Good morning, ladies and gentlemen, and welcome to Porto Seguro's results conference call referring to the Q2 2017. Today, we have with us Fabio Luchetti, the CEO; Marcelo Picanço, Vice President for Financial Services and Investor Relations; Celso Damadi, Controller and Finance Director; and Ricardo Fuzaro, Head of Investor Relations. We would like to inform you that this event is being recorded and simultaneously translated into English. All participants will be in listen-only mode during the company presentation. Ensuing Porto Seguro's remarks, there will be a question-and-answer session, at which time further instructions will be given. Should any participant require assistance during this call, please press star 0 to reach the operator. We have a simultaneous webcast that may be accessed through Porto Seguro's website at www.portoseguro.com.br/ir. Conference call banner and in the IQ platform.
At this address, you will find the banner, once again, conference call that will lead you to the presentation, which will be presented by the management today. Questions can also be made via the webcast, clicking on Ask the Speaker icon. These questions can be posed at any time and will be answered live during this conference call. Before proceeding, let me mention that forward-looking statements will be made under Safe Harbor of the Private Securities Litigation Reform Act of 1995. The statements are based on beliefs and assumptions of Porto Seguro's management and on information currently available to the company. They involve risks, uncertainties, and assumptions as 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 cause results to differ materially from those expressed in such forward-looking statements. I would now like to turn the floor over to the company. You may proceed.
A good morning to all of you. This is Fabio Luchetti addressing you. I would like to thank all of you for your participation in the Porto Seguro conference call for the Q2 2017. We're going to go to slide number three, where we have a summary of our main accomplishments and highlights. We see positive changes in the insurance company despite the challenges in the resumption of economy after three years of a slowdown.
We have the sale of new autos, which is important to support the growth of auto insurance that had a growth of 4% in the first semester. The insurance company has been very resilient during this crisis, and it had a growth of 4% vis-à-vis 2016. In Porto Seguro, the performance of the insurance sector was better, as well as the service and financial businesses that had a growth in profitability. On the other hand, we were impacted in terms of our financial results because of a drop in insurance rates. Besides the effects caused by the political instability in terms of auto insurance price, readjustments put in place enabled us to reduce our loss ratio.
The market continues to be competitive, but we realize that there are competitors that seem to be somewhat more reactionary as the Selic rate continues to be on the drop, and we do not foresee an improvement in our loss ratio. In all the other insurance parts, important products in our portfolio had a growth of 10%, such as health, property and casualty, life, which is quite relevant for us, and also in terms of transportation. When it comes to expenses, we have continued with our efforts to increase productivity, and consequently, our expenses have had an evolution below inflation, despite the increase that we had in collective bargaining that was approximately 5%. During this quarter, we have changed our calendar of interest on shareholders' equity. Until last year, this was carried out wholly in the fourth quarter.
The idea is to have a more rational flow of taxes and create a tax credit for the coming year. The shareholders' equity was acknowledged in June at BRL 433 million. The rest will be accounted for in the fourth quarter of this year. I would like to conclude and state that we continue to invest in actions that will allow for the longevity of the company through an enhancement of processes, better systems, and always focusing on the quality of attention. Despite a very difficult economic scenario, we have been able to present positive results. I would like to pass the floor to Marcelo to speak about the financial results.
A good morning to all of you. This is Marcelo. I would like to highlight the consolidated results that you see on slide number five.
For us, this was a semester for recovery in terms of margins, especially in the auto insurance, which is our main product, but also the beginning of a resumption of growth. In terms of insurance, we had a greater growth vis-à-vis what we were having. That was a growth below our historical rates. We went from a growth of practically 0 at the beginning of the year to 4%. Total revenues reached 5%, vis-à-vis an average for the semester of only 3%. Once again, this growth is below our historical growth, but we see an improvement. This is due mainly to a strong recomposition of prices in auto insurance, health insurance, and these two products, thanks to the price enhancement, have had an improvement in their loss ratios. Other business lines, other insurance besides auto and financial and service businesses, had an expansion over 10%.
Financial business with an expansion of 11% and service with an expansion of 19%. The profit per business line also had an improvement, especially in other businesses. And we ended with a return on capital of approximately 15% for the semester, 14.5%. When we assess the evolution of our insurance operations in the following slides, we are able to see that auto insurance is growing below the others because of the maturity of this portfolio or perhaps due to the competitiveness that exists in the market. Quarter- on- quarter, the growth was 4%. This is a better growth because at the beginning of the year, we had no growth whatsoever. Pension plans and life with a growth of 17%, and P&C with a growth of 5%. Health and dental with a growth of 7%.
