Caixa Seguridade Participações S.A. (CXSE3) Q2 FY2025 Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Caixa Seguridade's Earnings Call for the second quarter 2025. This video conference is being recorded and the replay can be accessed on company's website at the address www.ri.caixaseguridade.com.br where the presentation will also be available for download. [Operator Instructions]. Mr. Felipe Montenegro Mattos, Chief Executive Officer of Caixa Seguridade, Mr. Edgar Vieira Soares; Chief Financial Officer and Investor Relations Officer of the company are present. I would now like to give the floor to Mr. Felipe Mattos, who will begin the presentation. Please, Mr. Mattos, you can proceed. Good morning Mattos.

[Interpreted] Good morning, everyone. Thank you for participating on the presentation of the Caixa Seguridade results. We will present the company's results for the second quarter 2025. It is with great pride that I begin the highlights by celebrating the historic milestone of Caixa Seguridade's tenth anniversary celebrated on May 21. This relevant is a trajectory of successful moments marked by relevant achievement and an effective contribution to the strengthening of the insurance market in Brazil with our eyes on the future, we remain steadfast in our mission guided by excellence, innovation, focus on our customer satisfaction for the next 10, 20 or however many years ahead. Celebration was marked by an inspiring institutional campaign, which brought to light the concept a decade making the future are present. More than a slogan. This message translates essence of Caixa Seguridade, which is to protect people's present, while contributing to the realization of their life projects. In this context, we launched the institutional book Seguramente” which narrates the history of the company and its relevance in the national scenario, highlighting milestones challenges and achievements throughout this decade. In additional to the institutional campaign, the celebration included promotional actions such as a launch of a package of advantages with exclusive conditions on our product of our portfolio, including cash back of up to BRL 25,000 for contributions to private pension and [ raffles ] of BRL 200,000 with Bem Estar Insurance. In addition to discounts on insurance and facilitated conditions for Credit Letters. Moving on to next slide. We start the highlights with two branches directly linked to Caixa's core business, the Housing Bank. In the second quarter of 2025, both Home Insurance, house Residencial continue to benefit directly and indirectly from the pace of growth of Caixa's housing loan portfolio. I highlight that both branches achieved once again the best historical performance in a single quarter. Housing insurance presented another period of consistent growth, reflecting this stacking characteristic of the project, which follows the performance of the housing financing portfolio. We ended the period with BRL 985 million in premiums written, an increase of almost 12% compared to the same quarter 2024 and year-to-date, consolidating Caixa Seguridade's absolute market leadership in this field. Insurance exceeded BRL 280 million in written premiums, adding a new record for the fifth consecutive quarter. This volume represents a growth of more than 22% compared to the same period of the previous year. In the first half of the year, the advance exceeds 24%. This performance is the result of the strategy aimed at the increasing length of stay of our clients with a focus on multiyear plans, facilitated renewal and insurance coupled with housing, which make house more resilient predictable and sustainable. It is worth noting that we had an increase of almost 11 percent points in the renewal rate compared to the second quarter of 2024. The Home Insurance, coupled to housing which accounted for more than 10% of premiums written in the quarter. Finishing this slide, I highlight the Parcela no Bolso campaign and the first installment with terms of three years cost only BRL 1 in the Caixa Credit Card. This modality was responsible for almost 20% of the home insurance issuances in this quarter. This partnership with Caixa [indiscernible] strengthens the synergy between the conglomerates companies while generating a base of long-term home insurance with low delinquency. Moving to the next slide, I'd like to talk about Caixa Seguridade, actually Credit Letters or Credit Life. In this quarter, we reached BRL 185 billion in bookings, or reserves, representing a growth of more than 13% in 12 months. During the quarter, we boosted in -- input through cashback mentioned previously in the commemorating actions of the company's 10th anniversary. This initiative resulted in a significant increase in portability received and 95% compared to the second quarter 2024. Performance was also favored by improvements in the processes, which allow portability to be made available in a 100% digital way. In Life Insurance, we highlighted almost BRL 600 million premiums written in the quarter, although the volume remained stable compared to the same period in 2024, it is worth mentioning the strategy aimed at long-term sustainable results with a focus on the monthly payment modality. New sales of this modality grew more than 120% in the year-to-date compared to the same period of the previous year. This approach aims to ensure a continuous and predictable flow of premiums written, contributing to gradual growth in the coming periods. As we can see in the next screen, in the second quarter 2025, we also reap the fruits of the strategy aimed at consistent and sustainable long-term results in the Credit Letter and Premium Bond segments. Starting with Credit Letter, the product maintained a robust performance, driven by current scenario of high interest rates, which favors the product as an alternative to traditional financing of housing. The volume of Credit Letters actually followed an upward trajectory, reaching more than BRL 5 billion, which represents a growth of almost 42% compared to the same period in 2024 and almost 40% in comparison between the first semesters. The highlight goes to Real Estate Credit Letters, which showed an increase of more than 52% in the quarterly comparison. In the period, more than BRL 603 million in goods were delivered, an increase of almost 70% compared to the second quarter of last year. For Premium Bonds, we maintained our focus on monthly payment products, which continue to generate positive results in the quarter. The almost BRL 440 million in funds raised represent a growth of 32% compared to the same period in 2024. Monthly payment collection grew more than 46% on the same basis of comparison, representing 95% of the total collected in the second quarter, in line with cashless initiatives aimed at digital transformation and process optimization, we focus on customer centricity, we launched a new product sales journey on the platform used by the bank's employees. The update made the process more fluid, agile and intuitive, reinforcing the salespeople's experience and operational efficiency. To conclude this first part, I move on to the large numbers of company or highlights of second quarter 2025. Well, we recorded a managerial net income of BRL 1.42 billion in the quarter, representing a growth of more than 35% compared to the same period in 2024 and 21% year-on-year. Operating revenue reached BRL 1.4 billion in the quarter, an increase of more than 28% in the annual comparison, considering the accumulated in the first half of the year, the growth in operating revenue reached almost 19% compared to 2024. This performance directly impacts our main profitability indicator. ROE, which ended the quarter close to 70%, the highest level we have ever recorded and almost 10 percent points above what recorded at the end of June previous year. In line with the form of distributions doubled since last year, the Board of Directors approved yesterday, the distribution of BRL 960 million in dividends related to the quarter's profit. The payout of more than 92% remains above 90%, reinforcing the company's commitment to generating value for our shareholders, in a consistent and sustainable manner. I'll now give the floor to Edgar Soares, who will continue the presentation, bringing more details on the company's financial and operational performance in the second quarter of 2025. Edgar, the floor is yours.

