BB Seguridade Participações S.A. (BBSE3) Earnings Call Transcript & Summary

Hello. Good morning. Welcome to our virtual conference call to present the results of the fourth quarter of 2024. This conference call is being recorded, and you are now listening to the simultaneous interpretation into English. [Operator Instructions] This conference call is going to have 2 parts. In the first part, our CEO, Andre Haui; and our CFO, Rafael Sperendio, will share with you the results of 2024. Then we are going to have a questions-and-answers session, when analysts and investors will be able to ask questions. Our slide deck is available at our Investor Relations website at the www.bbseguridaderi.com.br. Now I'm going to give the floor to Andre, who is going to start the presentation. And I will come after their presentations to moderate the Q&A session. Andre, please, the floor is yours.

Thank you, Felipe. Thank you, dear friends. First of all, I would like to thank everyone who joined us in our virtual conference call. It's a great enthusiasm and satisfaction from me to announce that our net income grew 9.5% in 2024, reaching record of BRL 8.7 billion. Managerial profit according to SUSEP is BRL 8.2 billion, an increase of 5.7% compared to 2023. A very solid result, supported by the 11.9% growth in noninterest operating income net of taxes, which more than offset the drop in investment income. We continue with a very robust payout policy for our shareholders in 2024. BRL 7.1 billion were allocated to the payment of dividends in addition to BRL 1.2 billion used to share buybacks. In other words, between dividends and buybacks, more than BRL 8.3 billion were allocated to our shareholders in a payout of more than 95%. We have BRL 17.5 billion in written premiums, growing strongly in the most probable lines. In credit life, the increase was 7.9%. According to data from SUSEP until November, written premiums were more than 70% higher than the second place in the ranking. In rural lines, despite the challenging year, we managed to expand our market share to 63.6%, an increase of 21.2% in farmers' credit life insurance and 28.1% in rural lien insurance. Our loss ratio closed the year at the lowest historical level of 23.7%, a result of a very robust underwriting and risk-mitigation policy which is the result of our reinsurance strategy. In our accumulation businesses, pension reserves expanded 9.4% in 12 months, reaching BRL 428.9 billion. Collection of premium bonds grew at 4.2%, totaling BRL 6.7 billion in 2024. In our distribution business, the 10% growth in brokerage revenues was insured both to the commercial performance, including the sale of products that are not underwritten by our investees, and also by the recurrence and booking of revenues related to sales completed in previous years, especially in credit life insurance. In 2024, we continue to execute our strategy to evolve the use of technology and data to generate businesses and to improve the service to our customers. BRL 138 million were invested in the group's companies in IT infrastructure, cybersecurity development of new products and digital solutions. This investment has helped us to make important developments in our portfolio. In Rural insurance lines, we are expanding our operations beyond traditional products, such as crop insurance to be able to take advantage of all the opportunities of every business. We have launched livestock lien at the beginning of last year and have already issued BRL 511 million premium. And now revenues grew [ 84, ] almost BRL 650 million insurance premiums in the livestock market, which represents an important share of BB's rural credit lines. As I mentioned in the previous slide, farmers' credit life insurance had a significant growth of 21.2%. This increase was made possible by the conditions we implemented in the product with an expansion of the amount insured and the age of our customers. In a strategy that aims to look at the customer throughout their life cycle sold more than 85,000 personal protection insurance policies, which was launched in 2024. This product is a life insurance to simplified coverages and more affordable prices, an important product to universalize access to insurance, creating long-term opportunities as customers develop their financial education and start to purchase more sophisticated products. In pension, we launched a product that allow us to offer the accrued balance in reserves as a collateral for credit operations, important solutions that we developed in home to provide liquidity to our customers to prevent them from accessing long-term services in event of any momentary needs. In 2024 alone, more than BRL 800 million were given as collateral for credit operations. We also continue to advance in our distribution businesses in 2024. BB brokerage browse traded more than BRL 18.7 billion in insurance premiums. So it's important to work as a brokerage with sales of more than BRL 967 million for auto insurance premiums and BRL 153 million in large recent transportation with a focus on the BB's wholesale segment. In these reforms, we do not take part in the underwriting. To diversify our strategy, we issued more than BRL 2.1 billion premiums via partner channels, accounting for 12% of the total. In rural alone, it was BRL 1.3 billion, contributing with BRL 233 million to the result, a growth of 17%. Last but not least, we evolved in our performance in digital channels. In 2024, 180,000 new were added to our customer base, and more than 915,000 sales were conducted. We raised more than BRL 900 million pension plans and reached 26% in PM premium bond sales carried out remotely through digital channels. The economic performance that I have spoken to you is related to one of the most important pillars in our strategy, which is the customer at the center of our work. Our NPS remains consolidated within the quality zone and has evolved 4.7 points last year. The number of complaints has been dropping continuously. And in 2024, it was 15.2% lower than it was in 2023. The evolution of satisfaction levels is reflected in the permanence of customers, evidenced by 17% reduction in churn in 12 months, and the level of protection of our customer base continues to evolve. The number of super-protected customers, which have more than 4 products, has grown 12.6%. So the differentiated benefits and service has reflected in NPS at 11.9 points higher in 2024. And our relationship NPS is almost 12 points higher than that of our customers. Now I end my speech and give the floor to Rafael, who's going to continue giving you details on our financial details. I'll be back for our Q&A session. Thank you very much.