It had been some time that health insurance had not grown, and we also had an improvement in the loss ratios. Therefore, this semester was a recomposition for the health insurance. In combined terms, the main improvement vis-à-vis the last semester is 101%. This quarter, we got to 97%, 3 percentage points of reduction in terms of loss ratios, despite greater commissions of 0.8 and the other indicators maintained constant between administrative expenses and operational expenses and taxes. We were able to achieve almost 3 percentage points that are very important in terms of the number of premiums we have. If we compare the semester, a stability of 12% and an expansion in the quarters going from 10.5% to almost 14% quarter-on-quarter. I would like to speak about a more strategic outlook and speak about the competitive environment of auto insurance on slide number seven.
To position you regarding our context. In the first semester of 2017, we can observe that in fact, what we focused on was recovering our margins. We maintained our external expenses between loss ratios and commissions as the lowest in the industry. On the other hand, we had a growth that was impacted this semester during this period, and that was significantly below the average of other players. The market grew more on average and had an increase in expenses. This when we look at the semester. In the next slide, we show you a retrospective vision on the behavior of the main players and the general behavior of the market since 2011 up to present.
We can observe that the loss ratio had an increase of 1.7 percentage points on the average in the market, and that basically the auto insurance was the only among the 10 greatest that was able to gain market share and reduce loss ratio. This shows us that there is no magic. A very accelerated growth in this market will force you to pay the price of an increase in loss ratio. In the five, six last years, this has been a fact. In the following 10 years, this is what will happen. Therefore, we're showing you that this differential is important and that combination of growing above the market and maintaining low loss ratios can be very important when you think about the long run. Sooner or later, the price in quotations will appear, the price of charging less will appear, and the loss ratio will increase.
When we compare Porto Seguro with the rest of the market, we can see that we have always had a differential of the loss ratio without Porto Seguro and the loss ratio with Porto Seguro, with its three brands that were 5 percentage points, 6 percentage points or 7 percentage points, and at present are close to 9 percentage points. In 2015, they reached a difference of 10 percentage points. We still have this important differential in terms of loss ratio vis-à-vis the market dynamically and strategically when it comes to gaining market share compared to the loss ratio. The financial and service business results in the next slide. I'm not referring to premiums, I'm referring to revenues. A growth of revenue on slide number nine.
A double-digit growth with the exception of the consumption with a growth of 8%, monitoring 27%, credit cards and financing that have become modestly relevant to the group with a growth of 12%, with profitability levels that certainly are interesting, gaining market share in the company profitability and with decreasing default levels despite the scenario of crisis. This has also been important, and we have a great deal of synergy among the businesses with a focus on the company clients and working strongly on synergies you can see in slide number 10. In slide number 10, we show you what happens with these different products and the synergy and the opportunities we seek with these products.
The cross-selling opportunities, credit card, home, auto, credit card insurance, the ability to launch innovative products, Carro Fácil and others, seeking an improvement of profitability because of the use of information and full understanding of our customer base. The level of risk that we have with our customer base is much better with known clients, and this allows us to have very attractive profitability. Also looking at our clients and brokers, we intend to reinforce long-term relationships and showing the clients that we do have a sense of purpose and allowing gains for our partners and insurance brokers. On page number 11, the evolution of this business, and I think that this is a question that appears every once in a while, referring to the growth of life products.
We still have low indices in dental and life insurance, but we have had a growth of 30%, 18%, 12% in this. The idea of thinking about how much space we still have to grow. This space does exist, and we can grow aligned with a healthy strategy for this business, always seeking that cross-synergy with other businesses in segments where we have full knowledge, and that will enable us to foster the way we work. On page number 12, we had two different phenomena in the second semester, a chronic and an acute phenomena. The chronic phenomenon can be divided into two parts. A drop in the Selic rate, which is not a novelty. This is a gradual process that Brazil is undergoing, and according to the latest information from COPOM, this will be done in even greater lengths.
The drop has been 24% vis-à-vis last year with its impacts, of course, and extremely low inflation indexes, which is positive for the economy as a whole for our operations and costs, but with an impact on financial applications, which is a relevant business that we have in our portfolio. This impacts our revenues during the period. These are long-term allocations that have been done for more than 10 years. We will not change these applications because of the context, but this did have an impact on our results, especially due to the low inflation rates. When we speak about the acute phenomenon, these are due to the events that took place in May of 2017, the high market volatility impacting fixed income applications and the prefix securities that we have, our shares 2.5% and 3.5%, depending on the moment acutely impacting us during the semester.
