Conference Call 3Q17 and 9M17 11/01/2017 at 09:00 am (NY time)

Transcription

1 Conference Call 11/01/2017 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 Principal Accomplishments and Highlights Business Growth Revenues and Premiums Margin and Operational Efficiency Competitive Environment Analysis Return on Investments and Financial Results Net Income and ROAE 3

4 Executive Summary: Principal Accomplishments Despite the economic crisis, the total market insurance premiums (ex. Health) reported a growth of 6% in the year (vs. 2016), reaching R$ 73 billion (Source: SUSEP, 3Q17) In the auto segment, the industry still presents a competitive environment, but the price adjustments practiced by the industry have contributed to the increase of premiums in the quarter (+7%). Furthermore, the market already shows signs of recovery, reporting an improvement of 8% in the brand new vehicle sales (source: Anfavea 9M17 vs. 9M16) The insurance auto premiums of Porto Seguro increased as a result of the price adjustments and a reduction in losses, however the insured fleet growth was pressured In the other segments, several products reported a growth higher than 10% (Health, Dental, Life, Pension, Consortium, Cargo and Porto Conecta), ratifying our diversification strategy In the 3Q17, we have incorporated to the result the sale of IRB Brasil Resseguros S.A. shares, which contributed significantly to the net income. The total amount (net of taxes) was R$ 126 million Our discipline on recovering margins through price adjustments has favored the increase of profitability, even facing a competitive scenario. Both the operational and the financial performances were better, while the recurring net income was 5% higher in the year (vs. 2016), reverting the falling trend of the last quarters. 4

5 Consolidated Results Total revenues improved 5% in the quarter reporting a higher expansion of financial and service businesses in the insurance operation, the margins recovery policies affected the growth due to the competitive environment Total Revenues* (R$ Billion) Revenues by Business Lines (R$ Million) % % 1.9 3,725 +2% 3, % % % % % +13% Q16 3Q17 9M16 9M17 Insurance Premiums Other Non Insurance Revenues Insurance and Pension¹ Financial Businesses² 3Q16 3Q17 Services³ * Including insurance written premiums, revenues from financial and service businesses and other operational revenues 1 Considering insurance written premiums and pension gross funding (Total Contributions + Inputs + Incoming Portability) 2 Represents the revenues of Financial Products: Consortium, Credit Card and Financing and Asset Management 3 Represents the revenues of Services: Mobile Operator, Surveillance and Monitoring Services, Medical Services, H4Pet, etc. 5

6 Operational Results Insurance The Combined Ratio decreased 1.5. p.p. reaching the lowest level in the last 2 years, mainly driven by the lower loss ratio, especially in P&C (-5.2 p.p.) and Auto (-0.6 p.p.) segments the ROAE of insurance operations achieved 13.3 p.p. (+0.1 p.p.) Auto P&C Health + Dental Life Pension Total Premiums Insurance Premiums Growth¹ 3Q17 vs. 3Q16 (%) -2.1% 2.8% 2.9% 4.4% 10.3% 12.5% Premiums Distribution - 3Q17 (%) 2% 8% Auto 6% P&C 9% 9% 66% Health Life DPVAT Other -1.7 Combined Ratio (%) Insurance Profitability % +9% Q16 3Q17 9M16 9M17 Net Income (R$ Million) ROAE (%) 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) 6

7 P&C Insurance Evolution Porto Seguro The P&C products reported a consistent growth in the last 5 years (CAGR 15%) chiefly due to a lower loss ratio. This result is mainly driven by our efforts alongside sales channels and improvements of products and underwriting model P&C Insurance Growth¹ (R$ Million) CAGR: 15% P&C on the Insurance Portfolio¹ 10.0% 10.2% 10.3% 10.2% 7.7% 8.1% 8.7% +1.7 p.p ,089 1,257 1,328 1,003 1, % 9.6% M16 9M17 P&C Premiums Market Share (%) Loss Ratio M17 Premiums Breakdown¹ 9M % Homeowner Itaú 32.5% Commercial Porto 34.4% 31.7% 29.7% 32.5% 33.1% 32.9% 29.6% 21.0% Homeowner Porto 32.8% Other Porto M16 9M17 ¹ Insurance Written Premiums 7

8 Historical Performance of Auto Insurance Porto Seguro vs. Market The quarterly loss ratio in the Auto segment was the best of the year mostly driven by the reduction of claims for Azul (-2.3 p.p.) and Itaú (-1,5 p.p.). The improvement was mainly due to our focus on recovering margins in the 9M17, Porto Seguro s loss ratio was 9.6 p.p. better than the market Quarterly Loss Ratio Porto Seguro Consolidated Historical Loss Ratio Development Porto Seguro Consolidated x Market % 58.5% 60.1% 57.9% 57.1% 66.4% 62.9% 66.5% 64.7% 68.1% 68.0% 60.8% 55.3% 57.6% 54.5% 58.5% 58.4% 3Q16 4Q16 1Q17 2Q17 3Q M17 Market (Ex Porto) Porto Consolidated Market vs. Porto (p.p.) Source: SUSEP Available data until September/17 8

