Qualicorp Consultoria e Corretora de Seguros SA

BOVESPA:QUAL3

Earnings Call Transcript 2018-Q2

[Operator]

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Qualicorp's conference call to discuss the results for the second quarter of 2018.

We have with us today Mrs. Grace Tourinho, the CFO and IRO; and Mr. Pedro Henrique Rocha Nocetti, IR Manager. This event is also being broadcast live via webcast and may be accessed through the website, http://www.qualicorp.com.br/ir, where the presentation is also available. This event will be recorded. [Operator Instructions]

I'll now turn the floor over to Mrs. Tourinho, who will start the conference call. Mrs. Tourinho, you may proceed.

[Grace Tourinho, executive]

Good morning, everyone, and thank you very much to participate in this earning's call. You, who have been our investor for some time, know that this is the most challenging period for the company, between July and September. This is when we adjust most of our clients, accounting for almost 90% of our revenues and 83% of the [ light ] in our portfolio, and we make the readjustment precisely in this period. Thus, I would like to start this call by giving you an overview of this period.

We have set up a project involving all areas of this company. We have proactively communicated the annual readjustment to our customers, and for each one of them got additional downgrading offers so that they could migrate if needed from one plan to another. We have developed also products together with the operators in order to be able to properly meet the needs of our customers in this period in order to make available more affordable health, insurance plans in cities such as São Paulo, Brasilia and Salvador in the same format we already had in Rio de Janeiro. This product, which are available in our retention to date, will also be in the market starting in September 10 in order to enhance our sales force.

It is important to highlight the performance we had already managed to achieve in July 2018 even with an average raise annually by 17.7%. And with that, we could improve our performance vis-à-vis the previous year by 35% comparing the same period in 2017.

Regarding August, we have partial results. Of course August hasn't ended yet, but it's very close to what we had in July. Just to remind you in August 2017, we lost 32,000 lives that was in 2017. And at least, the first 16 days of this month points took the same percentage, 35%. We continue to work in order to deliver the best value possible to our shareholders, and our focus today is to focus -- our focus today is to retain our customer.

I'll give the floor to Pedro, our Investment Relations Manager.

[Pedro Henrique Rocha Nocetti, executive]

Thank you, Grace, and good morning, everyone. I would like to start on Slide 4, talking about portfolio. I think the first highlight here is improvement in the churn level, where we finished the second quarter with 94,000 lives leading the company. I think that we have started to point that out in the previous conference calls that the competitive scenario was more favorable. And that the retention work with new products in key areas, as Grace has mentioned, has already started to provides some results. So when you compare with the first quarter of this year, we see an almost 4% improvement. And when you compare with the second quarter of last year, we have an even greater improvement. We have to highlight that in the second quarter of 2017, we had people leading the portfolio because of the internalization of the health club. But even taking that into account and whether making the comparison, we have an improvement of almost 50% on the churn level when compared to the second quarter of last year.

Regarding gross add, it's growing in the sequential comparison, as it's important to say here that we have total sales in retail with the day-to-day sales by Qualicorp. A result not only of the products but also all the enhancement in sales campaign. So all these initiatives taken by the company have starting to show results, but we always want more, of course. But anyway, we have already started to see some response regarding all the work we have been doing.

It's important to mention here that Health Club segment, 27% of sales in the second quarter 2018. And before I talk a little bit about our small and medium-size businesses and TPA, I would just like to add to what Grace has mentioned. Well, now it's a time to be very close to the customer, providing alternative affordable products and investment in good service. So we are very confident for the second half of this year. The first indicator points to be clear improvements, 35% in July; August, between 30% and 35%. I also think the scenario is more favorable, a better readjustment than last year that is present between readjustment -- a different portfolio is better. We don't see any readjustment way above the average, then all of these leads to better retention and contributes to a portfolio performance that will be better in the second half of this year when compared with 2017.

