Earnings call transcript: Porto Seguro Q3 2025 sees strong growth but stock dips

Porto Seguro's earnings call for Q3 2025 revealed robust financial performance, with total revenue reaching 10.5 billion BRL, an 11% year-over-year increase, and net income rising by 13% to 832 million BRL. Despite these positive results, the company's stock price fell by 3.81% in pre-market trading, reflecting investor caution. The stock closed at 49.89 BRL, down 1.9 BRL, and is trading near its 52-week low of 34.77 BRL.

Key Takeaways

• Porto Seguro reported a significant 11% increase in total revenue YoY.
• Net income rose by 13%, showcasing strong profitability.
• The stock price fell by 3.81%, indicating investor concerns despite positive earnings.
• Administrative expenses were reduced to single-digit percentages for the first time.
• The company maintained a high return on assets of 23%.

Company Performance

Porto Seguro demonstrated strong performance in Q3 2025, with significant growth in both revenue and net income. The company has consistently maintained a high return on assets, exceeding 20% for five consecutive quarters. This performance is attributed to the company's diversified portfolio across insurance, health, banking, and services, which has helped mitigate risks and drive growth.

Financial Highlights

• Total revenue: 10.5 billion BRL (+11% YoY)
• Net income: 832 million BRL (+13% YoY)
• Return on Assets (ROA): 23%
• Administrative expenses reduced to 9.3%

Market Reaction

Despite the strong financial results, Porto Seguro's stock price declined by 3.81% in pre-market trading. The market's negative reaction may be influenced by broader economic concerns or specific challenges within the insurance and financial services sectors. The stock's proximity to its 52-week low suggests investor caution.

Outlook & Guidance

Porto Seguro remains optimistic about its future, expecting continued growth across its business verticals. The company maintains its financial result guidance for 2026, with expectations of higher profitability through product mix optimization. The auto insurance market is projected to stabilize in 2026, which could further bolster the company's performance.

Executive Commentary

• "We are pricing products at 100% of the CDI," noted Domingos Falcão, Investor Relations Officer, highlighting the company's strategic pricing approach.
• "Our expectation for 2026 is very good," remarked Rivaldo, an executive, indicating confidence in future growth.
• CEO Paulo Kakinoff stated, "The company can grow in ROE and globally, it can grow above 20%," underscoring the company's growth potential.

Risks and Challenges

• Cyclical pricing pressures in the competitive landscape could impact margins.
• Market saturation in certain segments may limit growth opportunities.
• Regulatory impacts in the healthcare market could pose challenges.
• Macroeconomic factors and currency fluctuations may affect performance.
• Potential investor concerns reflected in the recent stock price decline.

Q&A

During the earnings call, analysts inquired about Porto Seguro's excess capital of 3 billion BRL and potential dividend payouts. Competitive dynamics in the auto insurance sector and regulatory impacts on the healthcare market were also discussed, providing insights into the company's strategic priorities and challenges.

Full transcript - Porto Seguro SA (PSSA3) Q3 2025:

Conference Moderator: Good morning ladies and gentlemen and welcome to the Porto Seguro third quarter of 2025 earnings call. Please be advised that this presentation is being recorded and translated into English. Slides are available for download on the Investor Relations website. For English, please click on the button located on the bottom right side of your application and choose the English audio. If you're listening in English, you also have the option of muting the original audio by clicking on Mute Original Audio. After the end of the presentation, we will start the Q and A session. Please send your name and company name through the Q and A icon at the bottom of your screen. Your name will be announced and you will be able to ask your question live. You will get a prompt to turn on your microphone on the screen.

If you do not want to turn on your microphone, please write no microphone at the end of the question so it can be read out by the operator. Any forward looking statements made during this conference call regarding the company's business prospects are based on beliefs and assumptions of the company's management and based on the information they currently have available. Remarks about the future are not guarantees of performance. They involve risks, uncertainties and assumptions as they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that the overall economic conditions, that industry and other operational factors may affect the company's future results and lead to results that differ materially from those expressed in these forward looking statements. Now I would like to turn over to the Porto executives who will begin the presentation.