Thank you, Felipe. Good morning, everyone. Pleasure to be with you. I'm going to talk about the financial, commercial and operational performance of the company. On slide now, we summarize the performance of the finance of the quarter. It is important to note here that the numbers presented are managed year-over-year. According to the new (IFRS4) standard considering SUSEP has not yet adopted a new IFRS 17 accounting standards. In the second quarter, operating revenue grew 28.5% year-on-year, reaching almost BRL 1.4 billion of this volume, 58% correspond to the revenues from investments in equity interest with an increase of 50% compared to the same period of the previous year. I highlight here the historical results of Caixa Residencial, Caixa Consórcio and Caixa Assistência. The remaining 42% of operating revenue refers to distribution, which increased by 7% compared to the same period in 2024 with emphasis on revenues on housing and home insurance line in addition to Credit Letters. In the quarter net income exceeded BRL 1 billion, equivalent to a growth of 35.2% year-on-year. In the normalized view when we effect of extraordinary events on 2024 profit are disregarded. The results of the second quarter of this year, would be 12.2% higher than in the same period last year. From the accounting perspective, following IFRS 17 profit of BRL 1.028 billion corresponded to a growth of 57.3%, compared to the second quarter of 2024. As mentioned by Felipe, the company achieved an ROE of 69.6%, is the highest level in history, a growth 9 percent points compared to the same period last year. This growth was due to improvement of operating and financial results and the effect on the increase in frequency of dividend payments on the basis of shareholders equity on the movement that began last year with the quarterly distribution. Moving to the next slide. We're going to talk about the commercial performance of the Insurance business. Moving on, okay, we're going to try premise issues. The housing and Residencial branches stood out, which maintained the trajectory of renewed their historical records of premise. The housing line showed a 12% increase compared to the same period of previous year, reflecting the growth of Caixa's real estate loan portfolio. The Residencial branch with 22% increase in the same comparison, registered a record for the fifth consecutive quarter as a result of the strategies adopted for the segment and recently addressed by Felipe. I also highlight the annual growth of 62%, reaching the mark of BRL 2 million in the Rapidex product. The focus on consistent and sustainable results in the long term is a pillar of the strategy adopted by Caixa Seguridade. In addition to these positive results and quite a significant new sales of Life Insurance with monthly plan increase, an increase of 121.7% compared to second quarter last year. Although in this quarter, the volume of premiums for the product remain stable. This dynamic tends to translate into an increase in issuances or writings over time. The lenders insurance on -- while the Credit Life recorded 43% reduction in the issuance of premiums year-on-year comparison. This performance reflects, a more challenging macroeconomic environment marked by high interest rates, which reduces ability to contract credit for both individuals and companies. In this scenario, we also have a reduction in the capacity or ability to acquire insurance linked to credit operations. The cost of credit had resulting in a lower penetration of Credit Life Insurance. And the chart on the right hand , premiums for the second quarter, 2025 grew 6% compared to the same period 2024, which reflect the resilience of our business. In the year-to-date view, the segment growth was 7% in relation to the cumulative index in the first six months last year. On the next screen, we present some operational performance indicators compared to the second quarter of 2024. The loss ratio decreased 34.3 percent-point. This movement is due to the occurrence of extraordinary events in the same period previous year, which impacted the part of Credit Life and Housing sectors. Compared to the last quarter, we had an increase of 0.5 percent points, reflecting high volume of notices in the housing sector. In the first half of 2025, the loss ratio rose 24.8% within the historical level for the insurance segment. Regarding commissioning, the dynamics also remained within the historical level with no relevant variations throughout the year. As for the operating margin, variation of 66.7% year-on-year also reflects the loss ratio of the extraordinary events that took place in '24 compared to Q1 '25, the growth of 1.3 percent points is related to the growth in premiums earned between periods. Thus, representativeness of the total operating margin increased 11 percent points compared to '24, totaling 46% in Q2 2025. On the next slide, we have performance the accumulation vertical by segment covering private pension and also Premium Bonds. So starting with premium or private pension, the quarter was impacted in changes of the IOF which led to the decrease in gross contribution. In the first half of the year, contribution grew 1.9% over the same period previous