So TPA, not much change, the changes in the annual comparison are due to closing TPA contracts, as has been mentioned in the previous quarter, and also increase in the small and medium businesses portfolio. It has to do with one acquisition, as we mentioned in previous call.

In relation to corporate contract we had a reduction of 430k lives. We closed a contract but not much impact on revenue for the Qualicorp. So this is not a trend of worsening in the corporate segment and other segments, as I'm going to mention in the next slide, Slide #5, talking about net revenue. And here in the first quarter, we have been reporting revenue based on IFRS 15, where we no longer have recognition of revenue of royalties by contract, so what we used to include or report in revenue. Now we are reporting in net cost regarding what we get in terms of royalties. Regarding the revenue itself, we have a small -- BRL 483 million, a slight reduction when compared to the annual revenues because of a smaller portfolio and a small increase because of the brokerage revenue we received.

Now going to Slide #6, talking a little bit about cost. Gross margins grow -- grew in the annual comparison. Here, we can capture -- we could capture some value regarding expenses with personnel and royalties. As we can see, this decreased in relation to the first quarter. This is very much relative to cost-led payroll, particularly payment to executives. Some is [ based on ] in cost centers and services provided and also greater cost with medical services to employees, and Qualicorp pays for medical expenses of our co-workers.

Slide #7, talking a little bit more about administrative expenses. That increased when compared to the previous year, so it increased around 15%. When comparing with the first quarter this year, an increase by 16%. Here, I would like to say what impacted most this line, the second quarter of 2018. We have payment to executives, nonrecurring increase in coworker's medical expenses, as was the case in the costs, leading to an increase in PPR 2017. And we paid PPR in April after closing the balance sheet of the previous year. Since we make the statement, we calculated all targets, not only overall targets of the company, but also department target and individual targets for every worker. So we make the adjustment, and maybe we can pay some more than was forecast. And sometimes these expenses, where personnel in the second quarter goes a little bit up because of this profit-sharing program.

Regarding payment to executives, I'd like to clarify one thing here. It happens because we no longer have the stock-option program in this company. We don't grant -- we haven't grant new stock since February 2017. The company, as have been reported before, have put together a new program for restricted stock, and this program is a great tool, and actually it's been approved in April. However, in the past 12 months, we didn't issue any new stocks, and we don't grant any new stocks. But the company paid some bonuses to executives, but I said this is not a recurring payment. This plan was approved in the last assembly, and we will use it as a tool to repay the executives.

Regarding increase in other administrative expenses, this is very much related to regulatory contingency. The graph below shows the trend in administrative expenses. The reversal in the trend is very much related to nonrecurring expenses. So the company followed its guidelines to rationalize expenses, increasingly more efficient, and this hasn't changed. This is still the same.

Now let's look at selling expenses, Slide #8. Here, I remind you, once again, the impact of IFRS 16. We are no longer recognizing commissions in sales competence, and this applies to internal and external sales team, and we capitalize amortization for the period of 24 months. In order to guarantee comparison, we maintain amortizations inside selling expenses. And if we consider these commissions as expenses, this would be BRL 60.7 million second quarter 2018 compared to BRL 14.9 million in the first quarter this year and BRL 18.8 million in the second quarter of 2017. Regarding third-party commissions, these are just recurring commissions. And co-brokerage is a policy we have, which is linked to the sales-channel performance and annual reduction, and sequential improvement will be related to the performance of our sales partners and how much we will compensate them in order to, be better for the company.

Now I would like to talk a little bit about sales campaign. It's something we have been working on, and we are once again investing more heavily. We have been doing so in the past few months. So investments have been made, and the reason why you don't see any change in this line, particularly when comparing with previous periods, is because we understand that these campaigns modeled since in passage of IFRS 16. So it's a campaign model, and the compensation is fully linked to new lives. Because it's our commission, thus, we decided to activate BRL 6.5 million in awards or compensation second quarter 2018. So they will be active in the next 24 months. The same we do with sales commissions. The methods for the future now. Our sales force is in the engagement of a brokerage, and we are not afraid at all to review it and, if necessary, increase, enhance our onward policy, provided this will bring us lives that will be profitable for the company with business review earlier this year, and we can do it again if we think that this is strategic.

