Good morning, ladies and gentlemen. Thank you for waiting. Welcome to the Fourth Quarter 2024 Results Call for IRB (Re). If you require simultaneous translation, we have this tool available on this platform. To access it, please click on the interpretation button using the globe icon at the bottom of the screen and choose your language: Portuguese or English.
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Remarks about the future are not guarantees of performance, as they involve risks, uncertainties, and assumptions, and refer to future events that therefore depend on circumstances that may or may not occur. Investors should understand that the general economic conditions, market conditions, and other operational factors may affect the company's future performance and lead to results that differ materially from those expressed in these forward-looking statements.
Today, we're joined by the company's executives: Mr. Marcos Falcão, the company's Chief Executive Officer and Investor Relations Director; Mr. Daniel Castillo, Vice President of Reinsurance; Mr. Paulo Valle, the General Director of IRB Asset; Ms. Eduarda de La Rocque , Director of Internal Controls, Risks, and Compliance; and Ms. Debora Tavares, Actuarial Superintendent. I will now give the floor to Mr. Marcos Falcão, CEO, who will begin his presentation.
Good morning. It's a privilege to be here with you this morning for our earnings call for the fourth quarter of 2024. This is a year that we were very excited for, and we faced unexpected climate challenges and came out even stronger than we started the year. I'm going to leave the operational side of things to Castillo, as always, and I'd like to talk about what we've achieved in other areas of the company. One area we focused in 2024 was actuarial. I invited Debora to talk a little about the advances in methodologies, processes, and where we want to go. We want to be a company with practices equal to those of global reinsurers.
Another focus point for us this year was legacy issues. We worked on the reserves with claims before 2014 to diagnose this in the first quarter of 2025. Our initiatives aim at having a quicker, more agile company. In risk controls, we had a huge advance where we not only have regulatory and rating indicators, but we also have a benchmark from the SANS Institute. We developed an internal risk management model, and we are allocating capital based on business lines. We'll hear more about this soon. In 2024, we also sold land on Avenida Beira-Mar , next to our old headquarters, which generated a positive equity result in September.
We had an infraction notice from a subsidiary abroad for the years 2018 and 2019, which worsened our administrative expenses and also our tax expenses in the quarter. On the other hand, we had a reversal of a deferred tax liability in the IR CSLL line of a 2008 lawsuit, and the effect resulted in BRL 50 million that was negative but was offset by a positive result in the tax line. As I mentioned before, we hope to revisit our entire legacy by the middle of 2025, and this will be reflected transparently in our statements. A nd we're always available to answer any questions you may have.
Looking toward the future, I'm very excited because now, despite these past issues in the company, we're talking more about the future. Fred, our CFO, who has just arrived at the company, is focusing on reviewing our business plan, and he has brought great insight. As of the next quarter, he will be talking to you about the company's financials. Taking a look at our figures, we can see growth in our underwriting results, mainly due to the improvement in the combined ratio. On the financial results side, we expanded our assets under management, with financial and equity results also increasing.
On the next slide, I'd like to talk about the new way we're looking at the company from two different perspectives: one from the portfolio side and the other from the geography side. On the portfolio side, we can think that we have two companies with different portfolios: one for life products and one for non-life products, and in many of our peers they actually have two separate companies. These two groups have different dynamics, so under each portfolio, we have a domestic and an international perspective. We've been adjusting our portfolio in 2024, and we will continue growing from now on.
The non-life domestic portfolio is where we have put the most energy into. Castillo is going to talk about this because he led this amazing work. We started 2025 focusing on non-life international. Castillo is also going to cover this. Our results are therefore made up of all of these blocks: domestic non-life, international non-life, and life. And that's how we will communicate our results from now on. The next slide shows indicators divided into this life and non-life view. We can see that the net profit for 2024 came from the non-life portfolio and is reflected in the combined ratio, which is already running, as we said before, below 100%.
In the fourth quarter of 2024, it even reached 93%, which confirms that this is already an adjusted portfolio. The life result, although negative, is becoming less and less important in our retained premium. In 2024, it was 17% of our portfolio, while in 2023, it was 21%. As I've mentioned in previous calls, our challenge is to improve our administrative expense indexes. A part of them is related to depreciation and contingencies, which we call non-cash expenses. In the graph on the left, we've highlighted the main impacts: post-employment benefits and a tax assessment. The first refers to post-employment benefits, which are offered by IRB(Re) throughout its history.
