Conference Call 2Q17 and 1H17 08/03/2017 at 09:00 am (NY time)

Transcription

1 Conference Call 2Q17 and 1H17 08/03/2017 at 09:00 am (NY time)

2 Disclaimer The forward-looking statements in the conference call are based on the beliefs and assumptions of Porto Seguro s management, and on information currently available. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Porto Seguro and could cause results to differ materially from those expressed in such forward-looking statements.

3 Agenda 2Q17 and 1H17 Principal Accomplishments and Highlights Business Growth Revenues and Premiums Margin and Operational Efficiency Return on Investments and Financial Results Net Income and ROAE 3

4 Executive Summary: Principal Accomplishments 2Q17 In the first five months of 2017 the insurance market attained R$ 39,4 billion in premiums, reporting an increase of 4% when compared to the same period of 2016, even considering the crisis economic scenario (Source: SUSEP Data availabe until May/17, excluding health) In the second quarter, Porto Seguro presented a greater performance, both in the insurance operation and financial and service business. However, the financial result was lower, mainly impacted by the decreased interest rate In the auto segment, the industry still presents a competitive environment, but the price adjustments that we have set, have contributed to the improved loss ratio. Furthermore, the auto insurance market already show signs of recovery, while the brand new vehicle sales (light vehicles) increased 4% in the semester (vs. 1H16 - Source: Anfavea) In the other insurance, the main products (Health, P&C and Life) presented a double digit growth Our efforts to improve operational efficiency has led the expenses to grow below the inflation rate, while the G&A ratio has remained stable, even when considering the more challenging scenario to improve sales In the 2Q17, we registered on-balance the first part of the interests on capital in the amount of R$ 243 million. The Company will complement the payment in the 4Q17. 4

5 Consolidated Results 2Q17 and 1H17 Total revenues increased 5% in the 2Q17 while written premiums and other business revenues grew 4% and 14%, respectively Net earnings achieved R$ 238 MM (+36%) and ROAE attained 15%. However, excluding the fiscal benefit from the quarterly interests on capital the result would have been 1% lower Total Revenue (R$ Billion) Revenues by Business Lines* (R$ Million) +5% % % % % % % 3,448 3, % +19% Q16 2Q17 1H16 1H17 Insurance Premiums Other Non Insurance Revenues Insurance and Pension¹ Financial Businesses² 2Q16 2Q17 Services³ Net Earnings by Business Lines* (R$ Million) % -98% +128% +43% % -39% +72% % Q16 2Q17 1H16 1H17 Insurance (1) Financial and Service Businesses (2) Holding (3) Profitability* (R$ Million) and ROAE* (%) 11,9 +36% 15, Q16 2Q17 1H16 1H17 Financial Result ROAE (%) 1 Including insurance operations results, pension and capitalization 2 Represents Financial and Service Businesses results such as Consortium, Credit Card and Financing, Mobile Operator, Surveillance and Monitoring, Medical Services, among others. 3 Results arising from the financial funds held by the Holding, which is a relevant part of the Company free resources excluding G&A and tax expenses * Profitability and ROAE excluding Business Combination, net of taxes 14,3 14,5 +9% Operational Result Net Earnings 5

6 Operational Results Insurance 2Q17 and 1H17 The Combined Ratio improved 2.5. p.p. mainly explained by the lower loss ratio, especially in Auto, Health and P&C segments the ROAE of insurance operations reached 13.9 p.p. (+3.4 p.p.) Top Insurance Premiums Growth¹ 2Q17 vs. 2Q16 (%) Auto P&C Health + Dental Life Pension Total Premiums 4.1% 5.0% 7.1% 3.9% 17.8% 71.1% Premiums Distribution - 2Q17 (%) 2% 8% Auto 6% P&C 9% 9% 66% Health Life DPVAT Other -3,0 Combined Ratio (%) +0,8 +0,1-0,1-0,3 Insurance Profitability 12,1 11, , % 13, % T16 2T17 1H16 1H17 Net Income (R$ Million) ROAE (%) 6 ¹ Insurance Premiums and Pension Gross Funding/ ² Insurance Combined Ratio/ ³ G&A Ratio/ * O.E Ratio (Total other operational revenues and expenses / earned premium)

7 Expenses (Loss Ratio % + Commission %) Auto Insurance Scenario 1H17 Porto Seguro focused on the margins recovery the expense indicators (loss ratio and commission) remained as the lowest of the industry. However, the growth was affected in the semester Auto Insurance Performance* (January to May/17) Porto Consolidated 95.0 Zurich Mapfre + BB 90.0 Mapfre + BB Market: 85.4% 85.0 Var. Loss Ratio: +1.1 p.p. Var. Commission: +1.4 p.p Sulamérica Porto Consolidated HDI Sompo Seguros Tokio Bradesco Liberty Allianz Bradesco Auto/RE HDI Tokio Marine Liberty 75.0 Allianz 70.0 Sompo Seguros 65.0 Zurich 60.0 Market: +5.3% Premiums Growth Sulamérica * Written premiums growth and expenses (loss ratio + commission / earned premium). Source : SUSEP, data available from January to May/17. 7

