Caixa Seguridade Participações S.A. (CXSE3) Q3 FY2025 Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Caixa Seguridade's Earnings Conference Call for the Third Quarter of 2025. Please note that this conference is being recorded, and a replay will be available on the company's website, www.ri.caixaseguridade.com.br, where the presentation can also be downloaded. [Operator Instructions]. Joining us today are Caixa Seguridade's CEO, Gustavo Portela; and the CFO and Head of Investor Relations, Edgar Soares. I would now like to turn the floor over to our CEO, who will begin the presentation. Please, Gustavo, you may proceed.

Good morning, everyone, and thank you for joining us today in Caixa Seguridade's earnings call. I'm Gustavo Portela, and it's a great honor to assume the leadership of the company at such a meaningful moment in our trajectory. I'd like to start by expressing my sincere gratitude to the Board of Directors, Executive Board and all employees for the trust placed in me. We're living in an era of accelerated transformation where innovation, agility and purpose are essential to building companies that are resilient, relevant and prepared for the future. My mission is to strengthen these pillars, leading Caixa Seguridade on a journey of sustainable growth, positive impact and excellence in everything we do. I've been with Caixa since 1999, building a career defined by leadership, innovation and delivering results. I've held several strategic positions throughout the bank and the group. And in recent years, I have also served in executive roles in private companies and also as a mentor to start-ups and an entrepreneur. Since 2024, I have served as a Head of Investment at Funcef, one of Brazil's largest pension funds, where I was responsible for managing strategic assets and generating sustainable value for the beneficiaries. To our shareholders, I would like to reaffirm our commitment to long-term value creation. We'll continue to accelerate our digital transformation, expand strategic partnerships and keep delivering consistent results with transparency, governance and responsibility as a basis of our performance. I'm very confident and motivated about what we can build together. And now let us review the company's results for the third quarter of '25. We begin with Caixa's participation in the 30th United Nations Climate Change Conference, COP30 to be held in Belém next week. This event represents a strategic milestone for the company as it allows us to take part in one of the world's leading forums on climate change. Our presence at COP30 reinforces our commitment to sustainable development by promoting solutions that combine economic growth with environmental preservation. One of the company's main initiatives will be our role as an empowering partner as Casa do Seguro, insurance house, as CNseg calls it insurance Embassy at COP30. The house will serve as a hub for content business connections and networking, highlighting the insurance role in the climate transition. Another very important initiative that we're going to see there is the active participation in the inauguration of the concept branch Ver-o-Peso, marking an important milestone in Caixa's transformation of the banking experience. Moving to the next slide, we highlight now the commercial results in two segments -- two business lines directly connected to the core business of Caixa, the housing bank. In the third quarter of 2025, both mortgage insurance and home insurance continued on a growth path following the expansion of Caixa's real estate credit portfolio. Both segments recorded once again their best ever quarterly performance. Mortgage insurance posted consistent growth, driven by the stacking feature of the product itself. We closed the quarter with slightly above BRL 1 billion in written premiums, representing an increase of more than 10% year-over-year and 11.5% year-to-date, consolidating Caixa Seguridade's leadership in this segment. Now talking about home insurance. It exceeded BRL 300 million in written premiums, setting a new record for the sixth consecutive year. This volume represents a growth of nearly 29% compared to the same period in '24 and 26% year-to-date. Performance reflects our strategy of customer loyalty and retention, focusing on multiyear plans, simplified renewals and bundled home insurance linked mortgage, which accounted for over 10% of the quarter's written premiums, granting more predictable results. So we have almost 7% renewal rate compared to '24. Moving to Slide #5, we present Caixa Seguridade's performance in the private pension and Life segments throughout the third quarter of '25. In the pension segment, we reached approximately BRL 192 billion in reserves, representing a growth of more than 14% over the past 12 months. During this quarter, we continued to promote inbound portability, particularly through our cashback campaign, which delivered the highest quarterly volume ever recorded, BRL 624 million, a 51% increase compared to the third quarter of '24. This performance significantly contributed to a net inflow of BRL 1.1 billion during the period. More recently, at the end of October, we launched the Prev IOF Back campaign, an innovative pension plan that reimburses the client equivalent to the IOF tax paid automatically invested as a new contribution. In the life insurance segment, we issued nearly BRL 600 billion in written premiums in the quarter, a 2.6% increase compared to the same period in '24. During this period, we also expanded our portfolio with the launch of a personal accident product with income loss coverage for mortgage insurance clients, covering up to six installments of mortgage payments in case of involuntary unemployment or temporary physical incapacity. This product has a monthly payment model, and it contributes to the formation of a long-term recurring portfolio. In this third quarter, we also reaped the benefits of our long-term sustainable growth strategy in the credit letter and premium bond segments. Starting with credit letters. This product remained robust, driven by high interest scenario, which makes the credit letters an attractive alternative for traditional financing. The total amount of credit letters issued continued to rise, surpassing BRL 6 billion, a growth of nearly 30% compared to the same period in '24 and over 35% year-to-date. The highlight here goes to the real estate credit letters, which grew almost 40% year-over-year. Talking about premium bonds, we maintained our focus on monthly payment products, which continue to perform strongly. In the quarter, we collected over BRL 485 billion, a 33% increase year-over-year. Monthly payment products grew by more than 36% on the same basis, accounting for more than 92% of the total collections during the period. To conclude the first section, let's move to the company key figures for the quarter. We recorded managerial net income of BRL 1.14 billion, representing a growth of more than 13% compared to the same period in '24 and over 18% year-to-date. This performance directly influences our main profitability indicator, ROE, return on equity, which reached 69.2%, more than 6 pps higher than in September 2024. So the Board of Directors approved yesterday aligned with our distribution policy, the distribution of above BRL 1 billion. It's a milestone, and it is corresponding to a payout of over 92%, keeping our 90% threshold again, which reinforces our commitment to delivering consistent value for shareholders. I now hand the floor over to Edgar Soares, who will continue the presentation with further details on the company's financial and commercial performance for Q3 '25.