It's called Pre-68. It also includes life insurance, funeral aid, and health plans. To cover these benefits, we set up mathematical reserves, which are revalued or recalculated quarterly according with CVM regulations. In 2023, these reserves had a positive impact on administrative expenses of BRL 26 million, while in 2024, we had the opposite effect with reserves of BRL 13 million. In total, the post-employment benefit worsened expenses by BRL 39 million. In addition, we had an expense relating to the tax infraction notice in the amount of BRL 16 million, which is highlighted as a one-off.
Another point that impacted the DA index was on the earned premium side, which fell 5% in 2024. When we look at non-cash expenses, which is the bar graph on the right, excuse me, the cash expenses, it is stable at 8.5%. We're tackling this head-on in an urgent manner. I will now hand the floor over to Castillo, who will talk about our reinsurance strategy.
Thank you, Falcão. Good morning, everyone. It's a pleasure to be here to talk about the results for 2024. This past year, we experienced a major catastrophic event that affected the insurance and reinsurance market in Brazil and abroad. I'm referring to the floods caused by rainfall in Rio Grande do Sul. At IRB, we play a crucial role in our relationship with our clients. During this catastrophe, which began in May 2024, we made a point of being close to our clients and offering the necessary support at a very worrying time.
For our part, we had the same level of transparency with our retrocessionaires, which were also partners, and were agile in understanding this unprecedented scenario. To remind you of what happened, in the second quarter, we made a provision for this event to the amount of BRL 257 million. In the third quarter, we made an additional provision of BRL 12 million. And in the fourth quarter, we had BRL 3 million in claims reported, and then we reversed the BRL 55 million we still had as a buffer for the floods. In these big events, we always learn lessons that should help us for future events.
Lesson number one: we want IRB to continue to be the reinsurance company that is closest to the client. This made all the difference in the case of this disaster, and I'm sure it will have an effect on renewals and new businesses. Lesson number two: the risk selection strategy was correct. Geographical spreading was crucial so that we don't have a concentration of claims in a single region. Lesson number three, our retrocession program was essential to guarantee stability and predictability for our business.
And the final lesson: paying claims quickly and fairly with due diligence. It pays off when it comes to renewing contracts and new businesses. We then closed the subject of Rio Grande do Sul, which began and ended in 2024. The next slide talks about the profile of our portfolio. This quarter, instead of opening the portfolio in premium issued, we decided to use a premium retained. Just to clarify the difference between issued and retained premium, retained premium is accepted by IRB without any deductions. Of this volume, we give a portion to a retrocessionaire.
When we take the issued premium and remove the retained premium, or excuse me, the retroceded premium, we are left with a retained premium, which is what is actually kept within our IRB. This is why we believe that this snapshot best represents our reality. Moving on to geographic distribution, we continue to focus on Brazil, which currently has 71% of retained premiums. Latin America is the market where we want to develop partnerships with strategic partners and be relevant with our clients. Our strategy continues to be growth with profitability, with returns. In 2024, we grew domestic premiums by 5%.
Although we continue to focus on Latin America, in 2024, we reduced our volume of retained premiums due to not finding suitable price conditions. By 2025, our strategy will be to concentrate our business on a smaller number of clients. The rationale behind this strategy of having a smaller number of customers in a region that has catastrophic exposures is that we will be able to offer greater capacities to these chosen customers, but at our own price. How do we choose these clients?
They will be the ones we understand the reasons for buying reinsurance, the ones that are financially sound, that are specialized in, that have specialized underwriting and claims teams. In other words, we must subscribe to our clients and their quality. In terms of lines of business, we can see on the right-hand side of the chart that our main branches are property, life, rural, and special risks. This life portfolio has been cleaned up and is being rethought for a new strategy.
The next slide shows indicators for the last 12 months, separated into life and non-life. Note the gradual growth in net income, with a corresponding increase in the underwriting result from BRL 155 million - BRL 452 million in December 2024 in the non-life portfolio. The retained non-life premium increased by 8% in 2024 compared to 2023. Retained life premiums, on the other hand, fell by 18%. Note that the non-life combined ratio has already been performing below 100% at 96.8% in the fourth quarter, in line with our strategy. Moving on to the next slide, we look at indicators with a greater level of detail, segregating the non-life portfolio between domestic and international.