Having said all that, I would now give the floor back to Grace, who will talk a little bit more about allowance for bad debt and other financial highlights. Grace?

[Grace Tourinho, executive]

Thank you, Pedro. Going to Slide #9, bad debt. So we have as the basis IFRS 9, and we started to report not only actual losses but also forecast or expected losses based on the history we have of the fourth. So allowance for bad debt is stable when compared with the first quarter. However, it's gone up when we compare with the same period of the previous year 2017.

Now our analysis, what can we see here or highlight as a worsening, the Aliança segment. Actually, it has been getting worse, particularly because of the exposure of most, again, the customers are members of public organizations. And they are having a hard time making payments in some areas of Brazil, and we have had more allowance of bad debt in this part of the business. And this is related to the current economic hardship in some Brazilian states and in some Brazilian cities. I would also like to highlight the work we have been doing in order to try to recover credit from customers given discount and making campaigns in order to have the money returned to the company, and that has already helped us recover over BRL 12 million in the first half, 48% above of the recovery of the same period 2017. I understand that for the remainder of this year, our retention work will be extremely valuable for us to improve the allowance for bad debt. If by keeping customers with us, preventing the impact of default or nonpayment.

Going to Slide#10, financial income. This is a little bit of what has been happening in the previous quarters. Starting October 2017, we started to charge 2% fine for a delay in payment. We used to charge 10%, and this is one of the reasons why we have had a decrease in our revenue compared to the annual numbers.

Regarding investment, we had a reduction in SELIC, the basic interest rate, and this impacts our debentures.

Now regarding financial expenses, if you recall, we had part of the debt or payment of acquisition of Aliança, which is to be readjusted. It's -- now because of the payment in 2017, we will not have that in 2018.

Regarding interest rates on debentures, we make payments in the second and fourth quarter every year.

Now Slide #11, EBITDA. Here, we had a drop in the margin in the quarter, which is basically related to occasional expenses with personnel, as mentioned previously by Pedro, and also operating expenses gained particularly at retention of customers, which have and will probably still have a positive effect on our churns. I highlight that we still focus on having an efficient company with a lot of room for further improvement.

Going now to Slide 12, net income. They're comparing second quarter 2018 with the second quarter of 2017. Here, we have to mention that we had this 24% decrease in the year. It is due to the great impact of Potencial last year. Our tax rate closed the second quarter 2018 in 36.5% against the second quarter 2017 when the rate was 37.6% and 37.3% in the first quarter this year. And the tax rate is too high for the level we want to achieve. We have been working inside the company so that we can reduce this tax rate. I think that in the next quarter, we will see some improvement in this tax rate. This will probably presented on the next quarter.

In the past quarter, I talked about corporate restructuring and opportunities to add or deliver value to our shareholders. By the way, in June, we approved a change on the bylaws of the controlling companies. Now we will have brokerage activities as part of the holding quality, Qualicorp S.A. These opportunities are still here, and the company will work on them in order to deliver the maximum value to the shareholders at the right time. The current cycle requires total focus on administering or managing customers not only to retain the portfolio but to start growing again.

Slide 13, CapEx. In May 2018, we basically signed a contract with Hapvida, BRL 10 million, in order to get preference right in the selling of health care contracts for 5 years.

Regarding the net debt, which slightly increased in 2018, and it's important to highlight that we have used our additional cash to pay and anticipate the dividends to our shareholders. In the first 6 months of the year this year, we have already paid out BRL 355 million dividends to our shareholders, accounting for almost 7% of the yield for this period in the annual value.

