But we have also made investments in technology in the chain that will take place throughout the period. Now to complement what has been said and to speak about the app. We have made the first broad implementation for increasing the points of contact with the customer. This will give us more visibility. We have the credit card, the auto and RE, and the results have been excellent. We see that we have more than 350 partners at present. And we have called this SuperApp in terms of cross offers that we have attempted to work with. We have 3 significant launches that are underway so that we can learn what to do in the following implementations. And these are available for some customers based on any mobile. There is always the best moment of impacting these offerings, and we have tested this in the cellphone. We have 2 additional initiatives, the disconnect card and a consortium. So we're going to, of course, include other products, and we are increasing this. We will have an additional 2 products until the end of the year. Now what we want to do is allow our customers to have a greater ease of access to this app, offering services directly, and we have done this also in the SuperApp. Our project is ongoing. It will remain in that fashion until we are able to add new products and new offerings.

[Unknown Analyst]

Well, simply a follow-up here. Is there a figure of cross-selling that you could share with us? If it has evolved? If it is at 1.3 or something similar?

[Unknown Executive]

We have gone from 1.3. We are presently at 1.6.

[Operator]

We now have [ Matheos.]

[Unknown Analyst]

I have 2 questions. The first refers to your financial results. We have observed EBITDA volatility in terms of the results in pension, particularly. What is it that has impacted the results? I would like to understand the dynamic. This is not a very relevant business when we look at Porto Seguro as a whole. It has generated negative impacts on the results. And secondly, the synergies observed with Cosan, which would be the benefits with this new partner, what can be facilitated through Carro Facil. And if you could speak about the share in the business, considering the competition in the segment of car lease and much more.

[Izak Benaderet, executive]

Hello, [ Matheos, ] this is Izak. When it comes to the impact that pension had, well, basically, some of our plans are indexed to IGP-M, and they had an impact, especially in this third quarter. Now the portfolio that we have for these liabilities was impacted. We have a liability, made more sensitive over this index and everything was impacted by our mark-to-market. Basically, this is what happened.

[ Matheos, ] I would like to speak about the partnership with Cosan announced last week. We carried out a call where jointly we clarified some points. And I would like to clarify that this call is available in IR site, should you wish to have more details. We based ourselves on the Carro Facil operation, included this in the operation. And we truly believe in the complementarity of our activities. Cosan has fuel stations. We work with insurance and other products. And jointly, we will begin a subscription service where Porto Seguro is a pioneer in 2016 and launched the Carro Facil, and we're going to expand all of these services. We think that this makes a great deal of meaning. Both of us focus on mobility, and we're also in the field of taking care of people. And we want to have that opportunity of creating a new model of experience for the consumer in the realm of mobility. We still do not know where we want to get to with all of this. We have an enormous avenue that we still have to cross. It's still too early to speak about this. We're still awaiting the authorization of the regulatory agencies.

[Operator]

The next question is from Thiago. It seems that we have a technical problem with Thiago. We do have another question here from Guilherme.

[Unknown Analyst]

My doubt refers to something we did not discuss in the financial businesses. I don't know if you have been sufficiently aggressive in terms of your appetite and your growth strategy. There is a concern with the market in terms of the economic cycle, the indebtedness of families at very high levels and with the increase in the interest rates, limited expansion of the salaries, and this is a reason of concern going forward. So how are you going to balance your risk appetite for the coming year? Obviously, this is an important vertical for you, and the focus has been growth. So how are you weighing this risk going forward?

[Unknown Executive]

Yes, we follow-up very closely on the problem of indebtedness, on default, the problem of inflation, of course, and the interest rates. More specifically, we do have a different characteristic if compared to the market as a whole. We have a very large aquarium here, a selected aquarium of clients so that we can continue to grow. And in Brazil, very few people have a car. And the people that have cars, not all have insurance. And very few have insurance with Porto Seguro or other brands, where we have a strong analytic characteristic. And we believe that we can continue to grow and occupy a space that would be an alternative for these more qualified clients, for those clients who still have a slight reserve to burn, not comparable to the bottom of the pyramid. So we're going to adjust our collection models. We're going to make price adjustments, but always with a focus on growth. We're going to work with funding that has guarantee, especially in vehicles where we have broad experience of the behavior of customers and variables that involve the purchase of a car. We have several businesses that help us a great deal in following up on the macro economy. One of these is the credit card. We know where people consume and how they consume and how they make their payments. We have statistical models that will help us go through this period without moving away from our strategy, which is to continue to grow with attention, with caution, but always with a focus growth the coming year.