On this slide, we can see that non-life net income came mainly from the domestic portfolio, which also accounted for most of the non-life underwriting results. Note that the non-life combined ratio is already below 90%, delivering the expected profitability for this segment. It's important to mention that for the first time in the fourth quarter, our international non-life business posted positive underwriting results. This international portfolio will also be worked on to achieve similar levels of returns, adapting to specific characteristics of this market, which is more prone to catastrophe and therefore needs to be studied in depth.
Moving on to the next slide, we see the segregation of life and non-life according to the two main indicators of the combined ratio: the loss ratio and the commission ratio. When we look at the loss ratio, we see that non-life has been behaving in a stable and decreasing manner. Life portfolio had a more volatile behavior, especially because of the cancellation of a local life contract in July 2024, which reduced the volume of premiums. In the commission ratio, we had the same predictability in the non-life portfolio, which has been maintained constant with a reduction in 2024 relative to 2023.
In the life portfolio, there is greater volatility due to a contract which was canceled in 2024. This contract had a negative impact on acquisition costs, and after this cancellation, we can see that the commission ratio dropped and was 1% in Q4 2024. I now turn the floor over to Paulo Valle.
Thank you, Castillo. Good morning to all. In this first slide, we see the evolution of our financial assets. At December 31, 2024, the assets under management were BRL 9.2 billion. The result of our onshore portfolios and offshore portfolios was BRL 569 million in the year, of which BRL 142 million came in Q4. On the lower part of the graph, you see the financial result and the equity result, which was BRL 604 million, BRL 109 million in Q4 2024 because of the following events.
The onshore portfolio had a positive result of BRL 443 million in the year, of which BRL 121 million in Q4, arising from the exposure of 66% of the portfolio in assets linked to Selic and CDI, in LFT repurchase operations and private credit. The offshore portfolio had a positive result of BRL 126 million, of which BRL 22 million in Q4. In terms of foreign exchange variation, we had a positive result of BRL 34 million in the year. Although we try to protect our portfolio from the foreign exchange variation, this year we had an increase in the dollar.
In June, for example, the dollar appreciated by 6%, and it was not possible to have a positive result. And finally, we had a non-recurring financial expense of BRL 16 million in Q4, having to do with the monetary updating of the value to pay in the infraction notice relating to IR and CSLL, linked to the positive results of a subsidiary abroad, as we said in our explanatory note. On the next slide, we showed the allocation by assets and the profitability of our investment portfolio. 58% of our assets are invested onshore, and that is BRL 5.3 billion, where the total return was 9.9% in 2024, or 91.4% of the CDI.
Of our investments in the local market, 57% are public bonds linked to the Selic rate, with a return of 10.8% per year, and 32% are public bonds linked to inflation, NTN-B. Of this 32%, 18% are legacy bonds because these are investments made up to 2021 with worse rates, which were at 7.5% per year, below the current opportunity cost. Of the remainder 14%, the management is active and directional, and they have yielded 10% per year. In addition to those bonds, 9% is in private credit linked to CDI plus spread, and the return was 11.2%.
On the right-hand side, you can see a reduction in the difference between the total return of the onshore portfolio of 9.94% impacted by the legacy against the cost of opportunity of reinvesting in CDI, 10.87% in 2024, given the maturity or sale of assets acquired until 2021. For the 42% offshore invested in foreign currency to protect the portfolio, the profitability was 4% per year or 75.4% of the Fed fund rate. Of the total offshore invested, 35% are invested in U.S. and Canada sovereign bonds for regulatory reasons, and the return was 3.4% per year.
32% are Brazilian bonds, and 25% are private bonds, including Brazilian corporate bonds, time deposits, and CDs in different currencies, which we use to protect us from exchange risks. The return was 6% in dollars. We have some legacy Brazilian bonds, which account for 14% of the assets abroad, which yielded 1.9%, and another at 18% with a yield of 4.2%. On the right-hand side, you see the allocation by asset. On the next slide, we are disclosing the explanatory note 6.1 for you to see how we are accounting for our financial investments.
The standard has three classifications of financial assets, those measured at FVTPL, FVOCI, and amortised cost. In the note, you can see if there is a difference between the cost and the fair value of a certain asset. Now I'm going to turn the floor over to Eduarda La Rocque , who's going to explain our risk management strategy.
