Qualicorp Consultoria e Corretora de Seguros SA

BOVESPA:QUAL3

Earnings Call Transcript 2021-Q2

[Operator]

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Qualicorp's conference call to discuss the results of the second quarter 2021.

We have with us today, Mr. Bruno Blatt, the company's CEO; Mr. Fred Oldani, the CFO and IRO; Mr. Elton Carluci, Sales Innovation and new business Vice President; and Mr. Pablo Meneses, Vice President of Operations and Relationship. Some statements in this conference may be projections or statements about future expectations. Such statements are subject to known and unknown risks and uncertainties that may cause such expectations to not materialize or be substantially different from what was expected. This event is also being broadcast live via webcast and may be accessed through Qualicorp's website at www.qualicorp.com.br/ir where the presentation is also available. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. Ensuing this, we will go on to the question-and-answer session when further instructions will be given. [Operator Instructions]

I will now turn the floor over to Mr. Bruno Blatt. Mr. Blatt will begin the conference. You may begin, sir.

[Bruno Blatt, executive]

Good afternoon to all of you. There are a few things more beautiful to behold in the world that the thrill of victory after a long period of preparation, after a goal attained after a dream fulfilled. Who would we be without our dream. Last Sunday, we celebrated Father's Day. I am the proud father of 2 children that move me to improve the world. I am a dreamer father, not an invasive dreamer willing to decide on the future of my children, but somebody who is present in preparation for tomorrow. I want my examples to be dignifying.

Recently, I saw a film with my children about the life of a Japanese chef [indiscernible]. He has a relationship with his children. He is the best chef in the world in Sushi, he has technique, discipline and passion. Technique, discipline and passion values that we saw stamped on the athletes during the Olympic games in Tokyo.

Behind every tear, behind every smile, there is a long journey, a journey of perseverance, consistency devotion, a dream that doesn't run out in one day. The champions of life side looking forward and never stopping, exercise the crafts of patients. A bolder -- knows that times and times that are more bold a marathon runner knows that there has to be endurance. This lead to victory. And we are as entrepreneurs, athletes endowed with technique, discipline and passion. When we have a goal, everything is easier. When a marathon runner knows the path, they know exactly where they have to go to.

Quali nowadays is a company that makes me very proud. It knows where it is going to. It embraces goals with responsibility and a firm decision. We have a talented disciplined and passionate team. We're gigantic in sales and gigantic and our willingness to help the world become better to make a difference in the lives of people. Our goals are bold, they are grand, but we need time to conquer the medals that will come like athletes without the confidence of sponsors without the rooting of fans without the support in the journey, it is more difficult to overcome our limits.

Our Quali medal is to be an organization where people are proud to work, where shareholders have confidence in investing. This is one more quarter in the construction of Quali, the long-term construction of the company. I'm sure of this because we're within the preparation time for whatever will be necessary going forward. We broke one more record in the Affinity segment. 132,000 new customers that contracted a health plan through Quali, 32% more than the first quarter where we conquered 100,000 new clients. We attained a sales average per month of 44,000 lives and we obtained this goal before we had planned for it with the collective effort of the Quali team. We were absolute champions. We climbed up the podium.

And on behalf of the transparency, I have always had with you, I would like to reinforce that the results in the second quarter, albeit below expectations are part of the cycle of preparation that I'm leading. I am convinced that you will carefully look upon our results. Cold mathematics cannot explain the complexity of what we are doing in this company. We do not think in the short term, we're not going to cut essential investment for tomorrow because of a result that may be more applauded now.

As I said, our team has discipline, talent and passion. This is the most important thing. The internal and external conditions are in our favor in its own time. People dream of having a health plan. And we have a very clear perception that a company like ours that offers several alternatives for access, game space in the life of Brazilian Quali has the goal of guiding people so that they can build and plan in a more healthy way. This marathon is just beginning. I am convinced that I can count upon your confidence. Our team will continue to show what we are doing. And I can guarantee that we have a winning team. We have [indiscernible], and many more people falling, rising again, doing whatever is necessary to never give up when it comes to doing what is correct, this is our individual and collective dream of taking Quali to victory.

I would now like to give the floor to the Vice President, Pablo Meneses.