Good morning, my name is Paulo Kakinoff and it's a pleasure to be here to present the third quarter results for Porto Seguro. We have Celso Damato, our CFO, Domingos Falcão, Investor Relations officer and CEO of our business verticals, and the head of Porto Asset. This quarter we have continued to advance in essential pillars in our strategy. We sustained high NPS and ratified our focus to provide a better experience for our clients. We advanced across our four verticals in the Porto ecosystem, which can be seen by the expansion of 4 percentage points in combined operations for health, banking and services, both for income and revenue. They now represent 43% of the total. We also reached consistent financial results, expanding the number of quarters in which we had two double digit growth and an ECOA that is consolidated, as we'll see soon.

Here we see a comparison between the results for this quarter and the first nine months of 2020. Total revenue was BRL 10.5 billion, up 11% versus the third quarter of 2024 and Porto is reaching the second quarter in a row with a revenue above BRL 10 billion and net income. This is the third quarter in a row with results above BRL 800 million. Brazilian reais up 13% and an ROA of 23%. All of the figures for the first nine months of 2025 are at the highest historical level for the company, total revenue, net income and ROA. So we have reached BRL 3.5 billion in total revenue. Net income is close to the total amount we had last year, BRL 2.5 billion and ROA was 23.4%. The company is in its fifth quarter in a row with ROA above 20%.

There are several factors behind this performance and I'd like to highlight two. The company's capacity through its reorganization across four verticals to continuously capture the huge potential that the brand has across its four business segments. That will be a long road that we can continue trailing, especially cross sales for products across our four verticals to our ecosystem of over 18 million clients. We're currently reaching 32 million businesses distributed across these four verticals. At Porto Seguro we have 16.7 million items, up 6% versus last year. At the same time we have had a very well behaved loss ratio with a slight increase of 0.8 percentage points versus last year. In Porto Saúde we had 335,000 lives, out of which 143,000 were in health insurance and nearly 200,000 in dental.

The loss ratio was also at a healthy level with a slight reduction of nearly 1 percentage point or 0.8. Porto Banco is growing in revenue and net income at a significant level. Our revenue went up about 30% or 29% to be precise, and an increase of 90% to our net income. At Porto Serviço we had a reduction in EBITDA, especially due to the lower number of claims in Porto Seguro, which is the main revenue generating source for this business. We were able to sustain the EBITDA margin at a healthy level. To continue this presentation, I would like to invite Celso Damato, our CFO. Go ahead. Good morning everyone. I'd like to highlight our 11% revenue growth. As Mr.

Kakinoff mentioned in his presentation, Porto Seguro grew 3.3% and auto insurance had a growth of 4% in items, but the product mix was at a lower average price. We will go deeper into this during the presentation. At Porto Saúde, 26.9% growth reaching nearly BRL 2.2 billion. In Porto Banco we grew by 28.7% to close to BRL 2 billion. In Porto Serviço, we had a reduction due to the lower utilization, the product mix, and fewer services used from Porto Serviço. There is a reduction here, but there is a positive offset with the reduction in claims. This consolidated ROA of 23% includes an increase in our revenue and also a reduction in administrative expenses. We had a reduction of 0.3 percentage points, quarter on quarter, and 0.6 percentage points when we look at the nine month figures.

This is due to diversification and dilution of our fixed costs, as we have been doing in the last few years. In 2020, ARC administrative expenses were at 14.8%. At the end of this period, in September we reached 10.8%. This third quarter we reached the lowest administrative expense in the company. It's the first quarter in which we are at a single-digit administrative expense. We also in health were below 4-5 percentage points. We have been able to dilute our costs by diversifying products. Here we see the results for this quarter. 32% ROA, 28 in the accumulated figure, 26% in Porto Saúde and bank, and 18% in Porto Serviços. Returns over capital. As you know, we have a liquidity margin that allows us to grow easily across our business.

We have BRL 4 billion in capital sufficiency, which will allow us to grow in the next few years. Here we see a net income that increased 13% to BRL 832 million. It is the first time we have gone above BRL 800 million. We see our portfolio diversification. Insurance had a share of 59% and it is now at 56%, but again with very interesting returns on our assets. We also see the shares of banking and healthcare, which have a higher share of our results. Within banking we also have very diverse products such as credit and cards. Within that vertical we also have a lot of diversity. Looking at our financial revenue, we saw a significant increase due to two reasons. The average CDI went up about 3, 30% in these nine months.