Very gradually we are recovering. This volatility does exist in an emerging market such as ours. We are not going to change our applications or allocations because of this. We may basically maintain our applications with minor adjustments and believe that we have to be prepared to work with interest rate that will be much lower in 2018. This will require an adjustment in prices, which already has been done. There is no other exit. We also have to focus on efficiency, which is a program that is ongoing for many years, and that is showing a growth that is below inflation. This is something that we will continue to pursue until 2018. On page 13, slide 13, if we look at this from a more strategic outlook, we see the profitability of the company vis-à-vis the CDI or the interbank deposit rate.
How return on equity is going to operate with a scenario of low inflation. In 2008, this was approximately 8% and a return on capital of 17% and 16.5% for these two years, even with a lower CDI rate. The past results are no guarantee of future results, but they show that the company is highly concerned with having balanced work between the operational and financial part, and we consider this in an integrated fashion. If one side operates less revenues, the other side will have to offset this. This, of course, will also depend on market movements in the short term from one quarter to the other. This recomposition of margins does not achieve instantaneous results, but in the long term, we do believe that we will attain this. This is what we believe, and this is what we will attempt to put in practice.
The highest average CDI in the last six years took place in 2016, which is when we had the lowest return on capital in six years. Therefore, there is no simple correlation to see that profitability is directly related to the CDI. This will greatly depend on the operational part as well. Having said this, I would like to go on to the question-and-answer session.
Thank you. We will now go on to the question-and-answer session. Should you have a question, please press star one on your touchtone phone. Or, as an alternative, you can pose your questions through the webcast platform at the speaker icon. Thank you. Our first question comes from Thiago Capucci from BTG Pactual. You may proceed with your question, sir.
Good morning, Fabio, Marcelo. Good morning to all. Thank you for allowing me the question. I have two questions.
The first refers to the performance of the auto insurance. There has been an improvement in your loss ratios in this first semester, which is very welcome. But when we look between the lines, there is a very interesting fact. We see that premiums did not necessarily increase. There was a decrease in loss ratios, but we also see in other areas that the premiums decreased, and the loss ratio did not have an increase. If you could comment on this effect, if it is due to volume, this would be very helpful. My second question refers to the competitive environment. You mentioned that there has been an improvement. My doubt is if you intend to work with new price increases and if the competitive scenario shows that your competitors are also increasing their prices. Thank you.
Thiago, thank you for your question.
We were attempting to better understand your first question. The difference that you perceive in the behavior of loss ratio and revenues is associated to the difference of positioning. The previous year, in a certain way, we were seeking to place ourselves better in the competitive margin. We were losing market. We had high margins. Our loss ratios were reasonable at that point, and that is why we did not have a more expressive loss as we observe in Itaú, for example, that in this more competitive scenario, took advantage to position itself in a more reasonable place in terms of profitability. Once again, because of the competitiveness and the drop in the interest rates, it was expected, therefore, that Azul would have a minor effect in terms of loss ratio compared to Porto Seguro and Itaú. When it comes to the competitive environment, we have positioned ourselves well.
We are in a better situation. We attempt to analyze other insurance companies, those that are very focused on competing through price. We try to delay their actions. Our three brands, in terms of loss ratios, are all duly in a good position. What we now expect is for the market to reposition itself in terms of the interest rates and the situation of the country that has aggravated the loss ratio frequencies. It's inevitable that this will happen, and there will be a different timing in terms of a price recomposition for each of our three brands.
Very clear. Thank you for the answer.
Our next question is from Eduardo Nishio from Brasil Plural bank. You may proceed.
Thank you. Good morning to all. I also have two questions. I would like to refer to slide number 13.
We spoke about the return on investment and the combined ratios, and put into context the scenario that we're going through of a weak economy that prevails. Which is your outlook for the evolution of these pillars? There's a drop in CDI, a very weak economy, and you have spoken about the price. So I would like to better understand this dynamic and what will happen between this balance between the financial part and operations in 2017, 2018. It will still be very difficult to balance these two pillars of the financial part and the operational part. Therefore, which is your opinion in terms of these two pillars? Then I will ask my second question.
This is Marcelo Picanço. There's a very clear element that points to the difference between 2017 and 2011. It's the economic moment that we're undergoing.