Thank you, Gustavo. Good morning, everyone. I will now present further details on the company's financial commercial and operational performance in the slide. On Slide #9, I summarize the financial performance for the quarter. It's important to note that the figures presented here follow a managerial view under IFRS 4 accounting rule. In the third quarter, operating revenue grew 13.6% year-over-year, reaching BRL 1.5 billion. Out of this amount, 58% come from income related to investments in equity holdings. It's worth highlighting the performance of all new partnerships. We reached the best result ever, up 20.3% year-over-year. The remaining 42% of operating revenue come from distribution activities, which grew 11% year-over-year, highlighting the segment's mortgage and home insurance as well as credit letters and bonds. In the third quarter, net income reached BRL 1.14 billion, representing growth of 13.4% compared to the same period of the previous year. And for the first 9 months of '25, the year-over-year increase was 18.2%. From this accounting perspective, net income through September rose -- grew 23.9% compared to the same period in '24. Wrapping up the slide on the right side, I'd like to reiterate what Gustavo had said. Our ROE reached 69.2%, an improvement of 6.3 pps year-over-year, reflecting stronger operational and financial results. Moving to the next slide, let's discuss now the commercial performance of Caixa Seguridade's insurance businesses. Let's start talking about the written premiums that grew nearly 1% year-over-year and more than 6% quarter-over-quarter. I'd like to highlight the renewal and the growth trajectory in renewed historical premium records. The mortgage segment reached and surpassed BRL 1 billion in written premiums, a 10% increase year-over-year, reflecting the continued expansion of Caixa's real estate credit portfolio. The home insurance segment grew 29% on the same comparison, marking the sixth consecutive record quarter. This is fruit of the strategies approach by the segment. We also note a strong increase in the Assistance segment of 49%. Year-to-date through September, mortgage grew 11.5%, home insurance 25.8% and assistance 54.4%, all compared to the same period in '24. Focus on long-term consistent results remains a cornerstone of Caixa Seguridade strategy. In addition to this remarkable results, new monthly payment life insurance sales grew by 39.7% year-over-year. While total premiums remained stable in the quarter, this dynamic will support future growth in insurance for the future. Credit life insurance, on the other hand, recorded a 36% decrease -- 36% increase in written premium year-over-year. This performance reflects the impact of a challenging macroeconomic environment marked by high interest rates, which reduced credit availability for both individuals and businesses since the credit cost is higher, limiting the credit life insurance penetration, but we can see an increase of 15%. In the chart on the right, you can see that the earned premiums for the third quarter grew 6% compared to the same period in '24, reflecting the resilience of our business. On a year-to-date basis, the segment grew 6% compared to the accumulated results up to September of the previous year. Moving on to the next slide, we present some key operators performance indicators. Compared to the previous quarter, the loss ratio improved by 1.3 pps, reflecting lower claim volumes in the mortgage, credit life and life segments. Compared to Q3 '24, the increase of 3.7 pps is associated with some provisioning for claims and reinsurance adjustments related to the 2024 floods in the south of the country last year, which affected the Mortgage and Home segments. Year-to-date, the loss ratio stood at 24.5%, consistent with the historical average for the insurance segment. Regarding commissions, the dynamics also remained within the historical range. The 1.1 percentage point variation in the indicator compared with the previous quarter is related to the product mix. Regarding operating margin, it grew 17.1% year-to-date versus '24, driven by a lower claim volume. On a quarterly basis comparison, you can see a growth of 5%, reflecting the increase in earned premiums. As a result, the total operating margin reached the same level as in '24, totaling 40% in Q3 '25. On the next slide, we show performance in the accumulation vertical, which includes segments such as private pension, premium bonds and credit letters. Starting with pension. Total contributions reached BRL 7.1 billion, up 5.4% year-over-year and 24.6% quarter-over-quarter. Net inflow reached a positive BRL 1.1 billion, reflecting commercial mobilization, focused