[Pablo dos Meneses, executive]

I would like to thank you for your participation. I truly like what I am doing here. This is the best task of a human being a task of caring for people. And what we are doing at Quali is for people. We want people to work being happier so that they can feel more qualified because happier and more qualified people can produce more. They become fulfilled and they do more for the company where they work. And this is an investment of our dreams. And to speak about investment, perhaps most of our investments in marketing have been carried out in campaigns that create channels with people to foster our sales.

Now this quarter, we accelerated much, and we achieved very much. However, there is another dimension that we have to focus on, a brand. A brand that has survived through time, something we cannot ignore. And that is why we are investing in projects so that our customers will want to work with us, and we want to continue to be our customers.

We recently ended the Quali quote where we had 90 groups of artists and groups, music or theater, helping artists to overcome this very difficult moment and eliminate that anxiety that they felt. We had more than 10,000 applications and 100,000 applicants as artists, we did conquer the outside audience. But this is the in-house audience that we have to prepare ever more so that they can better service all of our customers. We have invested heavily in the operational area. And I can guarantee that we're in the best phase of the company at this very complex moment of price readjustments. We have to be ready to offer better service, and we have the lowest churn rate in the history of the company.

And we went from 55% to 4% in terms of our churn rate, and this cannot be done without investment, without training, or just work and the work of a team valuing each and every one of the people. And when it comes to resolution, we have 27 percentage points to levels of over 80%, which means that now the customer is able to speak to the company and can resolve everything in the first call. To help people also means to value our in-house processes We have a team for information security because you know that health has been the victim of the attempt of hackers, and here, security is fundamental. It is fundamental when it comes to our internal decisions when it comes to ethics and much more. And at Quali, we have invested here.

Now I would like to give you some data. In the past, Qualicorp had approximately 4 NIPS. And NIPS mean a great deal. They cost money, they wear out the image of the company, Qualicorp suffered the intervention of the National Health Agency because of the NIPS and because of the lack of resolution, well, we have reduced this figure to 1,430, and we can still do much more. What is more important is that we had a resolution rate of 97.80% in the first call.

NIPS are notifications of preliminary intermediation and they are divided into 5 stages. The fourth is the worst. It means you have more notifications and less resolution. At present, we are stage 0, the best. We received less notifications, have a better resolution rate. The market has had the highest accumulated readjustment of prices in all times, most of the complaints come from that. And we have a team now to explain, to tell the proof and to resolve the problem to keep our company comfortable and to keep our customers comfortable in terms of training, I could say a great deal. 17,600 and some training hours. And since we adopted technology for sales we are able to involve our professionals.

As I said, we have professional producing with safety and with productivity. And this is not by chance. It comes from valuing people from building a future. As Bruno said, we know where we want to go. And this helps us to make the correct decisions day in, day out increasing the favorability from 41% to 86%. More than 100% is our goal. And this proves that we go beyond the discourse. It is in practice that we involve people. It's because of the practice because of the attitude that for the second consecutive year, we have received the stamp of Great Place to Work.

To give you an idea, we launched a trainee program at Quali with 13,800 and some candidates for 8 trainee and intern-shaped vacancies. This is highly disputed and this shows that we are on the right path. Now the task is to unite people -- of reinventing people, valuing people. I'm very grateful for the opportunity of putting into practice the concept that I have learned and concepts that here, we believe in concept that I have learned through life that we have all learned through life, and we continue to learn them with our team. Our team has discipline, talent and passion.

I would now like to give the floor to another athlete from our team, Elton Carluci.

[Elton Carluci, executive]

Thank you very much, Pablo. A good afternoon to all of you, and it is a pleasure to be here with you in another conference call for Quali and to take advantage of what was said by Bruno and Pablo, at Quali, we are in constant evolution. We haven't stopped for a second since the last time that we had a call, and I like the analogy with the Olympics. We speak about teams. And when we speak about teams, that is what we do. That is why every Quali, every broker is treated as if they had potential to grow. And through this tireless work with this marvelous team, I think you have observed that we attained a new sales record more than a sales record. It crowns all of the work that has been carried out by Quali. And before speaking of figures, I would once again like to express our gratitude to the entire sales team and a special thanks to Alejandro, our Director, who is a true crack and has a wonder for team, [indiscernible], Nigel, Renato and others. You are making history in the company.