Slide 14, cash flow. After CapEx of over BRL 83 million in the quarter, considering expenses with personnel, payment of the batch of interest when compared to the second quarter of 2017, improved over 20%.

I would like to thank you all very much, and now we will open up for questions. Thank you so much.

[Operator]

[Operator Instructions] Rodrigo Gastim from BTG Pactual would like to ask a question.

[Rodrigo Gastim, analyst]

I have actually 2 questions. The first one, Grace, in the point, we started talking about -- you said you have seen improvement in churn in July and early August. I'd like to understand that better based on this 45 days you have. What changed in your view for the second half? I know it's early to talk about the second half that this improvement in churn -- what are the outlooks you have for the second half? This is the first question. Now going to my second question. How do you see the average ticket account? If we look at the consolidated, we improved the average ticket because of the downgrading and change in the mix. Could you please help us out in this regard, negative improvement in volume because of new product and downgrading, so how that will impact the average ticket and how this will impact the company as a whole?

[Pedro Henrique Rocha Nocetti, executive]

I will start, and then Grace can add to my answer. Regarding the second half, we see a significant improvement regarding last year. But of course, we still have a long way to go in the second half. Last year August was a very tough month. We lost almost 32,000 lives. However, it's been pointing to an improvement ranging from 30% to 35%. I believe this may remain forward because we have some products that only started [ here with patients ] channel, and now in September, they will be offered elsewhere. And maybe we have some maintenance on the sales pace or maybe we can have an -- have -- even have increase in sales. So we have a much better trend than last year, which doesn't mean that we will not lose lives. What we are estimating here is that we're to going lose much less than was the case in the second half of 2017. Now going to your second question. The average ticket dynamic is strongly impacted. We changed this readjustment process slightly. Now we have an active offer of products to virtually all customers that were getting this readjustment, this raise in price. And with that, you increase movement for the portfolio as a whole, and we have made retaining most of these customers due to downgrading. So if we are talking about a lower rate in prices or readjustment in prices, we are talking about a readjustment in average ticket that is lower than was the case last year.

[Rodrigo Gastim, analyst]

Okay. I got it. Very clear. Well, this improvement you started to see in July and are seeing in August and that you expect to see over the second half of this year, can you try to share with us how much is this related to a macro improvement in the margin or if this is due to the fact that, for this year, you have many different products, downgrading products? So how much of this improvement comes from one factor or the other factor? Could you say that?

[Grace Tourinho, executive]

Well, actually, I can show you what we feel. What we feel is that this improvement is because we have made available more affordable products to our customers. And we -- in July and August, we see a greater downgrading. We have more downgrading. That was, used to be the case before. We have a higher level of downgrading. This is stronger in our company. And the feeling we have is like customers do not want to stop having their health insurance. The thing is that often, they are not able to pay it, and this is what we try to build together with our operators, together with our partners and what we managed. Well, it's not still what we wanted. We wanted to have affordable products in every place where we work. But at least, we got to have this more affordable product in 80% to 90% of the places where we operate like São Paulo, Brasilia, São Paulo. And in Rio, it's doing well. I don't see this as an impact of improvement in the macroeconomic scenario. But we hope that this improvement in the macroeconomic scenario will take place after the presidential elections starting in January. But we cannot just cross our arms and just stop the macroeconomic scenario to improve. We cannot do that. We have to try to give alternatives to our customers with better service, be better prepared, with better trained people. So an effort was made. The huge investment was made by the company so that we could really retain and maintain our customers. This is the big focus now, but I don't see yet a real improvement on the macroeconomic scenario that helps us. When this happens, when the macroeconomic scenario gets better, this will be very beneficial to our company.

[Operator]

Luciano Campos from Bradesco BBI would like to ask a question.