We also saw significant cash generation due to business growth, which increases our reserves. Also, the free asset generation has increased both in the technical reserve and free assets. We had expressive financial results this quarter. Here we see the breakdown of our portfolio. We changed it slightly, considering a nominal financial revenue for 2026 that will be higher than what we saw in 2025. There are still some things to do at the end of this year to prepare this for a compatible nominal revenue for 2026. Now Dom is going to continue this presentation. Thank you and have a good morning. Thank you. Good morning everyone. Going into the verticals, something that is always a highlight is service quality. We have record NPSs here for Porto. All of them have been above 80 points.

When we look at auto premiums, we had a 1% growth. Over the year we had a growth of 2.7%. Looking at PNC and life, we also had double-digit growths. In PNC, it was around the accumulated figures, around 14%. When we look at the loss ratio for auto, we had 58.2% and 52% for the first nine months. In auto there was an increase of 1 percentage point. We're still at a very healthy level. In PNC and life it was A. It is around 30%. In PNC for the first quarter we had an uncommonly low loss ratio. In 2025 we saw an increase in 1 percentage point. In life it went up to 39.5%. When we look at our results distribution here, we see per business area.

What I'd like to highlight here is an ROA of 32% which we believe is very healthy for an insurance company. Another point worth highlighting is that we constantly get questions about migrating plans from Porto Seguro, Azul, and Itaú. One of the benefits that we're going to mention now is a reduction in the required net income. Because of this we had a reduction and so that led to a capital benefit which contributes to our ROA and our entire structure. In Porto Saúde we saw an increase of 143,000 lives insured and a net income of BRL 126 million. And here they are broken down between only health insurance and health insurance plus dental. When we look at loss ratio, health has the most striking seasonal pattern. We saw a decrease of 1 percentage point in the third quarter.

In health plus dental it was around 1 percentage point as well. Looking at ROAE, the same seasonal pattern appears. We finished the third quarter at 25.7 in ROAE, an increase in basis points year on year. Now, Porto Bank, we had 30% growth in the number of businesses. Our NPS is also among the best in the market. 76 points and an increase of 18.5% to our results. Our ROA was 26.1% and income was BRL 196 million. This is extremely healthy for any of our verticals. On the efficiency side, we had another increase year on year of zero. Excuse me, or another reduction of 0.6 percentage points, which is at the same level as other digital banks. We also have our average monthly revenue per active client going up. We are not only expanding the number of clients, but we're also monetizing these clients better.

Looking at tariffs and interests, the split is nearly 50-50. We also consider that to be very healthy. Here we see our NPL and there are some effects that have affected our market. Here we see our credit portfolio distributed between credit cards, financing, and loans. Looking at NPL, we are splitting it into short-term NPL, which shows that it's not a structural issue. What we've seen from the first quarter is an impact from the change in stop accrual from 60 to 90 days. This means that not only does that affect our NPL, but the market general NPL has also kept in the same pace. We saw a change in the number of basis points and when you look at the equivalent central bank data, it was very similar. Our portfolio is healthier than the general market.

Continuing with Porto Serviço, our service level, excuse me, the number of car services is still very high, close to 700,000 with an NPS of 81 points. Here we see some dynamics that have been explained before. We saw lower demands from Porto Seguro, which made our revenue go down. We see that there was a reduction, especially in digital products, and a 95% reduction in the first nine months. We delivered in efficiency. The 9.3 administrative expenses dropped to 8.3, an increase of 100 basis points. Finally, here we see our profitability. This is an operation that does not require much capital. The impact of ROA here is due to the discounts from previous operations. We revised our guidance, but they were held for most verticals, except for Porto Seguro, where we have been below in our G&A ratio.

We reviewed it to 10%-10.5%. Secondly, there has been lower demand on insurance. Porto Serviço had its expected revenues reviewed to BRL 2.4 billion-BRL 2.6 billion and our G&A is expected to be at 7.5%-8.5%. One last comment before I conclude. In October we had the pleasure of being among the top 50 companies with the most liquidity in Brazil in our stock exchange. Here we see a comparison of our growth to the rest of the market and some segments in which we believe we can still grow, such as Card Allied Vehicle Consortium, health and dental, we grew 31% and life, we grew 14%. Now we can continue with the Q&A. Thank you. We will now begin the questions and answer session.