on both acquisition and retention. which contributed to a milestone of nearly BRL 192 billion in reserves, up 14.4% over 12 months. Moving on to premium bonds, we can observe the effect of our strategy focused on the monthly payment model, whose share in total collections increased during the quarter. Monthly payment sales grew 36.2% year-over-year, contributing to a new record in total funds raised of 33.3% compared with Q3 '24. The reserves of premium bonds exceeded BRL 3.1 billion, growing 43.7% over the year. Finally, in the quarter, Credit letter sales totaled BRL 6.3 billion, representing a growth of 28.8% year-over-year. This performance contributed to the expansion of the credit letter inventory, which reached BRL 44 billion, an increase of 56.5% compared to previous year. Still talking about accumulation businesses. Operating revenue in the Q3 grew 13.2% year-over-year, increases across all segments. The main highlight was the credit letter segment, which grew 25%. The operating margin of the accumulation vertical increased 11.7% year-over-year, driven by revenue growth across all businesses. As a result, Accumulation businesses accounted for 28% of total operating margin in Q3 '25. On the next slide, we present further details on the distribution businesses. It's important to note that the distribution businesses include revenues related to access to Caixa's distribution network and brand usage as well as brokerage or intermediation revenues from insurance-related products, which are grouped here under the label brokerage revenues. In Q3 '25, brokerage revenues grew 10.8% compared to the same quarter of '24, reflecting the product mix sold during the period. On the table at the left, you can see the breakdowns by business lines show strong performance from mortgage insurance that grew by 26%, home by 29% and credit letters that grew by 40%. Regarding the distribution of brokerage revenues out of the total amount, 22% was allocated to the payment of incentive fees to Caixa employees and partners and 12% to Caixa service fee. The remaining 66% of the commission paid by the operation companies stayed within the brokerage firm this quarter. Thus, the operating margin increased 6.1% year-over-year, driven mainly by the performance of mortgage and home insurance results. In total, the distribution business accounted for 27% of the operating margin with 22% representing the insurance vertical and five accumulation vertical. In the next slide, we present the operational indicators in an aggregated view, considering Caixa Seguridade's economic interest in each invested company. Our IDA administrative expense index remained at the same level as in the previous periods with an improvement observed indicator in new partnerships, reflecting greater efficiency. The combined ratio, IC improved by 0.8% pps actually compared to the previous quarter, reflecting stronger margins in accumulation and insurance business, particularly due to lower loss ratios. Compared to the same period in '24, the 0.9 pp increase reflects adjustments in claims and reinsurance provisions related to the floods that occurred in Rio Grande do Sul in the south of the country in '24. The expanded combined ratio, ICA also improved compared to prior periods, reflecting the performance of the consolidated financial results. Moving on to the Slide #16, we can now analyze the operating and financial results and their share of net income, considering the effect of all equity holdings net of taxes and in proportion to Caixa Seguridade's participation. The financial result for the Q3 was higher than observed in '24, growing by 46.1%, driven by a higher Selic rate, a larger average balance of financial investments and a positive impact of about BRL 30 million from the IGPM lag effects on the revaluation of [ pension ] funds and liabilities. Thus, the financial result accounted for 36.3% of Caixa Seguridade's managerial net income in the quarter, representing a 4 pp increase compared to the previous quarter. Regarding the composition of the investment portfolio in the quarter out of a total of BRL 15.5 billion in financial investments, 49% were allocated to floating rate securities, 32% to fixed rate securities, 13% to inflation indexed securities and 6% to other types. The average yield of the fixed rate portfolio stood at 12.6%, a 10 pps increase compared to June '25, reflecting the strategy of extending portfolio duration and diversifying maturities across different time horizons adopted by the company's invested companies. With this, we conclude the presentation of companies of the company's results for Q3 '25, and we now begin with the Q&A session. Thank you all very much.