I would also like to thank the operating team under the leadership of Pablo and Fred, of course, for their support. Without their support, the company could never attain this new sales level. It's very important to mention that in the last quarter, we had already shown that we would gradually increase our sales level throughout 2021.

To speak about the presentation on Slide #8, you can see that at that time, we had mapped an incremental potential of 18,000 lives on average vis-a-vis the average sold during 2020. This would raise our historical volume from 27,000 lives a month to something close to 45,000 lives throughout the year 2021. As you have all observed in this quarter, we have already captured 98% of this goal, reaching an average goal of 44,000 lives. So as you can observe in the next Slide #9.

Now on this slide, in the second quarter, you can observe that we attained a brand of 44,000 lives through the affinity segment. This represents a goal of almost 32% vis-a-vis the first quarter of 2021 and a robust growth of 41% vis-a-vis the same period last year. An important point that I would like to highlight and perhaps we will have a question for this in Q&A., as part of this volume, we have 3% of incremental sales to our clients. Although small, it is important, we have changed our strategy, and we're using part of our own team for high-value customer retention. All customers that have high potential are treated by this team, and the results have been very interesting.

As I mentioned, we can explore this further in the Q&A, and we can perhaps give you more color on this. It is important to highlight that we continue to use the strategy of making all -- taking all of the opportunities in the SME segment. This quarter, we grew 7.6% vis-a-vis the first quarter.

For the year, the growth has been 6%. This is an important part in our loyalty strategy. Something we have remarked about our customers have active company, and they work through Affinities. But presently, whenever they cancel the health plan, we maintain the customer in-house generating additional and recurring revenues that we would lose previously. So quarter-after-quarter, we can observe this growth in a constant fashion. This strategy has proven to be very promising, and we will continue to act upon it. I would like to change topics and speak about churn.

We go on to Slide #10, therefore. And before referring to the quarter, it is important to highlight that, of course, we're facing an unheard of situation in terms of readjustment, the accrued readjustment last year and the recomposition made the clients to have an average of 23.2% in their monthly payments, and we can see an improvement quarter-on-quarter. The second quarter compared to the first quarter with an improvement of 8%. We have gone to 138,000 lives, and this readjustment ended up having an impact on 2 consecutive quarters.

When you look at the slides in greater detail, this happened naturally because we had a result that is very similar with 2017. The readjustment was 1.6. And that year, the churn was 2.1. And in the subsequent quarter, the readjustment.

Now this year, the behavior has been somewhat different, especially in the second quarter of '21. But we observed this same pattern when we look at the readjustment and recomposition applied in 2017, we see 12.1% of cancellations and 11% now in the second quarter, very much in line with the level of readjustments of 2017.

In this way, the accumulated churn has led us to having a portfolio somewhat below our expectations in the second quarter. This effect will be noted in the long term because of an increase in sales. Churn will become normal at some point. This is natural, historically. But this new level of sales means that we will be able to put the company in a sustainable and long-term organic growth. This is the good news, and we do have a very interesting sales volume with the potential of increasing this volume. I would now like to give the floor to Fred, and I will join you in the Q&A. Fred, you have the floor.

[Frederico de Oldani, executive]

Thank you, Elton. Good afternoon to all of you. I will begin on Slide #12, speaking about the quarter highlights. First of all, the growth in the affinity portfolio with a growth of 7.3% vis-a-vis last year, driven mainly by the record sales that we had in the second quarter of this year, as mentioned by Bruno as well as by Elton. And we were able to practically offset all of the churn that we had because of the scenario, the complicated scenario due to the readjustments that had a greater impact than expected throughout our actions. We were able to stop that additional churn that we had this quarter, something that is not recurrent, and we believe it will go back to normalcy.

Revenues reached BRL 517 million with a growth of 7% year-on-year, 1.1% below the first quarter '21 as was expected. The only relevant impacts are the evaluation of our portfolio and the downgrade of some products, which normally happens after the readjustment. With this, our EBITDA reached BRL 201 million for the quarter. I would like to remark a bit more on EBITDA in the coming slide. Net income, BRL 19.3 million, 28.4% below the second quarter of '20; and 21.1% below the first quarter of '20. Our free cash flow, reaching BRL 177.6 million, and our ROIC 42%. Our net debt reached BRL 926 million 1.0x adjusted EBITDA, a level that we were seeking. We had mentioned that the leverage should be 1.0, 1.2 net debt EBITDA, and we're on the path to delivering this with a new capital structure of the company.