As a reminder, if you would like to ask a question, please send us your name and company name through the QA button at the lower part of the screen. If you do not want to turn on your microphone, please write no microphone at the end of your question so that we can ask it ourselves. The first question will be asked by Mr. Daniel Vaz from Safra Bank. Go ahead, sir. Good morning everyone. Kakinoff and everyone else, I will ask the same question that I asked Milton at Itaú talking about capital and dividends. I know that Porto, roughly speaking, is at around BRL 3 billion excess capital, roughly speaking, you mentioned in previous calls that not that this entire value is not exactly. It is not. Does not exactly have a lot of liquidity. About half of it has liquidity.

Considering that your growth across less capital intensive fronts and auto versus the entire thing has, and since you have good capital generation ahead, how are you thinking about additional dividend payouts? Especially with the reforms that we are expecting next year, tax reforms. This might be a discussion of paying these in advance before still in 2025. How are you considering that with your excess capital? Thank you. Thank you for your question, Daniel. This is Celso. This is something that we're still monitoring, we're still trying to see how this is going to take place. I'm referring here to the tax reform we might need. If it remains the same, we will need to do this in 2025. Ideally there should be a bill that allows us to allocate dividends now to be paid up until 2028, as was in the previous bill.

The current bill requires us to pay within one year. We are still seeing how this is going to happen. We have not made any decisions yet, but speaking in general about additional dividends, last year we went from 45% to about 50%. This year, if everything goes well, that was our expectation to pay out about 50% in dividends in the following years. You know, with the cash generation we have, there were a few possibilities. Paying out additional dividends is one of these possibilities. I do not believe that it will happen this year. We have a structure that will help our verticals grow. We have a capital structure that will absorb this calmly without us needing to select what products will make us grow or not. This puts us at a very confident moment for the next five years.

We expect to grow across our verticals and that of course consumes capital over time. As we generate more cash for the next few years, we're going to have a deeper discussion on what we're going to do and if we will have additional dividends or not. Yes. If I can ask a follow on question. Of the BRL 3 billion that you have in excess at the holding, how much of it would be net? I think you mentioned that it was about half of it that had liquidity. Excuse me. Yes. We have BRL 3 billion in excess capital at Porto Seguro SA. In November we have to pay BRL 500 million in dividends. This will go down and then it goes up again. We're going to work with an average of BRL 2.5-3 billion for Porto Seguro throughout 2026.

This is the number for us due to our growth, due to our appetite for risk, and it's still healthy at BRL 3 billion. So our balance is BRL 3 billion. We're going to pay dividends in November, everything that has been scheduled. It will go down probably to BRL 2.5-2.6 billion, and then throughout the next cycle it will go up again. This is the level that we believe to be very healthy for Porto Seguro. Thank you. The next question will be asked by Mr. Antonio Ruetti from Bank of America. Go ahead, sir. Good morning, everyone. Thank you for your time. Two questions from me. If you can talk a bit about competition, specifically for auto. I think this is a question that is always asked, but it's important for us to get an update, especially when we look at the average ticket going down.

I know that there is a mix effect here. You've been selling products that operate at a lower ticket, but there's probably some effect from your competition. My second question is to. I'd like to ask a bit more about this issue between the loss ratio and services. We see that the revenue for services is weaker. It's actually going down. You mentioned that this was due to a lower demand. When we look at the Porto vertical, we see that the loss ratio has gone down. How does that match? Thank you. Hi, Antonio. Good morning. This is Rivaldo. Thank you for your question. First, this is not just a current matter. For many years, if you've kept track in auto, we have been experiencing a moment that we've experienced before, but this is a passing thing.

We see that the loss ratio in some of our competitors has been going up. We believe that this is just a passing cycle and it is probably at the end. We are very focused, as we have been defending recently, on gaining efficiency firmly. Our NPSs have all reached record levels and we are attempting to maintain our results. That is basically it. The competition has been stronger in the last few months. We believe that at some point this will cool down, because we have seen this in the past and we know that at some point the claims will appear. I will add to that. Last year we had the fortunate coincidence of adapting our structure to the brands specifically in auto. For example, we reactivated the Itaú brand, we launched products in other segments.

We practically revisited the entire structure of the motorcycle segment, which is a sub-segment that is growing at a very good pace. This year we saw that for a few months we had more motorcycles than automobiles. This redesign and brand repositioning was the main driver behind these positive results that we've been having in the insurance vertical, specifically auto. I'm referring here to ROA. Why did this happen? Of course, when you have irrational behaviors being produced by any market player. Rivaldo said this very well. He's been seeing this happen for nearly 40 years. There are two possible answers. The first one that we discard completely, which is that we are in a price competition. We don't think that that's the best or healthiest way of structuring our market.