8 Historical Performance of Auto Insurance In the last 5 years, of the 10 largest players, only Azul Seguros has increased its market share reporting decreases in the loss ratio Historically, the losses of Porto Seguro has remained below the market average (-9 p.p. in 1H17²) Market +1.7 p.p. 3,1 p.p. 1,4 p.p. -0,9 p.p. Auto players performance¹ (2016 x 2011) -0,1 p.p. 6,6 p.p. -2.5% -0,5 p.p. -0,4 p.p. -1,3 p.p. -2,6 p.p. -1,5 p.p. 4,4 p.p. 4,3 p.p. 2,4 p.p. 2,7 p.p. 2,8 p.p. 1,8 p.p. 1,9 p.p. 0,5 p.p. -1,1 p.p. Loss Ratio Evolution - Porto x Market % 66.4% 62.9% 66.5% 64.7% 68.1% 68.2% 61.5% 60.8% 55.3% 57.6% 54.5% 58.5% 59.1% S17² Market (Ex Porto) Porto Consolidated Market vs. Porto (p.p.) Market Share Loss Ratio Market Loss Ratio ¹ 2016 Loss Ratio vs. last 5 years average ² Source: SUSEP Available data until May/17 8

9 Financial and Service Businesses Results 2Q17 and 1H17 The quarterly revenues improved 14% in the 2Q17, boosted mainly by the mobile operator and credit card and financing products the credit card NPL decreased, enhancing the profitability while the ROAE attained 16.9% (+8.9 p.p.) Revenues Evolution 2Q17 vs. 2Q16 (%) Revenues Distribution (%) Credit Operation Consortium 12% 8% 16% Credit Operation Consortium Medical Services Surveillance and Monitoring Mobile Operator Other Businesses* Total Revenues 11% 14% 14% 27% 52% 7% 5% 9% 13% 50% Medical Services Surveillance and Monitoring Mobile Operator Other Businesses* *Represents the services provided to the Porto Seguro group Net Earnings¹(R$ Million) ROAE¹ (%) % % p.p p.p Q16 2Q17 1H16 1H17 Net Earnings % On Total Net Earnings ¹Without Business Combination 2Q16 2Q17 1H16 1H17 9

10 Products Synergy Porto Seguro works with synergistic diversification in order to contribute to improving the clients and brokers retention, leverage cross selling and increase the Company s profitability Synergy between Products Cross-Selling Sales expansion of complementary products: Auto + Credit Card; Auto + Homeowner; Credit Card Theft Insurance Usage of the power brand to launch innovative products and access new market niches: Health for Pet, Carro Fácil, Porto Faz, Conecta etc. Business risk reduction: know-how of the insured clients base (Credit Card, Financing, Landlord Protection insurance) Profitability Retention Scale gains through products synergy: costs reduction of the insured fleet monitored (Conecta); costs saving through the acquisition of car parts from Renova (Chop shop Company) Focus on long term relationship: High service level based on personal touch and differentiated loyalty programs that offer price discounts on the insurance policies Segmented Solutions (services, prices and specific groups): Auto Jovem, Auto Mulher, Itaú Roubo, Azul Leve, etc. Additional offerings for Brokers: focus on advisory performance, new sales opportunities and income source 10

11 Business Relevance Both the other insurances and financial and service businesses have been presenting a double digit increase, and still offer opportunities to expand Business Revenues (R$ billion) Business Volume (thousand) Products H17 CAGR Auto Other Insurance Financial and Service Businesses CAGR: 27.6% CAGR: 11.4% CAGR: 9.5% Dental Members Insured Number of Credit Card Life - Members Insured Clients of Consortium Surveillance and Monitoring Clients Homeowner Clients % 695 2,086 18% 2,776 7,165 16% % % 1,275 2,226 9% 11

12 Financial Investments Results 2Q17 and 1H17 The return on financial investments was affected by the lower average CDI* in the period (-24% vs. 2Q16) and a weaker performance of inflation linked bonds and the equities the financial result decreased 37%, producing a return of 2.1% (ex. Pension Funds) Revenue from Investments Assets (R$ Million) Net Asset Value (R$ Billion) Q16 3Q16 4Q16 1Q17 2Q17 Insurance Others Pension Funds Quarterly Performance 2Q16 3Q16 4Q16 1Q17 2Q17 Pension Funds Other Assets Allocation¹ (ex-pension Funds) % 3.5% 2.9% 3.4% *CDI Risk Free Rate (Similar to LIBOR) % 2Q16 3Q16 4Q16 1Q17 2Q17 Nominal yield (ex-pension funds) % of CDI (pension funds included) % of CDI (ex-pension funds) 2.2% 2.9% 3.4% 3.2% 2.4% 8% 8% 7% 5% 5% 28% 34% 23% 12% 39% 44% 25% 29% 31% 12% 11% 53% 51% 19% 42% 2Q16 3Q16 4Q16 1Q17 2Q17 ¹ Futures exposures included. Equities Corporate Bonds Inflation-Linked Bonds (Tips) Fixed Income Floating Rate Notes 12

13 Interest Rate Impact Historically, Porto Seguro has been able to achieve great results, regardless of the Selic rate oscillation the greatest challenge is still in the competitiveness of the auto insurance market Combined Ratio and ROAE vs. CDI 18.6% 16.6% 17.3% 16.5% 17.2% 15.5% % ROAE w/o Business Combination (Recurring) 13.2% 14.0% % CDI* 11.6% 10.8% 8.4% 8.1% 99.3% 99.0% 96.0% 96.5% 96.5% 99.1% % Insurance Combined Ratio *CDI Risk Free Rate (Similar to LIBOR)

14 Investor Relations Alameda Barão de Piracicaba, º andar, Campos Elíseos São Paulo, SP, Brazil (55 11) (55 11)