[Operator Instructions] Our first question comes from Ricardo from BTG Pactual.

I have two questions from my side. We have seen a great acceleration in growth from mortgage to home insurance and accumulate business. I'd like to understand if you had a change in attitude with this appetite for growth and incentive. If there's any short-term effect in the housing premiums, but understanding that this model can stimulate the emission of LCIs from some banks, which could bring some more competition to this private pension. I'd like to understand if you -- what's your position in this scenario?

Well, thank you for your question. Regarding the capitation of resources, the most important part here is that we've been perfecting our portfolio and improving our sales strategy. We have new products over the counter in the bank that can be offered by the bank or a line and another depending on the situation. We have seen that before. But now we have a counter cycle situation, and we've been working a lot regarding private pension to be able to work in inbound portability and increase retention and work with the resources that are within the industry. But we have offshore, of course, a perspective to keep our focus in private pension together with this financial institution. But of course, we're going to feel the impact of IOF throughout the next year, and we have to observe very cautiously how can we keep growing. But the fact is that we've been trying this countercycle movement. We have different campaigns and we've been positioning our product in the market for us to be able to keep our product relevant inside the portfolio of products and collections of the bank. And regarding the new model of mortgage financing, we have here, as we mentioned before, there is a great opportunity here to our insurance is the mortgage insurance aligned with the housing policy and with the real estate credit associated from the bank and the other products come together. We've talked a lot about our -- the bundled mortgage and home insurance that represents up to 10% of the volume of earned premiums for the period. So of course, we have a good way to work here with this new mode of real estate credit, mortgage credit that have been happening. And our perspective regarding collections maybe along the way the funding composition face that. Of course, we have -- we are in a good position in every line to follow this path with the bank, with Caixa.

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

I have only two questions from my side. First, Gustavo, if you could put some color on your term. I know that it's only been in the company for only a week. But if you could tell more about your ideas on what we found -- you found at the company? And my second question is if you could put some color in -- from the financial perspective, what are the impacts in the P&L for a decreasing interest rate in 2026. What do you expect in operating terms, which segments will be more impacted? What are you expecting from this scenario?

Thank you, Antonio, for this opportunity. Well, I'm very excited with this new professional opportunity. I've been working with Caixa since 1989. I have worked in practically every levels of tactical strategic levels. And after I went to the group, the holding, I understand our culture, our systems and our challenges. But I know our strengths, our brand, our client portfolio, the popularity of the company and of course, the talent we have here. There are over 80,000 employees all over the country. Everybody is very engaged, aligned with the mission of the bank. And in Caixa Seguridade, I have met a highly technical and committed team. So looking forward, our challenge is to keep up with the good work and of course, try to capture value in our potential. We've been facing the higher -- the biggest digital transformation of Caixa's history, and we will work together with them. We will like keep looking for portfolio efficiency, promoting synergy among our JVs and other companies. In the portfolio, I have a lot of energy to contribute for keeping this history of growth that has been written.