It does not match Porto, because this is a brand that has been investing in the quality of its additional services for many years, beyond a policy. The second possible answer is through a change in mix to simultaneously preserve high ROA and our global competitiveness. With that being said, this also addresses the second question you asked about the services vertical and revenue generation in Porto Seguro. When you have a mix of products or policies being sold to clients like Azul or Itaú, that provides fewer services to clients, and as a consequence this ends up impacting us because the services vertical will also have lower usage from our clients. This tends to be temporary. As was said, we have sustained high renewal levels in the company for insurance and we have had a high demand for quotation.

These are the main indicators that we are getting the strategy right. As soon as the market goes back to its normal levels, we should see higher utilization rates for services and policies, because the mix will also—excuse me, the sales mix will also follow a positive trend for other premium products. Antonio, that's an interesting question, because this is something that we have to answer very often. This also refers to a structural thing we have here. One percentage point increase in auto is fine for us. And why am I saying that? Because as a reminder, one of the components of the auto price and our DRE is a financial revenue. When you have a higher level of financial revenue, you can have a higher loss ratio, and the opposite is also true. The price component—one of the price components is financial revenue.

We had a budget for 2025, and then this increase was expected. The estimate was that the financial revenue would also be higher. So this D. Our e component was 32%, even though there was an increase of in 1 percentage point, because structurally, our financial expense grew more than this percentage point in the loss ratio. And there's also been a reduction in administrative expenses. When you look at the compound expanded index, the returns in the insurance company was very good in the quarter and in the first nine months. There's also a structural factor here, the increase in loss ratios. Considering these financial results. Thank you. That was very clear. As a reminder, if you'd like to ask a question, you can send us your name and company name through the Q and A button at the bottom part of the screen.

If you do not want to turn on your microphone, please write no microphone at the end of the question so we can ask it for you. The next question will be asked by Mr. Guillermi Grispun from JP Morgan. Go ahead, sir. Hi, everyone. Good morning. Thank you. And congratulations on these results. I have two questions. First, on your revenue from tariffs and services. At the bank, there was a significant increase. I understand that there was a turbo campaign, and I understand that for the third quarter, there is a seasonal pattern, but there is an accrual. In this quarter, we saw an increase of BRL 40 billion in consortium, which sustained the bank's growth. I am not so interested in the commercial campaign, but, you know, in accounting, what led to this increase? My second question is about financial results. You did not review your guidance.

Even the upper threshold will imply a significant reduction in your returns. The market is expecting that CDI will remain flat until the end of the year. What, how are you, why are you expecting this drop in financial results until the end of the year? Thank you. Actually, when we think about consortium, this is paid on a monthly basis, differently from insurance. It is a pro cash regime. There are different ways of accounting this, and we can analyze this in a separate call, but DC is deferred, and revenue is closer to the cash regime. This BRL 40 million, we will take a look and see if that was actually consortium and respond to you later. We are sustaining the guidance because as I mentioned in my presentation, our expectation, we are still planning for the financial results we will see in the fourth quarter.

With the opportunities we have in the risk premium, we should roll some of the debt and investments to 2026 so that we keep a financial result nominally above in 2026 versus 2025. We are sustaining this guidance because we do not have the exact values, as I said, but we are rolling some tunnels with lower interest rates and we want to make use of this opportunity of having still very good interest rates. We still have a window for 2026 to conserve our value, our balance. This is similar to what we did at the end of 2024. We will have some more time for this so that we can improve our financial revenue for 2026. I had a question about the third quarter. You mentioned that you expected to roll this out. Did you have any impact on the third quarter?

If so, what was the impact in this quarter? No, we did not do that this quarter. Okay, thank you. The next question will be asked by Mr. Marcelo Bistrahi from Bradesco BBI. Go ahead. Hi everyone. Congratulations on your results and thank you for this opportunity. I'd like to ask about Porto Bank. We saw a growth that was higher in your portfolio this quarter. We saw that the portfolio grew. The composition of it grew more in revolving cards than upfront cards. When you look, the issue for me is when we look at profitability first, the credit revenue versus the portfolio had a significant reduction this quarter, the yield. You had mentioned that we were going to try to find a more adjusted level for PDD, but it is still at a lower level than I expected.