Good morning, Paulo. Good morning to all. In this first slide, we are going to show facts about our regulatory solvency indicator, which has been growing continuously. The sufficiency of adjusted net worth in relation to the minimum capital required, which was only BRL 18 million at the end of 2022, is today BRL 894 million, as you can see on the upper left-hand side, which means a sufficiency of 183%, a 37 percentage point increase relative to Q4 2023.
This result owes to the combination of two factors, which we can see on the upper-hand side of the graph. There was a substantial increase in our adjusted net worth and also a drop in the minimum capital required in the last year, especially due to the quality of our underwriting. On the next slide, we are going to look at the second regulatory indicator, which reflects, according to SUSEP, the liquidity of our portfolio according to the qualifying guarantee assets, which allow us to pay for our actuarial commitments.
The coverage of technical reserves at the end of 2024 had a sufficiency of BRL 802 million, which is equivalent to 12.1% of the required coverage, 5.5 percentage points above the indicator of Q4 2023. On the next slide, we monitor the technical coverages, and we have a weekly meeting to manage our ALM, to manage liquidity, and the exchange hedge of the company. On this slide, we present our ratings according to international rating agencies. This reflects an improvement in our performance and our solvency and liquidity indicators, and last year, AM Best and Standard and Poor's revised our outlook from negative to stable.
On the next slide, I would like to tell you a little bit about our internal model to manage risks. We calculate four types of capital models: the regulatory according to SUSEP, the rating agencies model, our internal model, and the model of the European Union, which is known as Solvency II. Therefore, we are, in a certain way, adapted to the SUSEP Resolution 471. Since 2023, our risk appetite is monitored on a monthly basis by the company's risk committee. We measure underwriting risks, credit, catastrophe, market, strategic, operational, liquidity, and legal risks.
We are now beginning to measure ESG, cyber risks, contagion, reputation, and we are progressively adapting to the European Union rules. We use our risk models also to make decisions in terms of capital allocation, as is the case of the project that allowed us to calculate the target combined ratios, targets for combined ratios per business line, and this allows us to define targets for added value for each area within the company. Another area which I am responsible for, and it's a pleasure for me, is sustainability, known as ESG. I would like to share with you the progress that we made in this area and the targets that we are working towards in 2025.
Because of Resolution CVM 193, we will have to publish reports IFRS S1 and S2 with the financial materiality of our ESG risks. This will have to happen as of 2027, but we want to do it as of 2026. To create the reports, we had to change our company and put sustainability under the Director of Risk, which allows us to map and quantify risks associated with ESG, which are essential for the accounting and for the strategy of the business, and to ensure we are well assessed by the rating agencies.
We are reviewing our sustainability policy this year, but in relation to diversity and inclusion, we comply with B3 requirements relative to representation on the Board of Directors and Executive Board. Today, we have two women among the seven directors appointed by the board. Our program for people with hearing impairments now employs 10 people in the company. In September, we promoted in Rio de Janeiro the first research and development forum with the topic "Challenges and Opportunities in Addressing Climate Risks."
This was the beginning of an essential dialogue between different sectors about the importance of managing climate risks, which is a critical factor for the economy and particularly for the markets of insurance and reinsurance. We are committed to leading this area, which may help increase significantly the protection of the Brazilian market in relation to climate change, including for the most vulnerable population, by creating products such as insurance for climate resilience. In relation to our social responsibility policy, in 2024, we were honored to support the return of the Tupinambá Cape to Brazil.
We renewed our support to the Institute of Dolphins in Baixada Fluminense and a hospital in Curitiba. We were also certified as a Great Place to Work, and we now rank among the best companies to work in Rio de Janeiro, especially as regards mental health. In terms of compensation, we implemented targets and indicators linked to ESG for all the directors of the company, including integrated targets to comply with B3.
In 2024, IRB signed up to the Brazil Compact for Corporate Integrity, an initiative carried out by CGU to strengthen ethical and responsible corporate practices in Brazil. But we want to do more in terms of external certifications. We have challenging targets for 2025, and I will be telling more about that to you throughout the year. I'm handing the floor to Debora, who's going to talk about actuarial.
Thank you, Eduarda. I am Debora Tavares, and I have been at IRB for 17 years. I am the actuary in charge of the company, and I am going to present the results from an actuarial standpoint. 2024 was marked by investments in the actuarial area in terms of strengthening and training in pursuit of best international practices. Processes were improved to improve operational efficiency. We also have implemented diagnosis tools, and all the process was conducted to ensure more and more that we have strong technical provisions. The results presented indicate that we are on the right path. I now turn the floor to Falcão, our CEO.