year, reaching an amount of BRL 12.7 billion, reflecting the mobilization of sales forces, the cumulated inflow of BRL 185 billion reserves and increased more than 13% in 12 months. Moving to Premium Bonds. It is possible to observe the effect of strategy and focus on monthly payment modality whose representativeness in the total collection increased in the quarter. The sales with monthly payment grew 45.6% year-on-year, which contributed to reaching a new record in funds collected, with a growth of 31.5% compared to the second quarter '24. Premium Bond reserves, which we exceeded BRL 12.9 billion grew 47% in the year. Finally, in the quarter, BRL 5.3 billion was sold in Credit Letters, representing a growth of 41.5% compared to the second quarter '24. This performance contributed to the expansion of the stock of letters of credit, which reached BRL 39.9 billion, an increase of 62% in an annual comparison. So talking about accumulation on the next slide, operating revenue in the second quarter grew 13.1% compared to the same period of the previous year, with an increase in all segments. The main highlight was the Credit Letter. 30% growth between the periods. With regards to operating margin of accumulation vertical with the second quarter, we had an increase of 15.6% compared to the same period 2024 with growth in all segments. It is worth highlighting here the significant increases in Credit Letter and also capitalization also Premium Bonds here. Thus, the representativeness of accumulation business in the total operating margin totaled 28% in Q2 '25. On the next screen, we should have more details on distribution business. It is important to highlight that the distribution business includes the results related to revenues from access to the distribution network and the use of the Caixa brand and the revenues from brokerage and intermediation of insurance products, consolidated herein together as brokerage revenues. In the second quarter brokerage revenues grew 7.3% compared to the same quarter 2024, reflecting a mix of products sold in the period. On the left table, it is possible to follow the detailed performance by insurance lines in the accumulation business, highlighting revenues originated by House Insurance was 30%, 25% and also Credit Letter plus 55%. Regarding distribution of brokers of the total revenues, 22% was allocated for payment or award fees for cash employees and partners and 12% was allocated to Caixa service fee. The 66% portion of the commission paid by the operating companies remain with the brokerage this quarter, The operating margin fell 1% compared to the same quarter of 2024 and was impacted by the performance of the lender. Also the Credit Life. The product with highest level of commissioning in total the distribution business represents 26% of the operating margin with 21% referring to insurance vertical and 5% referring to the accumulation vertical. On the next screen, operating indicators are presented in the group vendor considering percentages of Caixa Seguridade's economic participation in each invested company. The administrative expenses ratio ADI improved in Q2 '25 with the reduction of 0.3 percent point compared to Q2 '24 and 0.3 percent point compared to the first quarter 2025. The indicator maintained the trajectory of efficiency gains with emphasis on the improvement of the indicators, the new partnerships and in the runoff operation. The combined ratio improved 9 percent points in the quarter compared to the same period of the previous years, reflecting extraordinary events of claims that occurred in 2024. Compared to the first quarter of this year, we had an improvement of 0.2 percent points, reflecting the improvement in the margins of the accumulation and insurance businesses. The ICA maintained a similar trajectory of IC. In the quarter-on-quarter comparison, we had a higher improvement then IC rising to 0.8 percent points, reflecting the increase in the group's financial result. Moving to the next slide, we can analyze the operating and financial results and their representativeness in the net income. Considering the effect of all participations net of taxes and in proportion to Caixa Seguridade. The financial results for the second quarter 2025 was above what was observed in 2024 with an increase of 30.6% reflecting a higher SELIC rate, higher leverage balance applied and the improvement in portfolio profitability. Thus, the financial result accounted for 32% of Caixa Seguridade's managerial net income in the quarter, an increase of 1 percent point compared to the first quarter. Regarding the group composition of the investment portfolio in the second quarter 2025. Of the total of BRL 15 million in financial investments 48% were both fixed security, 32% in prefix security and 14% in the inflation industry. The other 6% in other types of funds. Average yield of the fixed rate portfolio was 12.5%, an increase of 100 bps as compared to the March '25 position, reflecting the renewal of securities that matured in the period with securities with a higher yield. With this, we conclude the presentation of our earnings for the second quarter 2025, and we'll start the Q&A session. Thank you to each and every one of you.