[Operator]

The next question is from [ Daniel ].

[Unknown Analyst]

Well, first of all, we have observed a greater share in the sale of used cards vis-a-vis the new cars. I would like to gain an understanding if this will impact or benefit Porto. When it comes to the aging of the fleet or if you will have a greater penetration in used cars vis-a-vis new cars, how can we follow-up on this going forward?

[Marcelo Picanço, executive]

This is Marcelo Picanco. Thank you for the question. We have a very large inventory of vehicles, BRL 5.8 million. But this is a transitory phenomenon and we think that there -- the mix will be important in this case. Despite this, we do have solutions for each case. We have a broad range. We have premium vehicles, 0 kilometer vehicles. We also have master vehicles, which are the older vehicles, cheaper vehicles, the more accessible vehicles. We have vehicles for those who still do not have insurance that work in 2 different markets. So we're well prepared for any change in the mix. But the change in mix, we don't think will be very relevant. And even if it is, we will be well positioned to service this change. It won't impact us. We're not a company that works with niches, although we do have the Porto brand. We're not a company that works based on niches. We have vehicles that can service all the different segments, from commercial to others.

[Unknown Analyst]

Congratulations for the results.

[Operator]

We had a problem with Thiago's audio, but he did send his question through WhatsApp. Thiago is from BTG Bank and question is the following: The premium readjustments in the auto segment. How long will it take to have an impact on your G&A? Is this for the coming quarter or more for the year 2022?

[Marcelo Picanço, executive]

Thiago, this is Marcelo once again. It depends on the composition of the harvest. We're speaking about 12 different harvests or groups. Now to become more relevant, we have to go through more of these harvests. I think this will apply more in the first or second quarter of 2022. In 2022, it's too early to speak about that so that it will have a weight on the 12 harvests that are part of the same fund. It's still too early.

[Operator]

And to complement this Picanco, Thiago also has a second question that refers to risk and collection models that you have mentioned and the pricing of these models. If the greater use of technology is already helping you or is this something we will see in the future?

[Unknown Executive]

Yes, they are already helping us. This is our work. It's a core competence. It never ends. It's endless. These are new sophisticated analysis that we continue to do to maintain our competitive differential. All of this leverage by the volume of data that we have, 5.8 million vehicles. The scale is enormous. If we put it in operational terms, it's a skill that fosters intelligence. And this skill helps us to foster intelligence. We have already applied this and it generated an enhancement in the relationship between the loss ratio of the group and the loss ratio of the market in the period of the pandemic. Simply to add a point here, all of that technology, the digitation of prices is applied not only to prices, but also in the risk sector. This is a very important factor to have a more appropriate loss ratio.

Very well. And because of the time we are getting to the end, we will allow for one more question. If anybody has a burning question, please send it to us to [ [e-mail]. ]

[Operator]

[ Antonio, ] you are welcome to pose your last question.

[Unknown Analyst]

Thank you for taking one more question. Simply a detail. If you could speak about the nonrecurring impact for this quarter.

[Celso Damadi, executive]

[ Antonio, ] this is Celso. Thank you for the question. Now this is a cost that we had in our balance sheet. I and [indiscernible] on the share of manager, something that we discussed a short time ago. This is a process of BRL 400 million, somewhat more that was opened up by the internal revenue with significant discounts, almost 50% of discounts to adhere to the fees. Now if we look at the outlook and the jurisprudence that we have been following on. We did decide to adhere, and there was a net impact on taxes of BRL 144 million for the quarter. Now we took away some liabilities for possible losses that were part of our balance of a bit more than BRL 400 million. So going forward, we may still have an impact of BRL 400 million. We could have won this cause, but jurisprudence was showing us that the possibility of losing was greater than the possibility of winning. Because of this, we adhered to the head fees with an impact of BRL 144 million non-recurrent.

[Operator]

As mentioned, we will now end the Question-and-Answer Session. I will return the floor to Roberto for the closing remarks.

[Roberto de Souza Santos, executive]

Once again, I would like to thank everybody that participated in our conference call. I also thank you for your contributions, for the questions and of course for your interest in Porto Seguro. Should you have any additional doubts, please visit our IR page at ir.portoseguro.com.br. If you prefer, you can directly contact our IR team. Thank you very much.

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