Thank you, Debora. So for the next slide, you can see that we canceled treasury shares, although they do not have any impact to our result. There are changes in the balance sheet lines. On December 31st, as you can see, we had BRL 15 million in accumulated losses. So with that, we are now at BRL 300 million. In order to pay dividends, we need the accumulated income to be above this value. Now we're going to present three slides about our IFRS 17 results.
On the first slide, we highlighted net profit and net income in the fourth quarter of BRL 182 million against a loss of BRL 106 million in the fourth quarter of 2023. In 2024, we saw net income of BRL 806 million against a loss of BRL 124 million in 2023. In the year, the result from reinsurance services totaled BRL 777 million versus a loss of BRL 326 million recorded in 2023. The non-life segment contributed BRL 619 million in 2024.
Reinsurance revenues rose by 4.5%, mainly due to the variation in expected claims in the period, combined with a switching agreement for the domestic life segment and the improvement in actuarial assumptions related to risk adjustments, increasing the compensation required by the company for the risks taken. Reinsurance expenses dropped 6.4% compared to 2023, even taking into account the impact of the tragedy in Rio Grande do Sul this year. Results obtained in retrocession operations generated a positive variation of BRL 558 million, an effect explained by the higher recovery of claims in the 2024 year.
Finally, net financial results increased by BRL 285 million, impacted mainly by the effect of variations of discount rates, which we will mention later on. Moving on to the next slide. Here we have the impact of CSM. CSM stands for Contract Service Margin, or a contractual reinsurance margin. We see that the amortization of CSM is at 13%, up to BRL 1.4 billion. The non-life segment represented 72% of the total. As we mentioned before, CSM's amortization represents recontracting according to services provided, and it's the main component of reinsurance revenue.
The next slide shows a particular component of IFRS 17 that stood out this year, which was the effect of discount rates in this period. We saw an expense of BRL 130 million when considered on a retained basis, a reduction of 72% versus the previous year. This is due to the increase in discount rates in the period, especially on contracts made in Brazilian Reals and US dollars, generating a higher retained value in the year compared to 2023. We are gradually getting used to the IFRS 17 methodologies. We will now continue with Castillo, who will give his closing remarks.
Thank you. I'd like to take this opportunity to talk about 2025, the renewal of our business, and events that took place that will take place in 2025. Renewals for January 1st, 2025, are approximately 40% of the total premium for the year. Remember that we have contract and optional renewals. Contracts, which we call treaties, are contracts for a portfolio of businesses, meaning several individual risks. Optional renewals are participations in individual risks and not a portfolio of businesses.
For contracts or treaties, January 1st is when 40% of renewals are concentrated, while for optional contracts, renewals take place throughout the year. Of the automatic contracts, we managed to renew 92%, a reduction of 2 percentage points in the combined priced index, which means that we have an even better portfolio. We would like to highlight that participation in relevant contracts has been maintained, with an estimated underwritten premium or estimated premium income on the rise. This renewal shows that the market remains hard, but there is already a stabilization and a slight reduction in rates in some business lines.
I also think it's important to talk about the claims that have occurred. Wildfires in California have been in the press and in the insurance and reinsurance world. Just as an example, the most recent estimates indicate that the economic damage could reach BRL 150 billion, including property damage, job losses, infrastructure damage, and supply chain interruptions. Insurers estimate covered losses of around BRL 20 billion. Once again, a small proportion of economic losses are covered by insurance and reinsurance, showing that the protection gaps exist even in the most developed countries.
Within the principle of risk distribution, our modeling analysis indicates that we could have a claim of up to BRL 10 billion. It's important to mention that we haven't received any claim notices to date. Should losses worsen, we rely on our retrocession program. I now give the floor back to Falcão.
Thank you, Daniel. So this is the end of our earnings call. Daniel and I joined the company in late 2022. Our mission was to start a turnaround. What we're seeing now, and I'm sure that he agrees with me, is that we have turned the page on the turnaround. Now we're looking towards the future and not to the past. With all of this being said, we reached 2025 with more capital available for underwriting and with better ratings. Domestic non-life is at cruising speed.
International non-life is where we understand what we have to tackle, and our life portfolio has been cleaned and ready. We will plan this recovery very carefully, and we continue to be strong, prepared, and we have a very integrated team. We're excited to deliver a better year, and we expect to pay dividends again. We are now open for questions. Thank you very much.