I'd just like to understand if the average level of profitability for your portfolio is different. If there's a reasonable level for the future, this mix, and if you adjusted per risk, your NIM is at 3.9. Should we consider that? Is there any upside for next year? Also provisions, they were slightly higher. What provisions do you expect to have for the next few months, considering that this, that your defaults are being considered through an accounting perspective. Thank you for your question. Talking about this, reconsidering our strategy of focusing on higher profitability products, we had a NIM of 3.8. In 2024 it was 2.4. Now we're at an average of 3.5. What happened this year in the first few quarters was a drag effect, especially due to the stop accrual that went up to 90 days and prices in the first quarter.

If we had a higher, we had a higher NIM, and now we see that it's normalizing. Structurally we can see that we went from 0.8 to 2.4 and we're now at 3.5 so far. We expect to continue at this level. Considering the strategy we have of operating with credit products with higher profitability. When we look at this makeup of the portfolios, you mentioned that credit card went up. Yes. There is a strategy that we have of anticipating debt. There are installment plans that may have affected us. We don't have a guidance for the year that. What I can say is that for revenue and for losses, we are at the upper part of our guidance. I was going to ask a different question. I was going to add to that because you used a different NIM than what we're publishing.

When you analyze it, remember that we might, you know, we're using. If you go to our investor relations website, you can see this the way we analyze it. Okay. My next question was that if there was anything different about your appetite for cards and we saw that this was very strong this quarter and financing was at a lower level than the previous quarters. We're very confident in the client base that we've been having in card and credit, especially from 2024 to 2025, we saw good indicators. Nothing has changed in our appetite. Of course our appetite is much more cautious and much safer than the overall market. Our portfolio of products and loans has been very good and our origination has also grown. We're growing versus 2020, the third quarter of 2024, over 50%.

We're also seeing a better mix in Porto Bank. Okay, thank you. The next question will be asked by Mr. Gustavo Schroding from Citibank. Go ahead, sir. Thank you. Thank you for this opportunity. I have two questions. I'd like to go back to capital allocation. When we look at capital allocation per business unit, the company is above what was reported in the consolidated view. Insurance is at 32%, the bank is between 25-30%. Health is also above 25% ROA. When we look at this on a consolidated basis, I imagine that this is due to the BRL 3 billion still at the holding. First I'd like to understand, is this 23% threshold what the company believes it will have as its ROA for the future?

I'm sorry to insist on this, but from my understanding there's a possibility to have higher profitability unless ROEs per business unit are higher than you are presenting. It seems challenging. So insurance is at 32%, 25-30% in banking, and healthcare is also above 25%. So what is the level of ROE that the company believes we should work with for the medium and long terms? And my second question is about auto. There's a 1% growth. It's short of what it has been growing, at the level it has been growing. So what can we consider for auto in 2026? Can it accelerate or is it challenging to continue growing this much in auto? Thank you. Thank you, Sridhen. I'll start with ROA. We don't, as you know, have a guidance for the long term.

This is hard for any company but what we can tell you is first we're very happy with 2023 but what has happened is that there are things helping us across each vertical. In insurance we're seeing life, residential and corporate growing the most at 10-14% depending on where you look when you look versus auto. There is a structural mix issue and if this continues, ROE will be benefited. Besides that, obviously there are efficiency gains for example, a capital relief due to optimization in policies given at the bank. We also have a very positive outlook. Consortium is growing at a high rate despite credit cards being high, Consortium is growing even higher. That gives us also a mix advantage. In health insurance we don't see that mix issue but there's a dilution in SGA.

Before, in the previous quarters, we had much higher expenses than we're posting now. If everything remains constant, the mix will help us with the ROA. Obviously, I'm talking about products and not individual things, so there are other factors in auto. I will let Rivaldo answer unless Domingos wants to say something else about ROA. I just want to add to that, in our business model, when we look at the release, we are pricing products at 100% of the CDI. We are looking at the Porto group. Since we're running below the CDI, we're much closer to the—we're looking at the nominal results in the future and not just gaining 1% of the CDI. Our benchmark is not the CDI. We're showing it just as a reference.