[Luciano Campos, analyst]

My first question is related to the raw material behind the work you do, the products for retention and future growth and the relationship with the providers of this product, which are health insurance operators. We have been talking to many of these operators, even with big operators, and they mentioned an interest in providing more product, with more affordable products. But on the other hand, they say that they have to have a new pact, so to say, regarding brokerage. This is one aspect. And the other thing, when we look at your numbers for the second quarter, making it pretty straightforward comparison, brokerage revenue by member divided by the administration rate by member, we see a change. It used to be 47%. Now it's around 41%, 42%. Could you please, Grace, if possible, say something about it? If that is strange on the market, having a better offer with more products in exchange for a change in this brokerage relationship? And secondly, if this will have -- or if this has had a change -- or it has had an impact, sorry, in the numbers we see in the second quarter, this change in brokerage rate?

[Grace Tourinho, executive]

Thank you for your question. First, I would like to show you the scenario. Actually, brokerage revenue Qualicorp has in the market is one of the lowest brokerage revenues when compared to the market at large. Just to make this very clear, actually Qualicorp has a default nonpayment rate so it covers operating expenses, 7 days acceptance, all the documents. Many -- all the [ ramp date ], all the bureaucracy is here, and we get the same amount of a regular market broker. This has to be made very clear, no? Qualicorp is open to have new products, more affordable products. You shouldn't doubt that. As I have been talking to you, part of the revenue regarding brokerage, it's important to look at it as a whole between brokerage and the brokerage we have within the administrative company. If you look at this thing as a whole, we see that we decreased a little bit in the broker, but it's been growing in the other end. This is -- well, we work together with the operator, right? And particularly, we are really -- if this brings improvement, so that we can grow again. But we will try, whenever possible, to keep our brokerage [ margin ] as a whole. So don't look just at our brokerage revenue, but look at it as a whole. This is important, right? So it's an equation we have in our company. So usually, other side is offset. Did I manage to answer your question?

[Luciano Campos, analyst]

Yes. Can we be optimistic with this new product? Or it's still too early to say that we will really have more products be made available?

[Grace Tourinho, executive]

I have to be frank with you, thus, for you to understand. In the past, we used to have the credit in Rio de Janeiro. We work together with the operators only after almost 3 years after the launch of this product. We were able to relaunch it in Brasilia, São Paulo and Salvador. We tried to have partnerships with other operators, partners who are willing to enter into this market with a lower ticket particularly in the hard macroeconomic scenario. But it's not that fast really. And the difficulty operators have, which we understand, in that we will have a market like hospitals, clinics, labs you have in Rio, they are different from the ones you have in São Paulo, which in turn are different from the hospitals, clinics and labs in Salvador. It's not easy for operators to bring more affordable products to the market. So what -- so the difference is based where you are going to be seen. It's not easy, but anyway, we have been working very hard in order to make more products available. And I think that when one operator launches this new product into the market, the others will follow more quickly. So we have that movement. That's for sure. And another important thing to highlight here is that we have a movement in the market, which is I cannot prove yet. We have to wait a little bit. But anyway, we have a movement, particularly by hospitals. I think hospitals are more partners to the operators there now because hospitals want to have many patients in their hospitals. They have a lot of installed capacity, and the hospital-installed capacity is not being matched fully. And I see that many hospitals, many clinics and many labs are sitting on the table in order to try to get other forms of treatment and visits so that they better serve our customers. I already see an improvement there, and this will help us next year so that we don't have to make a readjustment on average of 17%. So we adjusted that last year. But still, this is a true big raise in prices considering the current interest rates we have in Brazil. So I see an improvement in this direction, and I hope that this period next year, we won't have to raise the price at this level.

[Luciano Campos, analyst]

Another question. I don't know if you look at the figures that way. If you do, maybe you can give me a more quantitative kind of answer. Otherwise, you may give me a qualitative answer. If you separate first group that entered in the company last year, the other group of customers, older customers like associations in another group, older patients of open association. If you look at the term profile of the different group, how do they compare?