Thank you. We will now begin the question-and-answer session. As a reminder, if you would like to ask a question, click on the Q&A icon at the bottom of the screen to join the queue. When your name is announced, you will receive a prompt to turn on your microphone. You must then turn it on and ask your question. We kindly ask that you ask all of your questions at once. The first question will be asked by Mr. Arnon Shirazi from Citibank. Please turn on your microphone, sir. Go ahead.
Hello, good morning. Congratulations on these results. So my question is about your growth in products for 2025. You mentioned that most of the contracts have been renewed in January. And for the rest of the year, what are you expecting when it comes to growth in comparison to 2024? Do you believe it will be in the same percentage basis, and do you believe that you will have more growth in non-life from now on?
Thank you. Hi, this is Daniel. So during my presentation, we stated that we renewed 92%. This was our renewal rate in January for the current contracts, and it was even a better combined ratio index. Not only did we renew these contracts, but we also got new clients and new contracts. In 2025, we expect to accelerate growth in Latin America, and our aim is always on the returns adjusted to the risks that we are taking. So renewals take place mainly in April and July 1st. We have our entire team here focused on developing this business.
Arnon, this is Falcão. We don't expect premiums to rise significantly because our focus is still business profitability adjusted to the risks. So we're going to focus and do things at a technical pace. So we will have to grow slowly. Single-digit growths are always welcome. We need to understand what is happening before we see any growth. Does that answer your question?
Yes, thank you very much.
The next question will be asked by Kaio Prato from UBS. Go ahead, sir.
Good morning. Thank you for taking my question. I have two. First, you mentioned the split between life and non-life lines. And when we look at the combined ratio in life, it was at 122%, which is actually worse than in 2023. So what measures have you been taking about this? And should we expect material improvements in this index for 2025? My second question is about your financials. We saw more volatility this quarter.
So, for 2025, do we expect any relevant changes to the portfolio that might have an impact? We know that some bonds were sold, and should we expect more recurring financial results in 2025? And how sensitive are you to the impact points with the Selic rate? Thank you.
Hi, Kaio. Thank you for those questions. So your first question was about life, life and non-life. So first, residual life premiums in the portfolio are very small in this business line. So these combined indexes are low, but they do not affect our results as much. And it's reflecting how we're cleaning our portfolio. So we want to remove bad contracts at whatever cost and grow on a solid foundation. So this is a process that we've been going through. I don't think this was any surprise to you.
But again, the combined ratio is not as relevant because when you multiply this by the premium, it doesn't really impact our results. When it comes to non-life, we got a great ratio in the domestic portfolio, and we're very excited to do the same for the international portfolio. The international portfolio is a bit more complex. Some regions have catastrophes, have a higher cost, so we might not get the same rates as the domestic portfolio, but we will definitely reach a good level, and that's why we're excited for this year.
We're much more excited about this than having significant premium increases, and what was the next question? Financial results. I think this year, the volatility of the financial results, well, I always invite you to look at Note 6.1, which shows the transparency of our financial statements. We have some assets, as you know, as has been reported that are marked in the curve and are below the cost at market value. So when we sell or when we load these assets, they have an impact to our financial results.
What we intend to do is to bring this portfolio to the market value. So that should be done gradually throughout the year. Again, the idea is avoiding any surprises. And you can see this in the explanatory note. This year, we were also impacted by foreign exchange variations. This has an effect on some of the provisions we made. So I don't believe that this impact will happen anymore. And besides that, you might remember that the Selic rate was higher in 2023 than in 2024. And 2024 will be lower than 2025. So we're being reminded of that right now. I hope that answers your question, Kaio.
It does. Thank you very much. So it's possible that we will see continuous portfolio repositionings in 2025, right?
Yes. And that's why I say that our portfolio is under the benchmark rate here and abroad because we have some assets that are below the market value. So this is what we've been doing. At some point, we're going to get there. We're getting closer to the market value with each day, and we're simplifying our balance as well.
Great. Thank you.
The next question comes from Mr. Daniel Vaz from Banco Safra. We are going to turn on your microphone.
Good morning. Good morning, Falcão, Castillo. I have two questions. First, I would like to go back to the single-digit growth in terms of written premiums. When I look at your capital sufficiency, there is more space to retain more risk. If you are underwriting single-digit premiums, can you reduce the retro? And then I'm thinking about the dividends. As of Q3, you should be able to reverse the accumulated losses in the region of BRL 300 million. Have you thought about distributing a minimum in terms of dividends or interest on capital or JCP? Interest on capital reduces also your tax base, which would not be good for the credit tax credits that you have?