So thank you, Andre. Now going to the details of our numbers for the year and the Q4, just reinforcing, stressing. So our approach is always according to SUSEP's accounting standards, which is the basis for our booking and our financials. So BRL 2.8 billion, BRL 2.2 billion in Q4, growing 6% in both comparison basis, a very solid result, especially if we consider all the challenges with the investment income, not just the reduction of the Selic rate, the increase of the cost of liabilities in Brasilprev with the defined benefit that is pegged to the IGP-M. And then we had a deflation of 3% in IGP-M in 2023; in 2024, a high of 6%. And this had a direct impact also related to the interest rate that caused the negative effect. That's why the investment income dropped 13% year-on-year in Q4 and dropped 17% in the whole year numbers. So this is one of the smallest shares in our historical series. Now with a little bit more detail and breaking down our adjusted net income. So the profit has grown BRL 440 million, related to the growth in operations, BRL 723 million, especially due to Brasilseg, not just because of the growth in sales during the business year but also because of the booking of sales that were conducted in previous business years with a reflex in brokerage revenues and also offset by higher commission rates or commission fees and then reduction of the crop insurance that helped to the overall composition of brokerage revenues. So we had a reduction in loss ratio in 2024 in all lines. There was a reduction in the loss ratio. Credit life has contributed a lot for the better results of the operation. In terms of the net investment income, we had an operational growth, and then investment income takes [ BRL 184 million ] as compared to 2023, BRL 57 million growth coming, especially because of higher volume. And then we were able to offset the reduction in the Selic rate with higher volumes. But then on the other hand, the mark to market took out BRL 184 million of our bottom line in 2024. And in 2023, that number was positive by BRL 149 million. Now going a little bit about the details per operation. First, the Brasilseg in terms of premiums written. So there was a growth of 6% in Q4, coming especially from an acceleration of the growth of rural lines growing 23% year-on-year in Q4 and a 2.2% growth of premiums for the whole year. Rural grew 4.1%, and half of the premiums written this 4.1%. So here, we call the rural lien and also for individuals and small- and middle-sized businesses. And then it dropped 40% because of the end of the product that we had for the credit letters, and then we decided to discontinue it in Q1 2024. So when we look at the quality of the operation, there is an overall improvement of the combined ratio coming, especially because of the drop in loss ratio, as I mentioned before, all lines getting better, except for credit life. Credit life has a few one-offs in 2024, especially in the reporting of claims that were -- there was a backlog. And then we reviewed the basis and reported in the first and second quarters of 2024 and technical reserve surplus. So apart from that, it would have been flat. So here in pink, you are seeing the increase in commission fees. So this is related to our brokerage business, as I said before. Credit life has -- pays higher commissions and crop pays less, so one down, the other one goes up. But in the end, it goes up. SG&A is almost flat. Net investment income dropped 2% in Q4, an 8% drop in the whole year, especially because of the drop in the Selic rate, which we could partially offset with volume, but not completely. Last, our net income grew 10% year-on-year, 10% in the whole year, better combined ratio, as I showed before, more than offsetting the results. Now going to our pension business. 