Thank you, Edgar. Thank you, Felipe. [Operator Instructions] Our first question is from Mr. William Barranjard from Itaú BBA.

[Interpreted] I have some questions here regarding private pension. The first is gross and net premium bond sale. Well, you were able to have positive input or intake even regarding turmoil regarding VGBL and IOF. What do you see in this growth funding how this should be impacted from now on? And also thinking about net funding, what you should assume we should see from now ahead? And second question regarding also private pension. Thinking about the management fee, it dropped to 10.6%, and it has compared to the drops in the previous quarters, has it had an impact because of the impact on this redemption rate or because of a greater allocation on fixed income?

[Interpreted] William, I'm going to start speaking, bring you some more macro data that we may have regarding VGBL and IOF and the impacts down the market. First point William is that those impact were for everyone in the market, not only for Caixa Seguridade. Let me say that we had a very fast response regarding the market growth in terms of placement when it was lower to BRL 50,000 the specific amount of investment and the new decrease that we had on IOF. And it impacted the whole market, not only the private pension, the investment market for all the segments of the financial system work and relentlessly to understand the impact and understand what the best reaction would be. Caixa Seguridade will go in depth. We felt a great drop in origination of resources so that the market could understand what the impact would be, but we can bring here that about 15% is expected of impact to our origination regarding what was initially estimated for our part of private pension. Edgar, if you want to go in more in depth?

[Interpreted] Thank you, Felipe. Regarding growth funding, Felipe brought our preliminary valuation had been at a level of 15%. We're expecting a rate of 15% to 25% impact on growth funding for private pension because of the increase in IOF, tax on financial operations. So in terms of net funding, Caixa has been adopting such portability, a change in positioning, and we have here an expectation that is not so impacted as growth funding because the market is already quite large and Caixa is already a consolidated institution in this market. With regards to the second question, the management fee has been reduced regarding more conservative funds, ways of investment and greater appetite that we have been having regarding funds that are already managed in the market, bringing reserves to Caixa Seguridade, right? I hope I have answered your questions. Well, if you need anything else will be available to go in depth.

Next question is from Ricardo Buchpiguel from BTG Pactual.

[Interpreted]. I have couple of questions here. This quarter, in addition to challenges because of credit origination because of the macro conditions, you had certain issues on certain INSS issues. Well, if you have anything, well, if you have the premiums for credit life in the next quarters, if this one is something we should look from now on? From my side, second question, you see better performance of origination in life premiums and you commented there is product of monthly payment is growing more. What we saw in terms of premium bonds. How should -- when should we see an acceleration in this segment of Life in the next quarters of the year? This makes sense to have this line growing at some point in two-digit levels if you consider that greater growth in monthly plans or payment plans?

[Interpreted] Well, thank you very much for your questions. With regards to Credit Life, this gap that we had regarding INSS impacted for brief period of time. It was received with nimbleness, and we actually have that readoption of Credit Life. The performance Credit Life has been impacted by these variables that we have brought here that you have reinforced on your question. We have an expectation of a second half that is stronger than the previous considering funds for rural credit are available again. The mandatory funds and the credit lines for corporations should move forward in the second half. In addition, we've also had the launch of our Credit Life insurance or the credit for workers, this should also bring positive impact, combining the whole situation and all the factors, scenario of the first half should be lower than the performance that will observe in the second half of the year. The second question -- sorry it was about, yes, Life Premium. Regarding Life, this change in strategy when we observe the behavior of monthly payment products. We start viewing a stacking of that from second half next year, we have time line of 12 months to observe this increase. The fact is that this operation of monthly payment produces the stacking and brings new business opportunities and customer relationship. We have been investing a lot in it, and we understand it's more long-lasting and brings more predictability, more return for shareholders and for the company as a whole.

The next question is from Kaio Prato from UBS.