I would like to speak about the highlights of our income statement. Our entire strategy is to focus on all the possible resources for our growth agenda. This quarter, we ended up investing more than we had planned initially, especially in sales expenses where we accelerated some investments and perhaps it is worthwhile underscoring that our investments in the market will be decided quarter-on-quarter regardless of the scenario, and regardless of our sales performance. We will be more or less aggressive in campaigns, in our awards. And we think we're getting very close to the level set forth as being the new sales level that will take the company to a new level of shares much higher than what we had in 2020. And as we are able to maintain the sales level, they will become recurrent.

Churn will return to the historical level, considering the normalcy of the scenario of readjustments, we truly believe that this is the path for the company to, once again, have a consistent growth in portfolio during the coming years and this will be the main driver of the company results going forward. It has been made clear how important this is for the company to grow again to generate value for the chain. And this is reflected in the figures of the company. And while we're investing to create this new cycle of organic growth based on the new way of being Quali.

I would like to speak more about the quarter. We had BRL 10 million expenses, one-off expenses that will not be repeated in coming quarters. And given the scenario that we forecast, the margin level, the accumulated margin for the first half of the year, is better in the coming quarters, better than it was here in the second quarter. We still think we have much more ability to generate value than the figures show at present. But as Bruno mentioned, we're working for the long term here. And we believe our strategy is the right one. And that this strategy will put the company in a sustainable growth path in terms of revenues and results.

We go on to Slide 14 to speak about cash flow. We reached an accumulated cash flow of BRL 177 million. This was a somewhat confusing quarter when it comes to cash flow especially working capital, there are no structural changes in the figures of the company. It is important to mention that given the volume that we collect from customers and pay to the operators throughout the month. There have been minor variations on the payment delays, the receivables of invoices from an operator. So this will change the results from one month to the other. And all of these changes are offset in subsequent months which means there has been no structural change in the company's working capital. The trend is for the working capital figures this year to become positive as we have almost BRL 100 million to receive in terms of revenue from brokerage and management dating back to last year. And the provision for bad debt should materialize. We will still have a very positive effect in terms of working capital for this year.

We can speak about the commissions. Commissions will be gauged every quarter. We cannot offer a new level of commission. We're going to assess this every quarter. We're going to continue on with a very dynamic stance when it comes to how to operate with this on the street. And as we stabilize what we consider to be our new level of market share, we can see these values becoming reduced during the coming quarters.

Once again, we're going to make these decisions every quarter based on what we observed in the competitive scenario when we attain the market share levels that we expect, the trend is for a normalization of these figures. This is what I wanted to mention in terms of results and cash flow.

And we would now like to go on to the question-and-answer session.

[Operator]

[Operator Instructions] Our first question, is from Samuel from BTG Pactual.

[Samuel Alves, analyst]

I have a question at my end. Fred in his presentation announced this stating that the company has attained the commercial levels for the year and an anticipated way. And margin, however, still very much below the historical levels. How is it that we should understand this? Is this the new normal for the company considering that it is a marketing initiative, the purchase of media, will this be recurrent? Or is this something that simply happened in the first quarter? If you could explore this further, we would be very appreciative.

[Technical Difficulty]

[Operator]

Ladies and gentlemen, if you could please hold while our speakers reconnect. Please hold while we reconnect the speaker's line. Thank you.

Well, you may proceed for the speaker.

[Pablo dos Meneses, executive]

We do apologize. We had a technical problem. We're trying to go to our backup. Elton and I will respond through the back up, and we can continue talking about the question very well. What happened in practice. We saw the opportunity and planning throughout the year, and we saw that we had a great potential of growth and that we could accelerate this process and capture as much as possible during the first semester. We always look at the trade-off of this with margin and the potential that we have to capture more market share as we had already seen, we're going to cancel the retroactive adjustment and recomposition of prices, but there was no reason to wait and capture the opportunity and do this throughout a quarter or 4 months instead of waiting another 8 months for this.