3% growth in collections in 2024 getting to BRL 59 million. So in Q4, there was a 4% reduction year-on-year. In terms of net inflow, we can see flat in redemptions, BRL 7 million net inflow in 2024. So this -- there is a growth of our reserves of 9%, so the concept in total; and then reserves of PGBL and VGBL, in line with our management fees that grew 10% year-on-year in Q4 and also considering the whole year for 2024. Even though we observed a drop in management fees because of the mix. And so you can see here in the lower left-hand side, the reduction of multi-market funds in the total AUM as a consequence, a reduction in the average rate because of risk aversion and more concentration in fixed income. So there is a reduction in the management fee. But because of the increase of more business days in 2024, this was offset and revenues grew, which is very much in line with our growth in P&D reserves. And so here, the efficiency of the operation improved in Q4 and also for the whole year. But the increase in revenues, management fees and more efficient operations were not enough to offset the drop in investment income because of IGP-M. So there was a deflation 2023 and inflation 2024 in Q4. So the impact was quite significant. So we had a reduction of 72% in net investment income. And this explains the drop in the net income, dropping 27% quarter-on-quarter and 15% if we compare the 2 years. So premium bonds collection grew 4% quarter-on-quarter, a drop of 3% in our reserves because of a shortened term. So there was a reduction in the last 12 months. So lottery is paid. So we had -- we paid 19% draws into Q4 and 63 in the year, almost flat. Net investment income, almost flat reduction of the Selic rate, so partly offset by the reduction in TR. For the year, so financial went up by 5% despite the 20 basis points drop in the financial margin because of the balance in financial in investment. And then net income grew 1% year-on-year, 5% for the whole year. So for the whole year, it grew very much in line with the growth of the net investment income. In Q4, it grew even though investment income dropped because of expenses. And this has been the main challenge in this operation, and we are trying to make it more efficient, and this is our challenge for the midterm. Now going to our brokerage business that grew 8% year-on-year, 10% for the whole year, especially because of the insurance operation, not just, as I said, initially, because of sales of the current business year, but also because of the booking of sales that were conducted in the last 3 years when brokerage fees being booked in 2024. We ended the year with BRL 6 billion, so quite relevant number of commissions that will be for the next years. Net margin is better, 1.1% year-on-year because of the mix and also higher investment income because of volume. And for the whole year, the margin is almost flat, an increase of 30 basis points. That's why the result is up a little bit higher than the growth in revenue. Now going to talking about our 2024 guidance. So noninterest operating result. Our range was 5% to 10%. We delivered 10.7%, so exceed our guidance because of a lower loss ratio than we initially expected. And this is an extremely good result because if we think the need of needing to have additional reserves and coverage, we hadn't planned that. It was not planned. But despite this provisioning that had not been included in the projection, we could exceed the range of the guidance. And in 2025, because of the most financial feature of this kind of coverage, it reflects the update rate plus inflation. So in 2025, we are likely to reclassify this expense to investment expenses. So therefore, the constitution of additional reserves, it would have been 12%. Written premiums of Brasilseg is in upper half, which was from 0% to 3%. So pension plans reserves is -- our range is from 8% to 10% -- 8% to 12%, and we have 10% almost. Now for 2025, the guidance here, the only highlight is that in noninterest operating results, we reclassified so the additional expenses for the provision of coverage is financial expense in Brasilprev. This is a difference. So the range is from 3% to 8% of the operations for 2025. Written premiums to a growth of -- from 2% to 7% and reserves of pension plans with a range from 12% to 16%. These are -- this is what we expect for 2025. Now I end my presentation. Now I'm going to join Andre and Felipe for our questions-and-answer session. Thank you.