Portfolios got a financial portfolio in our model that was a bit subsidized by the holding, although the holding is also posting very good results. There is so much excess capital that we could have a better result of the holding and ROA. Could be better in our portfolio if we were consolidated at 100% of the CDI. We are doing this in order to reduce the volatility of market risk in pricing our business. There is that component. It is slightly higher across others. There is also excess capital, as we mentioned here, BRL 4 million of capital sufficiency with an asset of BRL 14 million. That is one-fourth. There is a component that brings this consolidated ROA down, regardless of the market, of what we are seeing in the market here in the company. We make a daily effort to talk about auto and the levers that can improve our numbers.

There is the market side, but there is also a very big effort with the commercial team, and we are seeking other alternatives and solutions every day. When it comes to the market, as I mentioned just now, it is a cyclical thing. We have experienced this many times, and we always were able to step out of it very well. Right now, we are structuring ourselves very well with our tools, systems, and processes so that at the right time, we can come back on a very strong foot. Our expectation for 2026 is very good. We cannot state them yet, but we expect to see better results in 2026. I would also like to add to that answer because there is a philosophical part in common in both of these answers. The company has been refining its work, and its approach is to be conservative, and I am speaking here literally.

What do we want to conserve? We want to conserve the company's ability to navigate a traditionally volatile macroeconomic scenario. The way the company is growing by double digits at these rates in this environment, you know, we're seeing 2023% year on year. We're expanding with ROEs above 25%. The company's approach is to preserve its margin versus its market share. This is our approach. We're contracting future investments to preserve this pace through our own resources. This means that we have excess cash that, you know, will have some impact to our global ROA. What I'm trying to say is that this is the company's conviction. We navigated extreme situations, including the COVID pandemic, without needing to go to the market.

Obviously, we're not imagining that we're going to see an issue of that size, but considering what we believe is the size of the opportunity of being in these four verticals and the confidence we have that we will capture this opportunity, which would conserve the growth that we're having now. That it makes sense to conserve this capital, even though that might signal an increase in payout and acceleration of other verticals. These things are connected. They retrofeed each other. The company can grow in ROE and globally, it can grow above 20%. This influences the answers we gave on auto and the excess capital that the company has. In practice, we've absorbed variations from the competitive side and from the macroeconomic factors, and we see stability, which makes a lot of sense for us. Great, thank you. That was very clear.

I also think 23% is good. Okay. I just thought it could be even higher. Thank you. Yes, we did as well. This is something I say every day and we all repeat this in the company. We always want, of course, to be higher every quarter. So we're engaged in doing that. We're trying to reach our maximum performance. The next question will be asked by Tiago Paura from BTG Pactual. Go ahead. Hi, everyone. Good morning. Thank you. I'd like to go back to financial results if we can. Celso mentioned some initiatives that can take place for 2026 to try to extract a bit more value from our portfolio. From your portfolio, financial results have been increasing. I know that you don't use CDI as a benchmark, but this is also increased.

You mentioned a rollout for the year, and that's going to be accretive for 2026. For next year, is there anything else considering allocation mix or anything out of the box, or is it just expecting things that you have already done to roll out? Even with interest rates going down in 2026, how do you get more? That seems challenging considering what you've delivered in the last few quarters. Thiago, this is that general. What's also mentioned was the possibility of increasing our yield from our portfolio. We have a significant allocation in actual interest rates, so the yield versus what is negotiated today is lower. This allows us to increase the yield in the medium and long term. That would be it. Another important point is allocations in riskier assets.

We have stocks, we have other allocations that are a bit higher risk that should benefit from having lower interest rates. In general, it is a combo between allocation and better yields from interest rates and other allocations which have been affecting our results because they do not benefit from these higher interest rates. There could be better revenues versus the CDI. Yes. I just want to share with you that we are challenging ourselves to mitigate or even neutralize the effect of a reduction in interest rates to our nominal revenue. These are the possibilities that we are mentioning. Isaki talked about the possibility of having, of rolling this over or even having incremental gains from a nominal reduction, even if the interest rate, if interest rates go down. I just wanted to add something. Of course, we are always seeking the best possible yields. BTG did very well. Right?