Very clearly, the most important thing for us is the rationality of price. How does the economic environment impact this? The drop in the CDI extends to everybody, and as we have had a growth in the market sales of auto, some players are trying to gain market simply through market share. If we have a more rational macroeconomic behavior, we know that the price will drop, and significantly so. Even though we do not have a good market expansion, we will have a good profitability. We will not attain the levels that we had reached in 2011, 2012. But if we look at the latest figures of this year, in 2016, we see that the operational results are already quite poor. They're not going to become poor because of CDI. They're poor because of the price practices, and this should be redressed.
The CDI simply enhances the magnitude of this problem. We do believe that the operational pillar can be improved because of two problems. The first problem, which was the lack of prices, and the second problem is a drop in the financial segment. We can believe that we will continue to work with the low operating levels that we have now. We will not go back to the levels of 2012, but we can expect to be in the middle of both of these.
I am still somewhat concerned with the growth because you have been losing some of the fleets through time. In the last quarters, in the last semesters, you have had a reduction in the fleet. I would like to know if you are going to focus on profitability or share, if you are going to attempt to gain share because you are faced with very aggressive players. I would like to know your opinion regarding this, if the focus this year will be profitability.
Nishio, this is Fabio. Our reference here, if we analyze the last 12 months, what we lost in the past cycle, what we gained in this cycle, leaves us a balance of 40,000, which is not what we would like to have, but was necessary. There are two important variables when we analyze the market. We have a rate of 108, and we have to recompose this. We cannot continue on with this result. With this new repositioning, part of the fleet that has left will return. If we look at this from the viewpoint of fleet, we will once again have growth. The market share that we analyze based on premiums does not depend only on the growth of fleet.
We also have to focus on price, and we do have an opportunity for growth, which we have had in the last six brands. Our brands have grown more than the fleet, and we believe that this scenario will persist during the next six months. What we have perceived from what we have lost, and perhaps this is an optimistic vision, is that the market has taken part of our risk and the behavior has not been very good. This also has an impact on our rates of renewal, and some of the risks are exacerbated. They are somewhat below average. We see that the market has also taken part of this risk. We may have a more sustainable profitability through time.
Thank you very much.
Our next question is through the webcast. Done by Mr. William Mendes from Araújo Fontes. The income tax eligible was much lower in the second semester of 2017 compared to other semesters. Please speak about this in detail and your outlook for the coming quarter.
Good morning, William. Thank you for the question. As Marcelo Picanço explained during the introduction, we anticipated the JCP, the shareholder equity. When we do this, we have a tax credit, and during this quarter, we had a tax credit that we did not have in the previous quarter. In the previous quarter, the entire tax credit was for the last quarter. This is simply an anticipation of the shareholders' equity tax credit, not a reduction in the IR [eligible].
Our next question is from Gustavo Lôbo from JP Morgan. You may proceed, sir.
Good morning to all of you. I have two questions. My first question, once again, goes back to the issue of profitability, a sustainable profitability.
As you mentioned, the message is quite clear. It is not only the Selic that will bring you results. There is the market as well as other factors, and we do not doubt that the profitability of Porto Seguro will continue to be higher than that of the market. What I would like to know is how long this period of transition will be. How long will it take for everybody to include this lower Selic in their price, this fleet that has stopped growing, this increase in the theft of automobiles. The ROI is under pressure. It will continue to be under pressure. Therefore, I would like to gain an understanding of how long you think this pressure will continue until you are able to reach a more sustainable level. I will then ask my second question, if you allow me.
Thank you for your question, Gustavo.
It's a bit difficult to exactly calculate when this will happen. We have observed that some players have already positioned themselves, especially those that are against price and service differentials, and those who are taking longer, those that compete based on price. Through our bonus management, we observed that there is a decrease in aggressiveness and that people are adjusting. I don't think that more than two or three months will go by until we have a significant movement. The recovery curve of the insurance industry tends to be very long. Any movement made at present will only show improvements in six months. We're entering the month of August. In another 60 days, we might have a more positive scenario for the market to take a stronger stance.
If we think about this six month scenario, perhaps in March of 2018, all of these adjustments will be made in terms of loss of financial revenues and loss ratios.
Thank you. My second question is if there is any discussion to increase dividends. I'm not saying this because of your capital surplus, but theoretically, because the growth has been lower compared to last year. Although there was a drop, it continues to be an ROI that allows you to have a greater payout. Considering the growth that you have had, therefore, is this part of your future discussions.