[Operator Instructions] Well, I think that we already have a few questions. So let's start. Well, the first question comes from Jitendra from HSBC.

Congrats on the results. I have 2 very quick questions. First, maybe on the premium growth, when we look towards 2025 in terms of written premium, how do you expect growth in 2025 across different product lines given the higher rates scenario in Brazil and some economic slowdown? So if you could just provide some numbers by product lines, that would be very helpful. And second, I just wanted to understand dynamics about gross written premium and net earned premium. So net earned premium have remained stable throughout 2024, while gross premium were volatile. So how these 2 lines could evolve in coming quarters going forward or for 2025?

Okay. Jitendra, we're going to answer in Portuguese, right? So the question -- so is related to the guidance of written premiums and what our expectations for the different business lines. And also -- and the second question is the dynamics between retained and earned premiums. So I'm going to start the second question first. So in terms of retained premium, it grew more strongly, especially because of the dynamics of risk mitigation that we adopt in our company -- in our insurance company, Brasilseg. Crop insurance is a profitable product, but it has a certain volatility associated to it along years. So to reduce the volatility in our financials, we adopt a very conservative policy of reinsurance, where we retain something like 24% of the premiums. And then the difference goes to a panel of reinsurance, and then we capture the commissions. For the other business lines, as there is not so much volatility or loss ratio associated. So we do not grant premiums to reinsurance, but we have stop-loss clause. So this is in a nutshell the strategy that we adopt for risk mitigation of our insurance portfolio. As in 2024, we had a very challenging year for the agri business. Our crop insurance, especially in the costing modality, is the one that dropped the most year-on-year. But it is more sensitive to premiums written. When we move to retained premium, it's only 24% is retained by the company. The sensitivity to retained premiums is higher. So the lines where we retain more that have grown more in 2024 with a highlight with credit life, Also in the agricultural or rural line, we have the farmers' credit life Insurance and rural, and then life and rural lien have grown by 2 digits. That's why retained premiums grew more than written premiums because it's less sensitive to the performance of agriculture or crop insurance. Now talking about 2025 as part of our growth of 2% to 7% growth. I would say that this year, If we compare to the business year of 2024, this year is something that I will call less predictable for the lines that are more dependent on credit. So the sensitivity of this range will be very much concentrated, especially in credit life and rural insurance. So if it's better than expected, we get to the top. If it's smaller than expected, we are going to move towards the floor of the guidance. For the other lines, life, residential, corporate, they're underpenetrated lines in our bases -- in our customer base. These are lines that we are going to try and drive them to grow, to grow to the top or above the range of the guidance. But those are lines that are -- have a smaller share of our portfolio as a whole. Now credit life, we have a few important drivers. So there is everything that we've been talking a lot about. And then there is a new product. So we have the payroll loan. And then we have a new product in March that will help, but we still have an environment thinking of interest rate that is not so favorable as we used to have in the beginning of last year when we were expecting rates to go down with a much more favorable environment for credit life. And rural insurance has its own unique dynamics. So for 2025, differently from 2024, we are more optimistic for lines that are not really related to credit, but with a little bit more uncertainty in the lines whose performance is more related to credit origination by Banco do Brasil.

Thank you, Jitendra for your question. Our next question comes from Tiago Binsfeld from Goldman Sachs.

So I have a question about the investment income to understand your expectations for 2025. Now I'm looking at Page 7 of your presentation. There was a drop in '24 of BRL 280 million. Of course, there is lots of uncertainties in the year that lies ahead, things you can't control, marking to market, time mismatch. But what do you think of its -- of the share investment income to the profit thinking of the next months in the operational performance may add BRL 550 million, which is in your operational guidance? So maybe the investment income won't have something related to that. Could you give us some color about the numbers to help us think about that?

Thank you for the question, Tiago. Well, the investment income, you were right about a few of the points that impacted 2024 that we think are not going to be as relevant in 2025. So breaking down all the components, I'm going to focus on the portfolio is related to P&L. And this, between operational and financial. I'm going to focus on the share that is in our financials. Number one, last year, as you said correctly, and this is in our presentation, we had a net loss of BRL 184 million because of marking to market. So a relevant share took place at the end of last year because of the opening of the interest rate curve, especially because of the portfolio that we have in Brasilprev as an asset to back up our liabilities here and related to operations. Most of it is backed to the inflation with long and midterm. So of the BRL 184 million that we have here, because of the companies after income tax, there is an asymmetry today. I would say, the likelihood for 2024 is higher -- 2025 is higher in terms of positive marking or not having any marking than what happened last year. So -- in the conservative scenario, we are no longer going to have marking to market negative. The curve will be flat as compared to December, which is not true because it has already closed from December until now. So we already have positive marking in Q1. So just here, we would have BRL 184 million additional in the investment income. In the post fixed share, on the other hand, it's quite simple math. It didn't change the assumption that we have 100 basis of Selic is equivalent to BRL 100 million profit. So it depends on your Selic assumptions. If we think the Selic -- we think of the curve, we would have something like 5 points of increase in the average Selic, so 4 points of increasing average Selic equivalent to BRL 400 million roughly. But it depends on your assumptions, using what is implicit in the interest rate curve, it's an increase of almost 4 points, BRL 400 million, BRL 184 million, assuming that there is no negative marking to market, we would have something like BRL 584 million in the investment income of additional results in 2025.