Thank you, Daniel, for your question. In the first question, you asked and answered, so I don't have to answer, right? Yeah. We want to use the capital in two ways. First, we are going to offer more capacity for selected customers that we are going to cherry-pick in Latin America. And then we have been doing this since last year. We want to retain more risk and buy less retro, especially in those ranges where there is a greater probability of event occurrence. We have been studying it, and we are going to report on that in the future.
What you think is perfect, that's exactly it. And in terms of interest on capital, once we are close to turning a profit, we are going to take this discussion to the board because JCP interest on capital is much better for the company than for dividends and for the shareholders. So we are going to take this issue to the board. We have the policy of distributing 25% in dividends. And if we can show to the board that we can use capital, we are going to have an open discussion, a rational discussion. We want to do the best we can for our shareholders. Thank you, Daniel.
The next question comes from Mr. Eduardo Nishio from Genial Investimentos. We are going to turn on your microphone. You may proceed, sir.
Good morning to all. Good morning, Falcão. I have two questions. The first has to do with the loss ratio. You went to 64% this year, which is a great improvement relative to 2023. And despite the catastrophe in Rio Grande do Sul, I think you were helped, so to speak, by the rural segment. Can you improve the loss ratio? You must have some provisions for Rio Grande do Sul. Have you been able to reverse all of them this quarter? What can we know about this legacy which can have a positive impact in 2025?
And then in terms of SG&A, they rose quite a lot this quarter, and at the end, they were 10.3%. What do you expect for this SG&A ratio for 2025? Do you expect to improve the efficiency of the insurer, the reinsurer? What were the one-off items in the quarter and the seasonal items that impacted the rate of 15.2% for SG&A in Q4?
I'm going to take the first question. In terms of Rio Grande do Sul, and this is Castillo speaking, everything is over. We don't expect any developments having to do with the Rio Grande do Sul floods. In terms of loss ratio, the projected loss ratio remains flat relative to what we had in 2024. We don't expect major changes in the loss ratio. We are pricing our deals within the same range of loss ratio. I now turn over to Falcão to answer the question about the SG&A.
Thank you for your question, Nishio. First of all, the ratio of SG&A over premiums is something that we are concerned about. If we manage to increase premiums, then that will help. We seem to have a more expensive company than it should be, and we have more capital than we need for this size of operation, so there are two challenges. One has to do with the capital, and we have to use this capital with the level of returns that we have, and the second one has to do with SG&A. We have to look for efficiency gains and scalability, and we are not there yet.
We are aware of that. We have different actions on the way, and I hope we will be able to show you what we can do. Roughly speaking, we are aiming at 6% over premiums. Obviously, a bit of this administrative expense has to do with the legacy, and this is not spent in the business line. It's spent in legacy. We are going to give you a little bit more color in 2025. We are scrutinizing that very carefully. I don't have details to share as of now, but maybe in the next call, we will be able to give you some more color about it. In terms of the one-offs in the quarter, we had a tax infraction notice.
We had this proceeding in a lawsuit in 2018 or 2019. It had to do with the profit in Argentina, and we had this infraction notice for BRL 16 million, and then we had to focus on expenses with better quality and the reserves for post-employment. It's also a legacy issue. It has to do with the pension plan of our employees. We have been around for 85 years. So those who joined the company before 1968 were entitled to this pension.
And now, because of an actuarial review, we had to increase the reserves by BRL 31 million. This is allocated under a reserve. If this reserve is unused, it goes back to the company's cash position. So we are not very concerned about it. And Nishio, please expand or contact us if I fail to answer.
Just to follow up, 6% is in time, right? We can't expect that this year.
No, no, no. Don't expect that this year. No, no, no, no. We need more time. The premiums have to grow, and we have to cut expenses and increase efficiency. For example, the life portfolio can grow. The cost is low. We have other things that can grow in Latin America, local premiums. We have to explore other markets. So Fred, who has just joined us, he is focusing on this business plan. He is not looking at the past. He's going to look at the future. And that's what we are all doing. We are looking at the future. And we are aware of the problems and the criticisms. We are totally aware of that. We are taking it on board.
The next question comes from Mr. Grespan from JP Morgan. Your microphone is on, sir.