I have two on my side. First regarding well, you have had a very good performance, both, regarding mortgage and also housing. I'd like to know if you can break it down. If we can -- what we can expect from now on, if this growth level can be more sustainable on this two lines, especially in terms of Home. You mentioned coupled insurance has the share in the pocket on Parcela no Bolso. So I'd like to understand more about those products, if they have an acquisition cost that is higher, their economic viewpoint or if you imagine something of campaigns for other products as well? Perhaps you mentioned a bit of Credit Life. If for any other products, if you may have any other campaigns thinking about second half of this year?

[Interpreted] Thank you for the question. I'm going to talk about the overall lines and then Edgar can talk about that. Regarding homes, we expect the volume similar to the first. We follow the guidance given by Caixa. Caixa is going to disclose its number regarding Q2, and then second half when it makes its earnings results presentation. We had a very robust semester when we have -- what is the guidance of Caixa. Contracting rates at Caixa has been [indiscernible]. We believe that what we have seen in the first half, it has been a very robust quarter, very strong. And again, above expectation. We always work with best scenarios, but we must pay attention to a scenario that SELIC will be kept at the same level and the budget is not kept as expected, But Caixa from what it has given to us as indication when it brings to the market, it seems that it will be the year higher than last year, and it brings a good outlook for the second half regarding housing or mortgage. Regarding homes, we're growing at a faster rate than we grow in mortgage and because we are working on our portfolio to go deeper into your question and Edgar can talk about it later. But it's important for us to search ticket, we are seeking products that are more coupled more necessary for each type of customer. When I have more appropriate product for all types of customers. Caixa works with more segmentation of customers. We attained a higher level of customer satisfaction in terms of sales and renewals. Regarding sales strategies, campaigns are always analyzed according to needs both for the market and sales and for each product. So if necessary, for Credit Life, Mortgage, Rapidex we'll hold a campaign as long as we respect our premises which is customer focus, the effectiveness of the campaign and having an outreach to the real need, not only for the company, but especially for the customers we try to serve in the long term. Edgar is going to talk about the strategies.

[Interpreted] Well, Kaio, thank you for your question. With regards to Parcela no Bolso or share in the pocket, it's pluriannual. It brings a dynamic of greater permanence and so through payment with credit card. So it has a likelihood of cancellation that is lower and the operational cost is the same. So the improvement in the indicators offset initial payment, and we have observed a good behavior of our customers regarding the product. With regards to the [Foreign Language] or the home coupled, it has several advantages for customers because it brings with the installment of the mortgage payment and accounts into the account of the customers and their monthly expense in addition has reduced cost and longer term, which makes the customer to actually benefit from the insurance of the life cycle of their housing contract. And actually, the loss ratio is lower with less use of the insurance. So it's a strategy that has been bringing good results, and we have been investing a lot in making it along with our housing insurance. I think with the campaigns, Felipe addressed them quite well. We have to check the need opportunity or timeliness and convenience of holding them, in addition to bringing all the suitability, customer focus and the opportunities that come up at given times and market variables for us to tap into them and not be outside them. After all, we have a wonderful distribution network in the bank, and we need to boost those businesses.

Our next question comes from Antonio Ruette from Bank of America.

[Interpreted] I'd like you to elaborate on the possibility of the increasing penetration and maintaining the insurance sales penetration despite level that is potentially weaker. The question is, well, if we continued the interest rates, well, what we have in terms of levels that tend to be a bit below considering payroll deductible, if you can think you could talk about increasing penetration? That would be great.

[Interpreted] Great. Thank you very much. Answering your question, I think the higher interest rate scenario leads customers that are recurrent borrowers that frequently renew their contracts. They have lower search for credit, and we have the possibility of also working on other customers that are not typical borrowers. In addition, we have the payroll deductible for workers that brought an interesting customer base for the bank to work on space for growth penetration in the customer base exists. Caixa is revisiting its strategy with customer relations. We have been working on that. It's been a time for good exchanges. We've been moving forward quite well regarding the base, and everything we have been programming to deliver to our customers. So the penetration we have today should be growing on the timeline, and we should increasingly observe an expansion of the customer relationship of customers and Caixa and obviously, through our products and are having outreach to an increasingly greater audience.

Our next question is from Arnon Shirazi from Citibank.

[Interpreted] I also have two questions. My first question is regarding private payroll deductible. You said you expect an improvement second half on the part of Credit Life. If you could give some -- shed some more light on the ramp-up of this project? Second question is regarding general expectations for the second half of this year. As I've mentioned, you talked about the part of mortgage or housing. I'd like to have a know of you, what you expect in terms of the second half or considering you have no formal guidance for that.