Thank you. Following the question, I'd like to register that I'm honored to work with Gustavo. He knows everything about the institution. It's a pleasure to work alongside him. And regarding the financial results, with the higher interest rates, we had a higher representativity in our results in this quarter. We observed 36% of share. Our sensitivity is the same. We have talked about that before, about BRL 40 million every 100 bps in reduction of rate. But what can we capture of value in the scenario of a decreased interest rate? We have an opportunity here to strengthen the relation of the clients with the bank because, of course, some clients look for credit to renew their operations, contract the operations. And this decision comes with the credit and insurance. So the rate goes down, the client that was afraid to take credit goes there. Now this client will have this opportunity to take some credit with some insurance due to strengthen the relationship with the bank because all the lines they are intertwined in this credit line concession are strengthened. And our operational result is our main driver of results, and it will be like that. We are an operational company. We are looking for results together with the operation of the bank. And since the banking activities will heat up, we'll go after that, talking about credit life insurance, life insurance, home insurance and all the other doors that open regarding the relationship with client and the bank.

Our next question comes from Pedro Leduc, Itaú BBA.

Congratulations on the results, and I wish you success in this new cycle. If you could go a little back to the credit life insurance because there was a hard comparison with last year, but we saw some answers. If we could -- if you guys could help me understand the evolution of the products inside the segment. And if we can be sure that this inflection is now behind, at least talking about premiums.

Thank you, Leduc. It's a very important question. It's our business line that we've been talking a lot internally because it's important to improve its performance with this higher interest rate that lowers the capacity of the clients to contract insurance and the credit life insurance is -- works very close with credit. So we try to diversify the portfolio. We launched this product like giving credit to the workers, trying to tackle demand that existed and that could aggregate value for the client, and we did it. We still have room to work with the banking in different channels. Has been commercializing the branches, and we'd like to move it to the digital scenario. And we are sure that it's going to take a more prominent role in our mix, credit life insurance. And besides that, we have some other products that we've been studying and developing inside this area to work not as a replacement of the product that we have today, but as a complementary product with some credit opportunities that are not encompassed by the product, but trying to expand our portfolio and the product to be able to work with all the credit lines of the bank and all the clients that we can catch ahead. Well, regarding the projection, we are monitoring the movement regarding the social security, INSS. Due to a time frame, we see that sometimes INSS starts to debate regarding the operational flux and insurances and stuff. We've been waiting. We're not offering the credit life insurance with the social security because we'd like to double check the operational factors and we'd like to work with them. But we've been waiting to take the steps, and we have a goal of BRL 20 million a month provided from ISS, and it's going to -- we're going to feel the impact in the last quarter of the year, but we're going to monitor that. And once we go over this stage, we will see the credit life insurance running normally.

Following the next question, it comes from Maria Guedes from Safra Bank.

So we saw the product becoming representative. We have an inventory of BRL 44 billion in credit letter inventories to benefit from this stacking feature. So what is your expectation and what this product can represent in the margin? And I'd like to see your reading because in the industry, a lot of people talk since the product has been very strong, and everybody has been talking about the commercial performance of this product, but we cannot read the delinquency rates. Can you have a good reading in this? What's the advantage and what the delinquency rates here are compared to the other products? It would be very good for us.

Thank you, Maria, for your question. Well, regarding credit letters, the product has been showing a consistent growth over time. This project comes to complement the portfolio of the bank. We have a big representativeness in the real estate credit letters. So from the bank so we can see that a growing tendency and the managerial fees we've been -- and it has some relevance in our composition of results and we have a good scenario regarding the credit letters. Our indicators are really well controlled. So when you talk about delinquency rates, our operation is the clients from the bank. So it's a very conscious purchase. So our delinquency rates are really well managed within the expectation for the industry could -- and we have the positioning now the product is amazing. So we're changing the product, so improving it. So it will be felt in the time line because this trade-off will happen since when you have the administration fees at the beginning is a bit higher, you will balance that later, reducing the fee and then the clients will. [Audio Gap]

Just two questions from my side. So I understand that the IGPM lag that you mentioned of BRL 22 billion doesn't account the difference between IPC and IGPM. Is that right? Is that -- I understood that well. So if so, what was the gain for the private in this quarter discounting the assets versus liabilities? And my second question is regarding the credit life with a follow-up in the Leduc's question. I'd like to understand two things. First, can you remind us the requirements of eligibility because the loss ratio is below the market. So maybe you could expand capacity and collection of the product that would be -- would help the performance of the product. And I'd like to confirm with you that so -- and what about the INSS-related stoppage [Audio Gap].