Good morning. Falcão, Castillo, Natasha, congratulations for the results. I have two follow-ups here. Most of the questions have been asked. In terms of combined ratio, you talked about the renewal of contracts. Ex-ante, 2 % points lower. Is it a basic calculation? Am I doing it simply if I take this combined delta and extrapolate? The full year was 101, so this would take me to 97-98 in terms of combined ratio.
You have some SG&A initiatives which could drive this down, but I remember in the best case, your target was 95. So, 97-98, is it more feasible this year? Then a clarification here about Los Angeles. You said BRL 10 million in terms of losses, but I didn't understand the second part. Castillo said that, and I'm sorry if I failed to understand it. He talked about activating retrocession. Is up to BRL 10 million gross or net of the retro contracts that you have?
Just taking the last part, these are dollars and it's net. It's our share. But so far, we have received no notices of losses. Our initial calculations were BRL 7 million, but we wanted to be conservative, and we allocated BRL 10 million. If it increases a lot, we have the protection of retrocession. That's what I meant. In terms of the combined ratio, when we price our deals, we have a target combined ratio, the expected combined ratio. But then reality imposes itself, which has to do with the results.
But in our pricing, we price everything below 98% in terms of combined ratio. And our renewals have signaled that we are able to do that. This is going to vary according to segment, and we have to separate life and non-life. So the combined ratio goes from below 97%, but we separate life and non-life. And we have different combined ratios for rural, for property, engineering, and others. Have I answered?
Yes, yes. That was very clear. The target maybe was to reach 95%. In terms of overview, it's a transition year. You still have some legacy. It should be above 95%. But if I look at your curve of losses and the recognition of premium, what can you say? In terms of domestic property.
This is below 95% already. I think it's 89%. This is the idea to go down that road and do the same thing internationally. Everything that you did for deals in Brazil, we want to extrapolate that internationally. Always focusing about focusing on catastrophic exposure. When we calculate the expected combined ratios, we have to expect less than 95% because we don't expect catastrophic events to happen every year.
Let's go to our next question from Tiago Binsfeld from Goldman Sachs. I'm going to turn on your audio, sir.
Hello, good morning, Falcão, Castillo, and the entire team. Thank you for taking my question. So I'm going to ask you about tax credits. You have an estimate of using deferred tax credits until 2025. So I have a couple of questions. Do you follow IFRS 4 or 17? So could it be faster than what we see on that table? And also, when it comes to dividend payouts, what is your perspective on any acquisitions? Also, a quick question. Did you give any guidance for ROI, or do you have any expectations for ROI in 2025? Thank you.
Tiago, this is Falcão. Thank you for your question. So I'll answer with the last one first. We don't have guidance for ROI. Again, we've been talking about ROI with several people, but with no guidance. I think we're still coming to the cruising speed, and we're still understanding what the ROI will be. We can start talking about this more in the next year.
About the tax credit, this is calculated with IFRS 4 with SUSEP. This is how the revenue service does it here in Brazil, and that's what we're going to do. Did I answer all of your questions? Oh, about M&As. Listen, we would love to have an M&A with our healthy tax credit, but it's not easy. There's nothing really, no clear targets that would give us good returns, so if you have any ideas, please share them with us.
Thank you, Falcão.
Thank you.
This concludes the questions and answers session. We would now like to give the floor to the company for their closing remarks.
Well, everyone, it was a pleasure to have another earnings call. There's just one thing I'd like to clarify. We received a couple of questions from several investors in text. So I just want to make it clear. And Tiago had also asked this about IFRS 4 and IFRS 17. IFRS 17 is the accounting standard used by CVM, but our regulators are SUSEP. So some of our standards are done in IFRS 4 for the internal revenue system. And our numbers will continue to be reported with IFRS 4 and IFRS 17 . And we're learning with both methodologies.
They each have their pros and cons, and it's very interesting to compare between them. It increases our administrative costs slightly, but we've been learning a lot from them, and that's what we will continue to do. So thank you. Thank you for your questions. It was a little bit long today, but I hope that 2025 will be within everyone's expectations. We can ensure that we will work hard with a lot of dedication so that we can post growing numbers this year, and hopefully, we can start talking about dividends soon. Thank you, and enjoy your Carnival.
This concludes the earnings call for the fourth quarter of 2024 at IRB(Re). The Investor Relations Department is available to answer any outstanding questions. Thank you, and have a good afternoon.