[Grace Tourinho, executive]

I don't have that information. We do compare, but I don't have this information here to tell you now. But I can tell you that quickly after this call. Qualitatively, when you look at the past 2 or 3 years, you have a greater share not only in sales but also in terms of portfolio of Health Club. These are lower income customers, and the turnover of the segment is much higher than the turnover of the rest. And where we have some close associations, the profile of the members of this close associations, we have a higher income people there. So the turnover rates are smaller. Now the quantitative answer, we'll discuss here, and we can talk to you later.

[Operator]

Joseph Giordano from JPMorgan would like to ask a question.

[Joseph Giordano, analyst]

I have 2 questions. Going back to churn in this profile of cancellations. You mentioned Aliança, which I think is a portfolio that has a greater number of premium plans than the average of the company. So how is the churn between premium plans and regular average plans and basic plans? I imagine that basic insurance plans have a higher churn. And more than that, in which part of the pyramid do you see more cancellations? And what is the average ticket of customers entries? And how does it compare to the company. When you look at the company, the average ticket has it decreased a lot comparing a year, 2 years.

[Unknown Executive]

Great question. Let me just ask you. Actually, our sales, just for you to understand, in the fourth quarter last year, average sales is above BRL 370; Aliança, BRL 160; Health Club Quali, around BRL 500. And in the consolidated, we are around BRL 400. [ Board ] member for each one of these different segments [indiscernible]. Regarding the portfolio, we have Aliança with BRL 470; Health Club Clube de Saúde [indiscernible] portfolio is around BRL 190; and Qualicorp BRL 750, BRL 730. We just leave that number. In average, in the total consolidated figure for the company, we have around BRL 630 in our portfolio.

[Unknown Executive]

I would like to add the following. Actually, when you look at the Aliança segment, it deals with many publics employees, civil servants, people working in local state government, and with the situation in many different states, not only in Rio and São Paulo. But we have a crisis in many different public organizations, and sometimes employees don't pay because they're not paying from the government, not getting their salaries from the local or state government. That's why sometimes from Aliança, we had an increase in the allowance for bad debt. Now regarding sales, it's not secret. What we have been reinforcing in our offers since earlier this year is more affordable product, and more affordable product has a difference regarding the tickets when compared to the Qualicorp portfolio, which was built with a very solid basis of high end -- high to high end customers, premium customers. So we have this difference, this discrepancy. So in total sales today are around BRL 400 versus BRL 720, and 50% of our portfolio are customers where the premium product 30% of the customer portfolio have around -- account for around 50% of our revenues.

[Joseph Giordano, analyst]

Perfect. Regarding cancellations, people don't have your products again. Well, the cancellation profile is between what is being sold and the stock profile. So the cancellation profile is for medium-income people. So the person -- so this individual, they momentarily lose their income. Or maybe, they are affected with this raise in price, and they are no longer able to pay. So cancellation is more in this average-income-range customers. Are you seeing a migration already to corporate portfolios? Or is it more individuals who are no longer able to pay?

[Unknown Executive]

Joseph, actually, it's much more related to being able to pay the flow to the corporate portfolio. I have to tell you that it does exist. I could estimate it around 20%, 25%, a total of people who just give up, but I don't see such a big increase. This is really much more related to inability to pay. And we have a survey here showing that almost 50% are just giving up and are just going to the public health care system. So they're not able to pay any health insurance, and they just resort to public health care system. So at the right time, if you have a more favorable macroeconomic situation, surely people will return. Because anyone who was in public hospitals, if they see that, if they experienced that, they will definitely, when they can afford again, go back to the private health insurance.

[Operator]

Roberto Otero from the Bank of America would like to ask a question.

[Unknown Analyst]

This is Pedro, actually. Congratulations for the results regarding bad debt allowance. This is higher than expected for this quarter, particularly due to Aliança. Do you have an agreement how the allowance for bad debt will behave within the next period?