In the previous quarter, there was an unstable impact. Now there is a positive impact of 28%, mainly because you had a negative variability. And of course, what you said it's a fact. It's a picture for the third quarter. And as I told you, it had an impact in the previous quarter. Now it came with a positive impact and this impacts the financial result of the company in this quarter. So related to the credit life insurance, we didn't have any stoppage in the INSS for the third quarter. We kept selling that. No change. It was a very recent situation. And regarding the lines, we have for the coverage for the credit life we had like individuals credit, and we have the agriculture credit, and we have the credit life insurance for some corporate operations too. So of course, we could offer [Audio Gap] So the second most representative portfolio of the bank is the credit, we also have it. So there are space in other lines, especially for the workers' credit. As I like to say, it's an improvement of a personal credit that happened before with no guarantees. Now clients have the opportunities to have lower rates, and we are expanding the offer in this product. And as I said during the slide, we are waiting for an evolution of representativeness for the credit life insurance related to the worker. And all the products are under studies with Caixa, and we're going to disclose as long as they are getting mature in the time line and -- but as we've been talking to you, we show you and monitor the tendencies, the trends of the market and we improve the portfolio for our clients to have access to the best insurance products in the market.

Just a quick follow-up. What's the individual age limit for the credit life insurance?

So it's linked to the bank policy, right? I think it's 79, 11 months for individual credits. So our insurance follows this age cap for our insurances, okay?

I have two individual analysts asking about the dividend. And if is there any perspective for extraordinary distribution since there's the taxation on dividends are being discussed for next year.

Well, we keep our rhythm of generation and distribution of value to our shareholders. So our payout is always over 90% historically. So we had this change for the quarterly parameters. Our practice in quarterly dividend distribution and this change, of course, we've been monitoring that to see what's the best form for all interested parties. And of course, when we have more information, we're going to disclose to the market, okay?

Well, with one more compiled question. There's one more question talking about this new product called loss income called Perda De Renda for the mortgage insurance. So what's the ticket for this insurance? What's the potential for this product that you've been working a lot recently?

When it comes to complete the protection for the real estate credit loan taker because it had a protection of the real estate. It had the asset's protection. If something happened with the individual like death or permanent incapacity, for the mortgage now we added the physical damage to the mortgage insurance and along with the home insurance that we had, but we had to protect the client from this personal accidents with the loss of its -- of their income. So we came with this very innovative product in the third quarter. It's a great product to bring this security to our clients, has an average ticket of approximately BRL 50, commissioning policy is very interesting. It's been commercialized in our branches and in the digital channels. So it's a monthly payment product. We haven't seen the figures in the big figures of the company because you have such big numbers, and this has just been -- this product has just been launched. But it's been very, very interesting to see. You have over 6,000 policyholders and there is premiums earned over some hundreds of thousands of reals in this since and this portfolio has showed some increase some growth. We're going to keep offering this product and its share in our mix will be even more representative.

Following this line, Edgar talking about new products and campaigns, there is a question. And could you tell me more about the IOF back? Is it an opportunity to capture value in this moment of legislation change? And what's the expectation of performance you had?

Well, this campaign, IOF back came to bring some comfort to the client that already had their investments in private pension. And now with this new tax getting in, we're going to return the tax to the client. So there's no loss for the client when the client invests in VDL at this moment. So this campaign is very interesting. It's a permanent product. It's a temporary campaign, and we've been experimenting this campaign in this period. We have an expectation in that with that, we are going to not to be one more private pension player in the market. For end the client will distribute its investments among institutions. So the client that came to Caixa to invest his money in over BRL 300,000 that got worried about IOF and then looked for another institution to invest. Now the client can bring its full investment at Caixa because we're going to return the IOF as a new contribution for its investments.

All questions were answered. I'd like to thank you for participation. And I would like to turn the floor over to Gustavo, who will give closing remarks.

So I'd like to thank the opportunity. I'd like to thank the RI and financial team and everyone that helped us to release this presentation to our shareholders and partners and analysts. So thank you so much. So I hope we can come back later with great news. Thank you.

Thank you.