Our next question comes from Kaio Da Prato from UBS BB.

Felipe and Andre. I have 2 questions to ask. The first one is also related to the guidance, but this is more operational. Could you give us more color in terms of increase of the bottom line per business line? And what is the expected loss ratio for rural insurance? And you had a very positive performance in 2024. And then I'll ask you a second question.

Thank you for the question. Well, the assumptions are in the operational result. The 2 [indiscernible] are in the guidance. So the growth in reserves at Brasilprev. What is missing there to close is the issue of loss ratio, which is your question. In 2025, what happens is we closed at a historical low of loss ratio in crop and rural insurance. So it's difficult to assume, as I said, in the answer to the first question because crop insurance has considerable volatility. So when we look at the context -- the current context in terms of climate projection and of course, this changes rather frequently, but today, for the business year of 2025 in Q1, there will be a predominance of La Niña. And then it will be mitigated in Q2, and then we are going to have a predominance of neutrality. After Q2 towards the end of the year, which is a very favorable scenario. This La Niña scenario, we already have the February numbers, and we monitor this every day. What we need to see is a lower frequency of notices as compared to last year but faster, especially in Mato Grosso do Sul and Rio Grande do Sul once again. This is higher than historical low that took place last year if I compare 2023. And then things change -- well, the dynamics changes because what we are seeing this year an increase in January and a downwards trend in February. In 2023, we saw it going up January, February and March. So what can we say? And we're still very much in the beginning of the year to know the trends. But in principle, it looks like loss ratio will be between what we saw in 2024 and what we saw in 2023. We are not worried about it. This is normal, but we cannot assume that it will remain at a historical for 2 years in a row. So this is more or less our prospects for loss ratio for crop insurance. For the other lines, we are working with the improvement for home insurance, which is not very relevant. And for the most relevant, we're seeing an improvement in credit life. And there were some one-offs, as I said, for credit life. Especially in 2024, there were some one-off events that we hope will not happen again in 2025. And these would be the main highlights. For the other modalities, we are not expecting any significant variation in the loss ratio in 2025.

Very good. Second question about investment income, just a quick follow-up on Tiago's question. Now looking into pension, after the resolution that impacted your redemptions along 2024, just remind us of the mismatch between IGP-M and IPCA rates now as compared to how it was in the beginning of the year. I think you reduced this mismatch a lot.

Well, this is true, the mismatch has gone down in terms of the indexes. So there is something like 90% matched. So this reduced a lot. So before the resolution, it was something like 75%.

Thank you for the question, Kaio. Our next question comes from Antonio Ruette from the Bank of America.

Congratulations on the results. I have 2 questions. So I think it's clear that the growth in premiums depends very much on credit origination for next year, and this is incorporated in the guidance. Just taking a step further, it is penetration capacity in originated credit. So could you explore the main lines, that would be rural and credit life? So how the penetration in originated credit, how this has evolved and what are the main drivers for 2025? And a follow-up was something you've touched on. It is about the private paycheck-backed loans. So what is the ratio between insurance and the paycheck-backed loans?