[Interpreted] Thanks for the question. Let's talk about Credit Life and workers' credit. We've been developing a differentiated product. We should not keep early on the traditional products of credit life, we have a coverage that is also something that we are testing. Now we should expand it in the second half, which is loss of income. This coverage is interesting because we make a previous selection, the employer the borrower and also the profile that we have in the portfolio is starting this operation, and we have a great possibility of having interesting penetration of the product. Today, in payroll deductible, we have something. If you look at general concessions about 40%, 50%, depending on the period, some periods even higher than that, and we should also have an interesting penetration. With this new product, along with those convenient part of the portfolio. Regarding second half, I'm going to turn over to Felipe.

[Interpreted] Well, just bringing an overview. Well, for Credit Life which observe growth regarding first half. We have a more favorable scenario. In the second half with all the things that I've already brought to you, life insurance, we have this strategy. Actually, this payment that is going to be monthly. So for private pension, we have the high interest rate. So our business is resilient and strong because of balance between the result that we have from distribution, financial management and our profitability from our companies. The outlook we have is earnings results growth, commercial performance, they're line by line, product by product. We should go in the much greater detail than what we're bringing here. But overall, with strong businesses and growing results for the second half.

[Interpreted] Thank you for your question. Just to bring a bit that data that you asked about, I'm going to break down into segments. For well, mortgage, we've already talked about depends on the performance of Caixa. It's a market leader. Also, we have housing insurance. So we have an opportunity in the second half to keep on working on our portfolio, better understand the needs of our customers and be able to offer those customers an even better and more adaptive solution to their [indiscernible] regarding well, private pension, it's a challenging scenario because of the increase in the IOF. We're dealing and responding fast and quite efficiently. Regarding this new reality, we have been able to maintain a good level of growth, of course, impacted by the uncertainty brought by the IOF. Regarding life insurance, we have a challenge. We're actually bringing something that is [indiscernible] in the long term or good in long term, well, we'll feel in the next 12 months, we're going to see the result of the strategy of the monthly payments. But now we are still having a growth that may be improved in the second half, and so we spent, regarding Credit Life, it's been impacted in the first half. It should be growing more. We had a gap regarding the first half regarding what has been estimated will work with a new reality regarding what was expected for the year of 2025. Just as the whole market has acted regarding this segment. A great highlight we may bring our Credit Letter and also Premium Bonds with a high SELIC rate and the strategy of the company, we may say that we expect robust growth, as mentioned in the -- seen in the first half. So we have good outlook in those segments just as the system that is a product that is very closely related to our Caixa audience, and we are very pleased to bring solutions systems to our customers. Speaking of products, we are working on various lines and various fronts to launch, to brought the, the loss of income, the new support and assistance, new insurance, new products to our customers, we may improve not only our results, our penetration, but especially adaptability and customer service or Caixa Seguridade customers.

Next question from Maria Guedes from Banco Safra.

[Interpreted] I'd like to talk about what product people have been praising. Felipe mentioned which is actually a Credit Letter. The product accounts for 10% of operating margin of Caixa Seguridade considering the performance of the product and what is distribution revenue, and the product that has had a very good performance in the industry as a whole. And you have space for growing penetration within Caixa Seguridade. I'd like to understand your view in terms of commercial performance of the product. Even though it has had very good performance. Do you expect lowest, well, if we have lower interest rates, we see a lot of competitions in this project. I'd like to note the main point what the main expectation regarding it, looking at the operating margin. We have results that come from commissions and also from the operating margin, as you stack certain bonds. What would be the potential for the product for Caixa as a whole looking at a medium to long term?

[Interpreted] On Credit Letter, we should talk about the complementary strategy of traditional housing or mortgage. But our Credit Letter make the complementary tool. And in the second half, we expect to have high SELIC interest rates, we have a robust growth in credit letter segment. What about our strategies. Well, it's important to stress that our Credit Letter has cancellation fee that is the lowest in the market. We have customers coming from bank assurance to Caixa. It's more qualified. Second point is that we make an analysis of the customer. Their profile as we sell Credit Letter. Not only a sales to a future acquisition of an asset. But actually, the analysis to see whether the customer will be able in the future once they are contemplated of actually pay the installments once they are contemplated. So we anticipated -- controls made. We actually make the analysis before the new loans or letter. So we don't want people to have Credit Letters as a frustration. They want -- we want those to be stream fulfillers. We have a growing margin of our business, especially while brokerage expenses are high in the beginning, and they come as revenue for Caixa Seguridade. But we think that in terms of management fees, we have a differential regarding the market. We're still very young. Our operation of Credit Letters in the current model is from 2021. And our average management fee is still a bit high, although we have brought in previous calls, we expect it to stabilize between 3%, 3.5% over the years based on the portfolio. But Edgar overall I've mentioned that everything. So if you want to go in depth?