We adopted this strategy, therefore. And as Fred mentioned, once we obtain the expected level of market share and especially sales, we will be able to recover market share in the long term, so this was the first step. We anticipated this strategy, and we have been successful, although there is room to enhance the volume in the coming months, a bit of commercial aggressiveness has taken us to an interesting level, and we're going to observe this in the coming months and gauge it and eventually work on this per region. But of course, everything will depend on what is happening. We will be more aggressive.

But through time, this should become more normal attaining a level that will sustain the company's growth. This is spread simply to add to what was said by Elton the levels that we're working with yes, they do make economic sense. We have carried out several calculations, and these are levels that will sustain appropriate levels, levels that make sense. But it's important to take this into account as part of the larger strategy. The strategy as a whole is to recover the market share levels that we used to have. And in that context, it would make sense to change the model of action of the company and the market as we resume our market share levels when we obtain adequate levels the economics will become ever clearer and you will see how relevant and appropriate these economics are.

[Operator]

Our next question is from Leandro Bastos from Citibank.

[Leandro Bastos, analyst]

He's referring to the growth set, and if we could refer to this in a more qualitative way.

[Technical Difficulty]

[Operator]

I'm sorry, we seem to have a lack of stability and the connections. We apologize once again.

[Pablo dos Meneses, executive]

When we map the market, and look at the potential market share that we could have for the company, we work on a different planning and we set for the commercial strategy. For this to operate, we took into account several factors are priced out of competitors, where we were, where we weren't, and we set up a plan that would make sense, and we put up this strategy to reposition the company in the shortest time possible. I think that we were reasonably successful in the execution. We did not expect this to happen in the second quarter. We were expecting to attain that level, specifically in the third quarter, we anticipated the process. And of course, all of this, thanks to the growth in sales. If we takeaway that retention that the team has with high-value customers, we would have had an increase of 80% in the volumes sold. This is the most important point, of course. We're also looking in detail at each channel, and we have the expectation of cancellations. This will not cause an imbalance in the channel, of course.

And because of your question, I would like to underscore that when we do become more aggressive. We may have an impact on the channel. We want to make sure we won't have an impact on churn, and we're calibrating, we're gauging the mix, and we're looking at other channels, but this is for the long term.

In the short term, what we are doing basically is based on the channels that have already been implemented. And we're selling to all operators in practically all regions. If you look at the map of Brazil, we want to be everywhere. We are concentrated. We have vertical, and we have been able to grasp almost all of the opportunities in the past. If we had a product that was losing its competitiveness, we repositioned it, and now it is selling better than we had imagined. And this is how we have been able to attain these figures in the second quarter. It's a bit of everything, better channels, better performance, more operators, new products, all of this happening throughout the second quarter.

[Operator]

Our next question is from Mauricio from Credit Suisse.

[Mauricio Cepeda, analyst]

Once again, going back to the issue of churn to understand how I should think going forward and we want to know what is happening in the real world. Now the customers that are canceling, what are they looking for? Which are the alternatives? Another question refers to the seasonality of the cancellations of the churn. What is happening at present that customers are no longer canceling despite the readjustment. And of course, you have contracts, so it isn't that simple. Now if we look at the retention part. What is your opinion? What is that, that is lacking in terms of retention, something that could help you with the issue of churn and to take advantage of the question posed by some. Well, of what you have done in the commercial area, does the commercial areas still have to increase its figures to attack what is happening with churn?

[Elton Carluci, executive]

This is Elton. I'm going to begin responding to your question. Well, we're -- I will begin speaking about the customers that were canceled to give you more color in terms of what is happening. We have an increase in default during the first semester. And what happened, we moved in terms of our expectations was the default in the second quarter with some of our older customers in the company. And you can give me a class in terms of what is happening in terms of economic terms in the country, but the readjustment was 23%. This has what surprised us initially. Historically, the cancellations because of default was always around 30%. And this increased somewhat this second quarter, reaching almost 40%. And the cancellation by request ended being lower than what we had imagined in the second quarter.