Now giving you a little bit more detail about penetration. For the small and micro businesses, we have working capital penetration still very low. So I'm going to talk about credit life first and then rural. For individuals, we already have quite a high penetration. It has gone down slightly as compared to last year, which is normal in an environment of rising interest rates. So credit life, in this context, has a more difficult penetration. It has gone down but not a lot. It's just a little bit. But this is a more mature portfolio in terms of penetration, and this is a product that has been available in our portfolio for slightly more than 10 years, so a much more mature portfolio. So for small businesses, we have some more room to improve penetration. In rural, we can locate through different metrics. The penetration of insurance in Brazil as a whole is very low. So my memory maybe betraying me, but it has gone all the way to 15% about 2 years ago. But penetration has gone down to 10% of the planted area in Brazil is protected by crop insurance, so very low level if we compare to more developed economies. Using the U.S. as a reference, penetration is like 80% of the planted area, which is much more relevant than we have here in Brazil, not just talking about grain, but when we migrate to livestock, which is extremely relevant -- has an extremely relevant share in our credit lines. We explore it very little. We had a livestock product. We've been testing it. Of course, we do not master it as much as we master grains, but we've been testing it since 2018-'19. And now it has become slightly more relevant in 2024. And we are going to continue expanding in 2025 since it's a very healthy portfolio with very good loss ratios, and we are confident to escalate it. And also, our livestock lien that was relevant in 2024 for the composition of premium, yes, there is an opportunity in the segment of grains, but the whole agriculture industry is going through a rebalancing of supply and demand, both on the side of price. So the price of inputs and commodities. And after this period of adjustment, we have a more optimistic stance for 2025. And once this happens, we will be able to increase penetration again as we saw happening 2 years ago and in livestock, which is very much underexplored and is very important for Banco do Brasil. And we've been -- it's been increasing along years, but this is where lies the greatest opportunity if we look in the mid- and long term.

Thank you, Antonio, for your questions. Our next question comes from Daniel Vaz from Banco Safra.

I would like to revisit what Rafael said in terms of risk retention in crop insurance. This might unlock some gain in terms of premiums written to retained premiums. Have you been discussing this in terms of your risk policy? Any evolution in terms of negotiation of the contract with Banco do Brasil? So can -- any new developments? Anything happened in the meantime that you could share with us?

I'm going to answer the 2 questions. In terms of reinsurance, obviously, this is assessed at the level of the company, Brasilseg, that has the contracts. And this is done year-on-year and looking at the loss ratio and risk appetite. Obviously, we changed the level by 2 percentage points, but we are going to take a look at that year-on-year. We think there is room for more players in our panel. There is a risk appetite of local and international reinsurance companies. And of course, it depends very much on how much commissions are. That is the commissions that are available. So yes, we are looking at that in the company as Board members and as part of the company's financial committee. So we look at the scenario every year. This year, we are going to review that again and decide whether it makes sense. As to the contracts, as BB Seguridade, the company belongs to Banco do Brasil. We are going to continue existing. This is not a taboo. We are still talking to the bank. We think this -- the time for us to sit down and design. Anything has not arrived yet because we still have a long time for the contracts with our partners and investees. So at the right time, we're going to sit down and talk. But obviously, we are examining, reviewing it. We understand it, and we want to extract as much value as possible and the bank to be rewarded by what they're using.

Thank you, Daniel. Our next question comes from Guilherme Grespan from JPMorgan.

I have 2 questions, one about new products. I still have one question and a follow-up to Antonio's question. He asked about the private paycheck loan. So your credit life for the private or public paycheck loans and if the penetration is the same. So -- also for the consortium that you're going to relaunch the credit letters. So you had some difficulty in terms of profitability of the product over the last few years. I imagine that insurance is more about distribution, less about pricing. And there is a pull if you fit the product in a distribution of the consortium, the credit letters of Banco do Brasil would be a very good pull for you to capture. So what are you changing in the product? And how do you think about the revamping that you're thinking for 2025? So buyback, there was 0, which got my attention. And you finalized with 87%. So what is your buyback mindset? I thought that you were going to favor more buyback in the margin, but the 0 buyback in the quarter got my attention.

I think I can answer about buyback. Guilherme, thank you for the question. Rafael is going to start by the last one, and then I will talk about the credit letters.

Well, as to buyback operation, Grespan, we have BRL 1.2 billion. It's an irrelevant volume. The program was almost fully executed. And there are a few limitations in its execution, for example, the cash available today Seguridade has a reduced PL. And the capacity -- the distribution capacity is beginning of the quarters. So we have executed as much as possible, the cash available. And the buyback program has an impact in the capital of Banco do Brasil, and we need to take that into account. We ended it. If there is a definition in terms of the allocation of this in the treasury, and this is in a short time span.

So a product that used to be offer to BB consortium. It was a corporate product. It was an insurance for the portfolio. So we stopped this insurance now we have direct insurance for the customer that is taking up the consortium that is buying it. And so there is a credit life in built there. And we see very good opportunities there. As to the penetration of the payroll loan insurance, we need to see that number better, considering public and private. But its penetration in credit life as a whole is 20% to 25% of our potential audience. There's a lot of room to grow. This is a new product. It's a new credit modality. So we think we have a lot of space to explore there.