[Grace Tourinho, executive]

Pedro, actually this line allowance for bad debt in July -- well, I don't see that there is significant change. What is important to say here is the following. The initiative of having new products and offering cheaper products is in line not only to retain the customers but also try to avoid losing customers because of they don't pay because of default. So what I'm trying to achieve in the second half of 2018 is to no longer have such a big difference in allowance of bad debt as of the case last year. So we are just trying not to have such a big decrease in bad debt in the second half of this year. But we analyze that on a day-to-day, on a month-by-month basis. So far, I haven't seen any worsening of the allowance of bad debt in July.

[Operator]

Rodrigo Gastim from BTG Pactual would like to ask a question.

[Rodrigo Gastim, analyst]

Just another question, talking about future use of cash flow. The company is still generating a lot of cash. It has a robust cash flow, and you mentioned the change of the corporate structure. Could you please give us an idea, a schedule, what are the next steps to be taken if you have an extraordinary payoff of dividend? What are your plans? And what can we expect?

[Grace Tourinho, executive]

Rodrigo, thank you for your question. We are trying to optimize our cash flow as much as possible. Actually, we have anticipated the payment of dividends 2018. BRL 355 million was paid to our shareholders this year so far. Right now, our focus -- our customers -- to retain our customers, our clients. This is our focus now. We are -- we will now incorporate the brokerage company into our holding company. It is within schedule, and the past two days we got an approval for that. And right now, we -- now the holding became a brokered company, and we will have like 30 to 40 days for us to get the revenue from this brokerage company. This is the first thing. And with that, we will probably benefit regarding both because they had a holding company with no revenue, and that will be sold, or this will be sold in the period. Now regarding the next steps, we have been working internally in order to add more value to generate more value. So I'd like for you to know that our focus now is to retain customers. And later, we will go to the second, third and fourth tab, but be patient please because we will be doing that when the right time comes. Let me know if I managed to answer your questions.

[Operator]

Marco Calvi from Itaú would like to ask a question.

[Marco Calvi, analyst]

My question is about these ex-patients in the Health Club in price improved sales. Could you please give me some information regarding the difference in the profile or lives in Health Club regarding brokerage and other things? Tell me how do you see the return from these lives regarding the expansion in your basis vis-à-vis the average of the basis? This is my question, if there is a difference -- a significant difference in the return from these lives when compared to the basis of your company.

[Pedro Henrique Rocha Nocetti, executive]

I will start. Grace can add later. Actually, when you think about the logic, administrations, fees and brokerage, we don't have a very significant difference percentage-wise. Now we are talking life profile here, which is 3.5, 4x lower than a Qualicorp ticket. So your gain per life is smaller. Now regarding how we see this basis of customers, well, this product is very easy to sell. However, considering the profile of who's buying it, considering the target audience, these are individuals who are struggling, impacted by the market. If you have a strike, anything could make them give up the insurance plan. And turnover, therefore, is higher than the basis. No doubt about that.

[Grace Tourinho, executive]

I would like -- just like to add to add to what Pedro said. This is very strategic. This is the first time this individual will ever have a private insurance company, and this is very important, particularly when we -- and this is very important when people -- when we have an improvement in macroeconomic conditions. So this person is entering this plan, and later, they buy more premium plans. So we -- you -- the Health Club in a different brand, it's not Qualicorp, it's a different corporate number so that we work in a different way, delivering value to the company. So I think it's a beginning, and we are working on it differently. And it does generate value and opens up a major opportunity for us, and particularly in strategic turns considering the competition we have in the market. I don't know if I made myself clear.

[Operator]

We now close the Q&A session. I'd like to give the floor back to Mrs. Tourinho, CFO and Investor Relations Officer, for her final remark.

[Grace Tourinho, executive]

Thank you very much for this conference call, and we are all available to clear any doubts, any questions you have. Thank you very much, and have a nice day.

[Pedro Henrique Rocha Nocetti, executive]

Thank you. Have a nice day.

[Operator]

Qualicorp call is closed. We thank you very much for your participation. Have a nice day.