By looking at these figures, we see that families are suffering pressure in their budgets. So this is the first point when it comes to our figures. Now the problem of nonpayment or default was exacerbated in the second quarter. And well, this was part of what we had in our radar. As a result of this, we drill down on the figures, and we do this based on survey. We survey each of the customers canceled and then we carry out a crossing to see if they have active link or not with a focus on cancellation. So we work with squads that are looking at this in the company. We drilled down on the numbers and what is it that we have seen an increase of people migrating to the sole health system the [indiscernible], A large number of people migrating to the [indiscernible], and people decreasing their coverage, working with local operators with a lower ticket. So there's a bit of everything. And what I can say to you is what cause this imbalance was this additional default and volume of people migrating to the sole health system. All the rest was what we had expected.

The -- this was a novelty in the second quarter, the default levels and people who have had to lease their health plans for financial reasons exceeding what we had imagined. Now when it comes to retention and to explain how we're dealing with this. We're implementing multiple strategies. The most recent was to focus on conversion using sales vouchers. And our sales team has helped us [ backed up ] and retention. We have to accelerate this. As everybody knows, part of our portfolio, 50% will have a readjustment.

Now in July, it has already been applied a readjustment of 11%, in case you ask. So we have intensified what we were doing. We have people who will have 34% readjustment in a time horizon of 7 months. So this could lead to a greater churn expectation than what we have seen. But with the figures of July, we based ourselves on our guidance, and we see a behavior similar to 2019. This brings us a certain tranquility because it's a compound accrued readjustment for the customer, and the customer will have a readjustment as if they had not had a previous readjustment. And those who are at the limit of their budgets are being impacted, and this is a default that we saw in the second quarter, the second -- first half of the year.

I see a behavior that is very similar, therefore, in July, and we already have some days of August. I look at this once or twice a day, but hour after hour, I have a dashboard that is being updated and we know every hour, what is happening with our portfolio and the behavior is very similar to 2019, but we have anticipated a strategy. We have changed the level of sales in the company. We're working with 45-plus of lives for the third quarter, if we have the same cancellation performance that we have in 2019. We're repositioning the company in terms of growth because in the fourth quarter, all of this will become more normal. We agreed on a more aggressive commercial stance. We anticipated it, and we are seeing exactly the same behavior that we saw in 2019. If you do your accounts, you see that it will be very similar to 2019 in terms of percentages with an adjustment of gross adds. And perhaps you will be able to see the strategy that we have set forth and that will put -- be put in place as of now.

Very well. I think that I have responded to all of your questions. If Elton could complement something. When we took on the company with this new strategy, when we look at the market, we had several doubts One was to fix up our sales level. The company was losing share and sales constantly. And I think this was the first challenge that we can say we have a trust. We were able to take the company to a completely different level. The second challenge is churn. We have adopted several measures. We can now see results unfortunately, because of the economic situation, the only issue that we cannot work on is the customers' pocket, as you can see, with the size of the readjustment that we put in place. However, as we have worked with sales -- taken sales to another level.

Nowadays, the company will have to focus on retention. One of the challenges has been taken out of the way. And the churn will now become the second great challenge of the company. We believe that this will become more normalized. Historically, this is what happens after a readjustment. The third great challenge mentioned by Pablo refers to the evolution in the company operations. And this is very important for this new phase where we're going to focus on retention. If we look at the cycle now vis-a-vis other years, we were unable to do this.

When somebody call to cancel, we have to practically stop working, considering the evolution in our operations in the last readjustment cycle, we had less than 4% loss of calls based on a level of 40%, 50%, 60% after readjustments. So when we look at churn, we know that now we are at a moment that we can see the evolution of the service levels of the company, and the contributions of the operations area and perhaps we are now ready to tackle churn in a more aggressive way as we have done with our sales.

[Operator]

Our next question is from Vinicius Ribeiro from UBS.

[Vinicius Ribeiro, analyst]

I do apologize to continue speaking about margins. Can you refer to the margin that -- the pressure that you had on your margin, which part of this is due to technology to the hiring of people or because of your customers? And if you can convert this into cash according to the levels of 2019. How should we think about this as you recover the market share that is natural for you as you remarked?

[Bruno Blatt, executive]

I'm going to begin with the SG&A. $10 million for the quarter are a one-off event. Now if you look at the commercial discount, we have a new level of commercial expenses basically. Now given the number of present sales, these are the new values. When you see what was added, we have more people. And I think the growth of people is very clear. What I can say is that the great investment that the company made was in 2 areas: operations, where we changed the level of the service levels of the company. And initially, the idea was not to optimize cost, but to maximize service levels because we see a scenario with very high readjustments and because customers want us to look for solutions.