[Interpreted] Well, the challenge of going in depth after so much information you shared well regarding commercial strategy, just to share with you. It's important for us that we have been working on reduced installment payment on the product. It brings the possibility for customers. They're already pay rent, they can actually have, for example, Credit Letter for real estate, they can actually pay higher installment when they have high Credit Letters, well, the customer paying some kind of financing or loans. They used car, for example, for commercial activity. So they may have a Credit Letter or not, actually buy the vehicles. So reduced so much is a strong strategy, expanding the Caixa channel. The way Caixa has been positioned regarding its channels. It's also important and Credit Letter segment is following that. We know it's a very competitive market. And we have a lot of players. There is this competition in the market, but it is a project that is a dear product for Brazil. People like the product. And we have in the Caixa brand it's soundness, the indicators. Felipe talked about the indicators that we have. We have better indicators than the market. And now we have high contemplation, low cancellation fee. So our product is well positioned. We'll position it better in media, in the ways people can visualize the products so that we have an increased audience and it can be reflected when we have a lower interest rate. We have a trade-off between traditional positioning and Credit Letters as you have been observing. We have a record of hiring housing and mortgage and also Credit Letter so we can coexist with the two movements on banks counters.

Our next question is from Tiago Binsfeld from Goldman Sachs.

First, we should -- with Edgar's success in the new position. My question is exactly that. The change in CFO, if you can comment, if anything changes in terms of strategy of the company. What changes Edgar tapping into your experience that is very vast in the retail network of Caixa. If you see opportunities of improving incentives and also a part of private pension?

[Interpreted] Thank you, Tiago. Thank you very much for your question. You gave me an opportunity. I was expecting. at some point to be able to talk about that. Initially, Eduardo has worked here as a Director at several roles, at Caixa Seguridade -- very grateful to everything he has done. He actually performed greatly. He was an executive, an exemplary executive. We were very happy to have him in the company. We don't expect line changes in our way of thought and the way we act. We like and we fight to keep on being a company that is predictable, conservative company and also our shareholders and customers are able to trust. We don't expect any change. This is not our ideas change in any line of our action in the financial field. The first part, it's important for us to bring it up. Well, Edgar's arrival, which has been exemplary from our commercial in Caixa Seguridade. He also has a very sound background in financial department and also in the controllers area. We brought Edgar from the commercial state to the financial seat because we expect continuity in our way of work and our lines of thought. We strengthened ourselves with a person that has a strong commercial resume bringing [indiscernible]. So bringing Edgar from commercial to financial, the deals with that very well. We wanted to share this impression, this idea to the market that we want to continue being what we are. We understand that our business model is something solid. It's a successful model, and we believe in it. Therefore, we plan to continue as we have been so far. And once again, I'd like to thank Eduardo for everything he has done, thanks Edgar for the period he's been on commercial and wishing him great success in expressing mine not only mine and from the Board of Directors of Caixa Seguridade's total trust in the performance and work of Edgar's heading the financial department and Sidney, who is going to take over the commercial department.

[Interpreted] I'm going to take the floor to thank for your congratulations. I'd like to say that I've been -- two years with great Edu, CFO of the company, when working in the commercial department. To highlight how much we've grown together, learn, share ideas, and we'll keep on being in the same direction that we have had so far. I'm sure that we're going to follow this line of work, the work that we have, the team that we have that is very strong that has brought all the result, predictability to you so that we can keep on working together over this period. I'd like to thank Edu, -- and pay, tribute to him. Welcome Sidney, a wonderful person long background in the retail network. We work together in the retail of the bank, and I'm sure that we're going to keep on firm on the same pace we had with the new management. Thank you very much and success to all of us.

If I could just have a follow-up tapping into your experience coming from the commercial area regarding incentives for distribution of products do you think today, the incentives are well positioned? Or if you see any opportunity, perhaps more in the long term of the improvement and even increasing the products within the network?

[Interpreted] Well, I am moved and the answer for the second question never came up. Well, with the remodeling and let me put it like this. The strategic change that the bank is going through and that we are engaged the expectations of various incentives of the bank should be reflected all layers of its commercial departments, areas, branches portfolios, and we're working along with them, to foster correct incentives to right people to have the sales made to the right customers and all that being done in a sustainable way. Today, we have incentives. Of course, it's the bank's counter. We have competition of all financial products we have in the bank. So we are here with about 20% of the way we expect the performance of normal commercial activities and what we have been sharing with you, we have room for other incentive mechanisms, performance evaluation. Caixa has been evaluating that. We see perceptions of both of colleagues, their work in branches as well as various managers here so that we can tap into those strategies and foster new incentives. The traditional ones that we have will be maintained. And we evaluating the inclusion of other instruments now in the near future. And we'll analyze that along with the bank to launch that as soon as possible. Thank you.