You've been also delivering very good yields. Great, thank you. The next question will be asked by Mr. Caio Prato from UBS. Go ahead. Good morning. I have two questions about healthcare. First, I'd like to ask about the cost of sales that increased. I think it was 60 basis points in the last quarter and 40 basis points now. I just want to understand if you need to be more aggressive in this segment. If this is an industry trend, I'm just wondering what we can expect. You started with a lower grace period, but I wonder if this is faster now. Also in healthcare, I think your average ticket increased. It was close to 4% for the year. That draws my attention because maybe we are looking at lower cost products. Maybe you can tell us about this trend.

What average ticket should we expect for the next quarters? They were closer to double digits until the end, until the beginning of this year. It changed now. I'd like to understand what your expectations are. Thank you. Hi, Caio, thank you for your question. Both questions are a bit connected. Our commercial policies remain unchanged. We are not changing them for now. This is a different competitive scenario and we continue with technical growth as we have had for the last years. The number of product lines, partnerships. This is all leading us to this level of sustainable growth in pricing or commercial policies. The question is, what is behind this increase in DC? The main effect is accounting about two years or maybe more.

We expanded our mobilization and that creates more amortization to traditional products with average tickets that were sold for a higher price than the new premiums that are being sold at a lower average ticket. The new premiums dilute the historical load less as we will amortize the DC. That is the effect. We have not done this looking retrospectively, but that is the main effect that we will see in the future. You may also ask how far this is going to go. There is still a tail end for the next two or three months, considering that amortization will remain the same. Later on this effect will no longer happen. It will be slightly above the current level. This is the projected figure. The main effect is actually that we will have loss ratios under control.

The new products which we are launching and that are gradually gaining a large share of the portfolio, they do. In fact, with the new product lines and with verticalization and so on, they are more efficient products. So they lead to having lower loss ratios. Our loss ratio is close to the level that we had in the COVID pandemic, where basically had no claims. The combined ratio and net income, we see year on year that it has had a growing trend. Average premiums continue to go down due to the average ticket. We have Porto Vallus, which has a lower average ticket in our portfolio. We have the traditional line, which still is selling at a different proportion.

Quarter by quarter, we're soon going to see these new lines prevailing with lower average tickets, with technical competition, considering the breadth of products and services being offered and a positive effect in our combined index. Okay, thank you. The next question will be asked by Carlos Gomez Lopis from HSBC. He asks, good morning. Can you talk about the competition in the auto industry for 2026? Is it higher or lower? And when you do reinsurance in the international market, are prices higher or lower? Thank you. Good morning, Carlos. When it comes to reinsurance, we've always had very competitive rates. Our risk selection has always been very good. Considering competitiveness in auto, our expectation is to be closer to the average because it really was a year in which it was very high.

The loss ratio, you know, will happen to everyone, will happen to the market as well. Our expectation for 2026 is for it to be a year in which things are not as competitive as they have been this year. At the end of this year we can start perceiving some changes in the market. We see some readjustments, but I think it's still early to confirm that. Our expectations are very good for 2026. The next question will be asked by Mr. Daniel Vaz from Safra Bank. Go ahead. Hi everyone. Sorry to ask another question, but this is just something I remembered. Last week there was a ruling from the Brazilian Supreme Court about health plan readjustments for people over 60. There was a decision on whether that could be done or not.

I'd just like to understand from you how relevant that is for Porto. I think big operators are the most impacted, like would you imagine others? If you can tell us a bit more about that, about your position or, excuse me, your exposure, if it's higher or lower, and how flexible you are in repricing for the future and if that can affect your industry. Thank you. Thank you, Danielle. We are not very affected by that. Close to zero. It's very low. I do think it's bad for the entire industry because it creates another layer of unpredictability. Our portfolios are very up to date. They're very efficient. In 2021, we had 250,000 lives, and now we're very close to 800,000. Even before 2021 we were already at a good level. This is not good for the industry.

We have a group of regional operators, small operators, which will have a big impact beyond the companies that you yourself mentioned and how they're going to cross subsidize these impacts. That can lead to a marginal relief to this commercial war, but it's hard to predict. I can't be a spokesperson for them, but I think as a whole it is not good for the industry. We want more predictability. Of course. Great. Thank you. This concludes the questions and answer session. The Porto executives will now make their closing remarks. On behalf of Domingos, Celso, and the entire Porto team, we'd like to thank you for your time. Please don't forget to send us your suggestions and your criticism. We want to service you in the best way possible. Thank you once again and have a great end of the year.

This concludes the company's conference call. Thank you and have a great day.

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