So we gauge the entire area of operations to work with retention. This was a significant massive investment very carefully sought out. And going forward, we think we can improve on this but we're not going to take away any capacity until we have a clear vision of churn. So the operation's area, perhaps, is larger than would be necessary when we look at the company portfolio, but this is because of an economic situation that still causes concern because of the churn. We want to have excellent service levels and when all of this becomes more normal, when the churn becomes more normal, this will simply remain as efficiency for the operations area.

In the commercial area, we have opened offices in different regions. We're working closer with the brokerage channel. We're working more with training, investing in having a sales force in the hinterland. And we're also working considerably on retention. We see significant effects, positive effects or recovery of customers since we set up these teams. So these are the 2 main investments in SG&A. We had some. I'm not going to say we didn't, but they took place during 2020 and the first quarter of this year. And nowadays, they help us with everything that is changing, and the company investments were made in improving our customer service and improving our sales force.

Now we can break down our strategy somewhat further, and we can guarantee that we have a very healthy relationship and an aggressive one to readdress all of these points and we can look at this in detail for each product, for each region, each operator. Once we have achieved the volumes that we think are important for us, we're going to look upon each of these different components and gauge the investment based on market share. Of course, we accelerated the work in all of the areas when we concluded the sales potential that we could reach during that quarter. We went from 27,000 lives on average last year and got to a figure close to 50,000 for the third and fourth quarter. We still have potential for this, means we had to reinforce our anti-fraud areas. It was a marginal investment that was important to guarantee that we can sell to this relevant number of lives and have everything working properly.

Once again, we can get to 50,000 lives and this will be a wait on the operations area. So the team had to anticipate this process. And well, eventually we could work with another readjustment, but we have to learn how to sell with quality. And this is what we have done during the second quarter.

[Operator]

Our next question is from Bradesco Bank by [ Gustavo].

[Unknown Analyst]

We have a single question. To understand what is happening with your channel, some of the -- and if there have been any movements to transfer some of this work to the brokers. This is the question we have at our end.

[Elton Carluci, executive]

Gustavo, this is Elton, once again. And if I don't fully respond to your question, my colleagues will also do so. We have had training in all regions. And of course, when we look at the strategy as a whole, the part of loyalty, we -- this has led us to having a multiplicity of products, products that will resolve any problem. We have all of the products in all of the regions, and it is almost impossible to lose a sale for lack of alternative. And whenever we have the opportunity of bringing in a new product in the center west, we consider this opportunity. But we have done most of our homework during the last quarter of last year, and it has enabled us to get to the position we are in at present. This was the goal.

Of course, the brokers ended up considering Qualicorp as their favorite operator, especially where we have competitors with another administrator. What we haven't done is to become the main administrator of all of the brokers in the country. We do carry out a great deal of survey, and we look at the comments and others. And we are achieving what we had committed ourselves to achieving. We look at the operators that have a affinity plan. We see how they perform during the month to see if they have an escalate in terms of churn. And well, all of you know how far we were from having a share equivalent to a company like ours.

Well, we're not there fully, but we should get there during the third quarter. And we will do this through our sales planning that is very mature and it will enable us to tackle the churn. The churn has had a bad performance, not only in the third quarter but also in the fourth quarter. So we're focusing on reconquering our market share. And we're going to carry out these fine-tuning so that we can better work on cancellations. We know there will be an improvement. A great deal of the problem is the economic situation that is impacting the customers' pockets, but we're better prepared than in the past, and we're not going to allow a competitor administrator to take over what we have. This is the main point that we're working on tirelessly here.

[Operator]

We have no further questions. We would like to turn the floor over to Mr. Bruno Blatt, CEO of the company.

[Bruno Blatt, executive]

Well, that is it. Once again, we would like to say that our team is determined. We have a very clear strategy, and we continue to pursue our strategy with a view on the medium and long term without truly focusing on the short term. We're convinced of this path. We are athletes as I mentioned, and we're very determined and focused on obtaining our goal. Once again, I would like to express my thanks.

[Operator]

Thank you very much for participating in the call the Qualicorp conference call. And here, we would like to thank all of you for your participation. Have a good afternoon.

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