Just a quick follow-up. The BRL 0.5 billion of opportunity in consortium, is this profit?

This is premium.

Thank you, Guilherme. Our next question comes from Arnon Shirazi from Citibank.

My question is about your basis scenario and guidance, just to understand your IGP-M and Selic assumptions for the year.

Arnon, thank you for your question. In terms of assumptions that we used, Selic between 14% and 15%, within that range. Of course, we define scenarios like we define likelihood. So we are working with Selic within that range along 2025. And IGP-M and IPC between 4% and 5.5%. These are the ranges that we stressed to convert both for impacting reserves and impacting our operational result and the pricing component in terms of written premiums.

Thank you, Arnon. Our next question comes Eduardo Nishio from Genial Investments.

I have 2 questions. The first one is about your loss ratio. You had a very strong good year. And what are your prospects of loss ratio, especially for crop insurance that had a very good performance this year? How did you include your expectations, not just overall but also agricultural and rural? And question number two regards pension, so with the -- it was negative in Q4 in terms of inflow. How much do you include in terms of net inflow? Do you expect an improvement as compared to 2024?

Nishio, thank you for your question. As to loss ratio of crop, we are expecting it to be higher than '24. But once again, anything that we are worried about because our comparison basis is the lowest level in history -- in our historical series. So we are seeing the climate transition now with a predominance of La Niña and with an impact where we have a relevant exposure in Mato Grosso do Sul and Rio Grande do Sul, we are seeing more severity in claims. But impact was very much concentrated in January. But we are not worried about it. At first, it's not even close to what we saw in 2022. And today, with the numbers that we are observing, it will be something between '24 and '23, what happened in those 2 years. So this is what we've been seeing, but it's still too early for us to explore any kind of trend. These are our expectations. And in principle, today, according to our climate expectations until the end of the business year, we are expecting something neutral for the next few months. We are not going to have any big surprises along the year, except if those projections do not prove to be accurate. But this is what we expect today. And as to the growth in reserves, pension reserves, we are working with a range that we have defined. So at the floor, there is an outflow of funds, if there is some stress or deterioration of the environment. So we need to contemplate that within the range. And along the business year, we might review. But today, as we are very much in the beginning of the year, we need to forecast adverse scenarios. So we expect outflow of funds. And from the middle to the end, we expect net inflow of funds. But I would say that today, considering the current scenario, there's a little bit more less volatility. We are likely to have a more favorable year, except there is a deterioration. But this is not our assumption today.

Great. Just a follow-up. AAs to the loss ratio, overall, do you see that rate flat or slightly worse in 2024 overall? We talked about crop but...

So it's likely to increase marginally because we work with prospects of increase in crop, but on the other hand, there is a reduction in credit life and home insurance. So the combination of all of this will lead to a loss ratio that it will be marginally higher.

Congratulations on your performance.

Thank you, Nishio. Our next question comes from Marcelo Mizrahi from Bradesco BBI.

Congratulations on the performance. About life insurance, in last years, performance is slightly smaller. And when we think about the dynamics, what is getting better, worse? What is your expectation for the products? The product changed in terms of mix and everything, pricing? How much growth do you expect in terms of the writing of life insurance? In terms of loss ratio, as a follow-on to Nishio's question, you said that we should think that loss ratio is going to have a slight increase year-on-year. It's difficult once we get numbers and we take a look -- and we look at rural insurance at the levels that you mentioned. So the consolidated loss ratio is unlikely to get worse. Do you see any higher numbers in life maybe to get to the higher consolidated loss ratio? And lastly, about pension, the question is do you think that 2025 can be a year of positive net inflows? Are you doing anything different in the product profile and higher interest rates or not? Do you think this is more the seasonality? And this is what we had to say.