[Interpreted] The most important that we may say is that Caixa Seguridade is in a relevant part in the Caixa's results. And we don't expect any changes in the guideline of the bank regarding incentives and the policies of what is already done. After all, Caixa Seguridade will intend as a conglomerate to follow Caixa's steps and grow better serving society and our customers.

We have one more question. Guilherme Grespan from JPMorgan.

[Interpreted] Two more technical questions on my side. In Life, remind us what is the percentage of the premiums linked to [ IGP-M ]. The prospects for the forthcoming months, considering [ IGP-M ] has been suffered with the devaluation ratio. The second one is Private Pension and Credit Letters, can you remind us what is the accounting method of commissions, not from brokerage. I think it's Caixa regime, but only from the viewpoint of the operational subsidiary? Just to remind what its Caixa regime, if it's deferred over time if it's Caixa -- the context -- so question is more private pension, if you could actually answer on Credit Letters. If this commission of Credit Letters is also deferred?

[Interpreted] Thank you for the question. Well, today, we have 70% of life linked to [ IGP-M ]. It's a representative share, bringing very objectively the answer to your question regarding private pension and Credit Letters results on the company are deferred on time line. It generates stacking all the dynamics we already have, level of commercialization today reflects in the future results and some products may suffer -- well, because of tax and the part of Credit Letters is greatly improved. So we have to work Credit Letters because it's a product of Caixa.

We now have one more question in writing from the HSBC analyst, Carlos Gomez-Lopez. I'm going to ask your question. This question is regarding changes of tax policies. First regarding if there is an outlook of changes in the IOF considering the impact of those changes have on the system. And this generates a negative impact for accumulation of financial resources in Brazil. This is the first question. Second question is regarding the outlook, an impact of increase in social contribution for insurance companies in June. I'd like to know if this is going to materialize, who should be impacted?

[Interpreted] I think the first question is more important. We'd also like to know regarding your question regarding the tax scenario and the impact of what they may bring will always going to work according to the market. The industry analyzing the market according to what comes up. We cannot stipulate or say what will happen if there will be actually a change, in the fiscal tax policy, perhaps what has been in terms of changes in the tax reform regarding policies that may come up that are not on our radar are things that we cannot clarify. I can assure you that we'll be following the market according to our industry in action in a proactive way as ready as possible. Edgar go ahead.

[Interpreted] Carlos, what we have to say regarding tax changes is that -- it is something that actually does not depend on us. We have to work and change as fast as possible to adapt and to be inserted in the market. we have been observing, where we are keeping everything on our radar and having a counter cyclical measures so that we can have certain measures in such a more portability work on inputs or customers have a second institution, we can be a second private pension institution, and we have a logic working on to be countercyclical which is aiming at best results in the area regardless of the scenario. Second question, with the preliminary analysis we've made is the impact of the movements in what we have in terms of spending. So the levels are half way for us to be able to analyze, but 5% is what we have observed so far.

[Interpreted] I'm going to move on to the next question in writing from a shareholder called himself. My first question was answered regarding the new financing lines, regarding private credit, it's being delved into. Well, regarding impacts that may happen we -- regarding the nonrenewal of the shareholder contract?

[Interpreted] Thank you for the question for your interest. It's interesting to have investors following our earnings results call. And it's very good to be in touch with everyone. Regarding the first part, as Matheus brought, we have been debating the question. We don't need to be long on that. The part [indiscernible] is the renewal of the agreement is simply not commercializing the actually housing in terms of the Seguridade, our equity or our share is maintained in the company. We have the commercial agent of the bank made by to Seguros. And we as participants this corporation will have the results or the company, whilst we are partners as we are also keeping a share of it. We keep -- we follow on the same path. As to back counter commercialization. We follow with the first option, which is Caixa Residencial, the housing and second option on market. Our second option on the counter is [indiscernible], the insurance company that offers the housing insurance along with our Caixa Residencial okay. And brief, for the time being nothing changes. We don't have an outlook of change regarding that. Much on the contrary, we'll continue with housing insurance on the bank from these two insurance companies we follow the Seguros with the Bank.

[Interpreted] Thank you very much. The Q&A session is closed. I'd like to give the floor to Felipe Mattos so that he can make his final remarks.

[Interpreted] Thank you, Matheus, Edgar. But especially thank you who believes in Caixa Seguridade, who follows our results, our performance every employee, enthusiastic shareholder that takes a bit of their time that uses a bit of their time to be here with us to encourage even more our continuing with this company that certainly will be a success for the next 10, 20 or 100 years. Thank you very much.

Caixa Seguridade video conference is closed. We thank everyone for their participation, and wish you all a very good day.