9 Expenses (%) (Loss Ratio + Commission) Top 10 Auto Insurance Performance* (9M17) Auto Insurance Scenario 9M17 The auto insurance industry improved 6% in the 9M17 with a slight decrease of loss ratio (-0.2 p.p.) we still have a strong competition, despite the lower SELIC rate and the higher auto theft frequency in some country regions Zurich Porto Seguro Bradesco Auto/RE Market Total Expenses: 84.4% Var. Loss Ratio: -0.2 p.p Var. Comission: +0.2 p.p Sulamérica HDI Mapfre + BB Bradesco Liberty Porto Consolidated Allianz Sompo Seguros Tokio Market Growth : +6,3% Premiums Growth (%) Mapfre + BB Sulamérica Tokio Marine Liberty Allianz Sompo Seguros Zurich HDI * Written premiums growth and expenses (loss ratio + commission / earned premium). Source: SUSEP 9

10 Auto Insurance Scenario 9M17 However, the Auto Insurance Industry already shows signs of recovery, reporting premiums growth and increased margins the loss ratio variation in the quarter (3Q17 vs. 3Q16) was the best of the year Market Premiums and Loss Ratio Variation (2017 vs. 2016) % 6.0% 5.4% Q17 2Q17 3Q17 Var.Premiums (%) Var. Loss Ratio (p.p.) 10

11 Financial and Service Businesses Results The revenues improved 10% in the 3Q17, boosted mainly by the credit card product, while net earnings reduced chiefly due to the higher operational losses of Porto Conecta. However, the results of credit card improved with the lower NPL, while the consolidated ROAE reached 6.9% Revenues Evolution 3Q17 vs. 3Q16 Revenues Distribution Credit Operation Consortium 8% 11% 17% Credit Operation Consortium Medical Services Surveillance and Monitoring Mobile Operator Other Businesses* Total Revenues 2% 11% 15% 10% 24% 6% 5% 9% 14% 49% 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 +3.5 p.p -6% % ¹Without Business Combination Q16 3Q17 9M16 9M17 Net Earnings % On Total Net Earnings 3Q16 3Q17 9M16 9M17 11

12 Historical Performance of Credit Card and Financing Products In the last 5 years, the revenues increased on average 19% YoY and the number of clients more than doubled, even considering the focus on our clients base the NPL is below the market average (-1.9 p.p. in the 3Q17) and we are still growing, despite the regulatory changes Revenues Performance (R$ Million) CAGR: 19% Clients Base Evolution % 7% 6% 6% 6% 6% 6% 34% 29% 30% 33% 39% 38% 40% Other Revenues % 65% 64% 62% 55% 56% 53% Revenues from Services Revenues from Financial Intermediation ,376 1,625 1,870 1,973 2, M16 9M17 NPL over 90 days¹ 7.4% 7.4% 7.0% 6.8% M17 Total Financing Clients (thousand) Credit Card Clients (thousand) Monthly Average Expenditure 2Q (R$ Thousand) 6.3% % 5.0% 4.9% Q14 4Q15 4Q16 3Q17 Porto Seguro Market ¹The NPL over 90 days was adjusted to stay in line with the Central Bank methodology, which establishes that the balance of agreement operations related to late payments are not considered delinquent Citibank + Diners *Banco de Brasília Source: Cardmonitor BRB* Porto Seguro Banco Brasil Banccop 12

13 Financial Investments Results The return on financial investments was affected by the lower average CDI* in the period (-35% vs. 3Q16). However, the performance of equities and inflation-linked bonds reported a relevant contribution to the financial results, which generated a return of 3.0% (ex. Pension Funds) Revenue from Investments Assets (R$ Million) Net Asset Value (R$ Billion) Q16 4Q16 1Q17 2Q17 3Q17 Insurance Others Pension Funds 3Q16 4Q16 1Q17 2Q17 3Q17 Pension Funds Other Assets Quarterly Performance 3.5% 2.9% 3.4% % % Allocation¹ (ex-pension Funds) 2.9% 3.4% 3.2% 2.4% 3.5% 8% 7% 5% 5% 5% 34% 12% 25% 29% 31% 12% 11% 19% 22% 18% Equities Corporate Bonds Inflation-Linked Bonds (Tips) 3Q16 4Q16 1Q17 2Q17 3Q17 Nominal yield (ex-pension funds) % of CDI (pension funds included) % of CDI (ex-pension funds) *CDI Interbank Deposit Certificate 44% 53% 51% 42% 51% 3Q16 4Q16 1Q17 2Q17 3Q17 ¹ Futures exposures included. Fixed Income Floating Rate Notes 13

14 Recurring Net Earnings (R$ Million) and ROAE (%) Consolidated Results Excluding the net effects of IRB sales (R$ 126 million) and maintaining the comparison tax basis to the last year, the quarterly recurring net income was R$ 259 million (+27%) and R$ 651 million (+5%) in the 9M17, while the ROAE reached 16.1% in the 3Q17 and 13.6% in the 9M % +5% Q16 3Q17% 9M16 9M17 Net Earnings (Ex. IRB and Interests on Capital) ROAE Profitability* (R$ Million) and ROAE* (%) % % Q16 3Q17 9M16 9M17 Financial Result Operational Result ROAE (%) Net Earnings Net Earnings by Business Lines* (R$ Million) +88% % Q16 3Q17 9M16 9M17 Insurance (1) Financial and Service Businesses (2) Holding (3) 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

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