Thank you, Mizrahi, for your question, and congratulations on the sell side. I'm going to start addressing the first one. And then I have 3 questions. If I forget something, please remind me. For life, we are working with a more favorable environment in 2025 than in 2024. We have the coinsurance that had a negative impact. And for the first half as a whole for the life product, was a difficult 6 months. So this is an old portfolio -- so it's still adjusted by the IGP-M, accounts for 80%. So when IGP-M is negative, we do not transfer price adjustments. So the policy that matured along the first half of the year had no price adjustments. So only the policies that matured along the 6 months were adjusted. So inflation in the first half of last year had a negative impact in the issuance of premium in 2025, which is a scenario that we do not expect to repeat in terms of the writing of premiums in 2025. And this is a natural dynamics that takes place in the company. When we have a more favorable environment for credit life origination, the network is going to focus as much as possible on credit life, which is a simpler product and approach than life -- pure life. So when the situation reverses and if this happens in 2025, there will be an acceleration in the growth of life insurance, even stronger than what we are expecting. But I can tell you that within the range of the guidance today, according to our assumptions, we think that it's going to grow from the middle onwards. As to the loss ratio as a whole, so crop is worse, credit life gets better, home insurance gets better, but the improvement in credit life is not enough to offset the increase that we are expecting in rural insurance. That's why the loss ratio is likely to go up a little bit. It's not a relevant increase, but we are talking about the historical floor with a slight increase in 2025. And for pension, today, the scenario that we are working with -- so we have unemployment at a historical low, the interest rate curve with less volatility. What really influences inflow is the income available. And sometimes customers panic when they see an atypical oscillation in terms of return. So this happened a little bit along 2024, especially towards the end of the year. So we took out risk from the funds along last year. And today, we are having a much more conservative management to take out volatility so as not to scare customers. So it will not have the same impact as in 2024. And our expectations looking into the 2-digit Selic scenario for 2025, less volatility curve and unemployment at a historical low. It favors that our base scenario that is optimistic, we have positive net inflow. But I do not have a specific guidance for the net inflow.

Can I follow up -- ask a follow-up? Average administration fees slightly lower this quarter, and you say this profile of less risk with the portfolios with less risk, so products with a lower risk, would there be an impact in admin fees in 2025?

Yes, there is, and we hope that this trend remains flat, what we saw in the last few years. [indiscernible] rate is less than BRL 1 billion per quarter.

Thank you, Mizrahi. We have another question from Pedro Leduc from Itaú BBA.

I promise to be brief. In terms of premiums written, we have the guidance in 2024 rural, follows credit origination at BB with credit -- with different dynamics between different credit lines. So how do you see the mix, the final combination, within crop insurance and farmers credit life insurance and rural lien? What is the final makeup?

So just as a reminder of what happened in 2024, yes, it was a little bit difficult for the agricultural products because of the whole scenario. And we were able to offset the deficit, so to speak, by opening new lines. As I said, we have livestock lien and livestock insurance related to collateral -- credit collateral. And we increased the insured amounts for the farmers credit life insurance. So we could work around the difficulties that we had in the agricultural or rural front. And so compared to the portfolio of the bank but the relationship between the products that we have in the portfolio and the bank credit lines. So costing, we can go in with crop insurance and farmers credit life insurance depending on the collateral that is given for the lien investment lines, then we can go in with lien in life and for commercial lines, life and sometimes lien. So there is a common point between the 6 lines. So farmers credit life insurance, we can work for the 3. When one of them is difficult, we can always resort to farmers credit life insurance. And this is an extremely important and relevant product for farmers, especially during the pandemic, BRL 1.3 billion, I can't remember the exact number were paid during the pandemic, more than half were for farmers that had the farmers credit life insurance. So this ended up helping a lot many families who depended on farmers -- on the farming business. For 2025, of course, our comparison base is more difficult for the growth of rural lien in farmers' credit life insurance. So the dynamic today in the buildup of premiums written, we are going to see a slowdown of the growth in lien and a recovery of crop insurance. This is the scenario.

Thank you, Leduc. We have no more questions on the line to be asked by audio, and we answered all the questions that had been asked to us in writing. So now we end the conference call for the fourth quarter of 2024. As a reminder, at the end, we have a satisfaction survey. We kindly request you to answer it, and thank you for that. Now I'm going to give the floor to Andre and Rafael for their closing remarks.

I would just like to thank you and say that I am available, I and the entire Investor Relations team, to answer any questions that we might not have answered now.

So first of all, I would like to thank our customers, our investors, and I would like to emphasize the quality of our team that is very technical and that made possible this performance with exponential growth in this company. Thank you so much for your trust and hope to see you next quarter. Thank you very much, and see you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]