This is Marcelo addressing you. We always look upon this, and through the years, we have been making adjustments in terms of increases or decreases. We know how important and sensitive this issue is for our investors. Once again, this is a very sensitive topic.
We're concluding some timely and important investments in the company, especially in the field of technology for core systems, for products that have had a great deal of growth. We had systems that were quite old, and we're in the stage of conclusion with this, our CapEx. In a company like ours, we have two types of CapEx, one for real estate, and this has been significantly reduced in the last two years. Furniture, we have avoided this because of the signals of the regulator that do not consider this as a capital base and the guarantee of reserves. The second part of the CapEx refers to technology. Basically, we are an information company, and we need technology.
We went through periods where we made parallel investments in business, in life, in pension plan, in food items, and some other systems such as SAP, which is very important for the governance and stability of a company with its revenues. When this possibility comes around, which may happen in the near future, we are assessing this. I would not like to give you a date. This may not take place in the coming quarter, but whenever it becomes possible to increase the payout, we will do it. We do want to allocate our capital in the most efficient way possible, and if the internal projects do not generate returns for the investors, an alternative that we would consider would be an increase in dividends.
Thank you.
Our next question is from Mr. Lucas Lopes from Credit Suisse. You may proceed, sir.
A good morning to all of you, and thank you for the call. I have two questions. You spoke about the increase in the sale of autos that increased in May and June. I would like to know if you have had better results in the last two or three months, and to be less pessimistic, what is happening with your insured fleet? I will later speak about my second question.
Good morning, Lucas. This is Fabio. Thank you for your question. It's simple. We see that the increase of new vehicles was greater in the second quarter than in the first, and there is a reflection of this on our sales map and our growth. The growth of our premium brand, which is Porto specifically. We're somewhat more optimistic, therefore, for the second semester.
Thank you, Fabio. The second question on health. We seem to have a positive impact in terms of loss ratios. What justifies this improvement year-on-year? What is your outlook, and can we become more optimistic in terms of the macroeconomic outlook for health?
We have two relevant effects here. The first is price. We had to make price adjustments in several of our segments. We also carried out a review of processes. We introduced new committees such as a cost committee, new management methodologies to analyze expenses per event, beginning with a request for reimbursement and what happens within hospitals and clinics. Therefore, we have made several adjustments in this scenario. We're also ensuring that we have less examinations, a more controlled system. All of this is due to our new management methodologies that have allowed us to improve our results.
Thank you very much.
We would like to remind you that should you wish to pose a question, please press star 1. Our next question is from Mr. Alexandre Masuda from SFA Investimentos. You may proceed, sir.
A good morning to you. First of all, I would like to praise you for the presentation of the second quarter. It has been a very clarifying presentation. I have two questions. The first question refers to the auto market. What do you foresee for the second semester? Perhaps a greater rationality in the market. If competitors reposition their prices, will Porto Seguro also increase its prices to gain the market share that was lost in the last month? The second question refers to your financial results. I would like to hear your outlook in terms of the CDI. You have not changed your financial position, your liabilities, and others. What do you expect for the second quarter? Or the second semester. Sorry.
Good morning, Alexandre. I will respond to your first question. This is Fabio, and then Marcelo will respond to the second question. From the viewpoint of the auto market, we have already remarked on this. The three brands of the company, the Porto Seguro group, are very well positioned when it comes to profitability in operational expenses. The expenses are controlled. In terms of accounting, we still haven't reached the position that we would like to get to, but this indicates that our future results will be improved. What we're basically expecting is for the market to reposition itself. This is already beginning to happen. As the Porto Seguro brand, we're going to look for market share, but we don't see the need to realign our prices as the market repositions itself, especially the most competitive brands.
I think that we will recover part of the fleet that we ended up losing during this semester. I will now give the floor to Marcelo to respond to your second question.
In terms of our financial results, an excellent question regarding our outlook. When we carry out our allocations, and we have done this for the last 10 years, we tend to look at the final results, the nominal results in Reais. A large part of our allocations are not post-fixed. We don't think there will be a linear drop because of the Selic. How does this happen? It happens through two instruments. We have several securities that are pegged to inflation that we purchased in the past. They pay us real interest, some more than 6% or more, with greater inflation.
Others pay around this, and even with a significant drop in Selic, in a certain way, they will uphold our financial results because we will have the greater nominal yield. Compared to the CDI, we will have a cushion. We will not have a drop that will be similar to the CDI. The others are fixed income instruments that were also purchased in moments of market stress, thinking of a long-term strategic position in the market. Some of these movements took place in May, where the market was undergoing a great deal of stress. We decided that this would be an opportunity of enhancing our position in pre-fixed assets with rates above 5%, as Brazil does not have the economy to operate with rates above 11% for the next two or three years. Therefore, why not allocate a relevant part of our portfolio in this for the long term?
We are long-term investors, and we think with the mentality of long-term investors. Because of this, while we're not traders, we allocate for the long term, and the market stress has been beneficial for us. We have focused on opportunities for gain above what we expect, something that will not be impacted by short-term phenomenas and events. To sum up, we do believe that there will be a relevant drop in financial revenues, but not in the same proportion as the CDI.
Thank you.
Our next question is from Eduardo Nishio from Banco Brasil Plural. You may proceed, sir.
Once again, thank you for taking my question. My question refers to the credit card. All of the banks have suffered due to the regulatory changes this semester, there has been a low impact in terms of credit card for you, 7% quarter-on-quarter, with an increase every year. If you could comment on this, which has been the impact of these regulatory changes, if you think that this impact will extend in the coming quarters. Once again, I would appreciate it if you could remark on this.
Nishio, a little bit of everything you said is true. The main impact was in June. May was part of this because part of our portfolio was affected by the rotating credit. When we compare our portfolio with competitors, for example, large banks that are working with broader income brackets, we focus on the higher and middle income brackets. Of course, the client base of the banks is much greater than ours.
We work with less than half of the customer base of banks, this rotating credit is not as strong for us as it is for the larger banks. So we suffer less in this portion of our revenue. Secondly, we still do not have a very good view of what is happening. In June, the results were lower than other months. It was the full impact of this measure, so far we do not know which will be the risk behavior of our customers who will perhaps opt for other types of financing. What we do expect is that if there is a lengthening of the debt, when you leave the rotating credit that has very high interest rates, perhaps we will go to a model where we will have moderate rates for the longer term. This will offset revenues.
On the other hand, the levels of risk will drop. But to evaluate the risk levels, we need at least three months, this period of time has not gone through. To have a clear view of the P&L, we will have to wait for the year to end. If we only look at the top line of our revenues where the impact was lower, I think the impact exists, we're working hard to offset this in other revenue lines. For example, other types of insurance that generate revenues, mass sales, and other activities of that type. We're not facing a problem. Of course, this leads to a reason of concern, but every week we focus on this and adopt measures to ensure that it will not have a greater impact.
Thank you. Thank you very much.
Our next question is from Eduardo Rosman from BTG Pactual. You may proceed, sir.
Good morning to all of you. My question, well, you announced that you had some shares from the IRB, I believe it was BRL 13 million. They're now worth more than BRL 200 million . I would simply like to understand if this is a strategic position or if it is something that you will do in the next months or years. This is my first question. Secondly, I would like to know if this can lead to higher dividends. You will have a gain in your balance, your equity should increase, if this will also increase the capital available for the payout of dividends. Thank you.
Eduardo, this is Marcelo. We have gone through the underwriting of this. We have the possibility of selling this. We don't have a strategic position according to what was informed to the market.
We may or may not sell this. We do not have a strategic position. Our stake of 2.5% would not lead us to having a strategic position in the IRB. All of this will depend on the market conditions and expectations that we have for the shares, and this will depend on our assessment. With the sales and the impact on our results, which may be partial or total, it does not mean that we will sell 100%. We may sell only part or not sell. Even if we sell all of our shares, the situation here is different compared to that suit of these [COFINS] that we had that generated extraordinary dividends, which was double the profit. Even if we do this fully after taxes, this would generate BRL 160 or BRL 150 million , 15% of the profit of the company in a very typical year.
Therefore, we cannot conclude what we are going to do. As I responded to another question, it will depend on our need for CapEx. It will be part of our general results, and we will consider this vis-à-vis our need for investment. In an isolated form, we cannot justify this, but perhaps we will sell these shares. Initially, we need to see if there will be this sale based on the market situation, which will be the price, and when this will be done.
Thank you very much for your answer.
Our next question was done through the webcast by [Mr. Marcos Perin from Informa Econômico]. Generally, which are the main risks that you foresee that could lead to a reduction of margins and profitability in the company?
Well, this is Marcelo. The main risks that we foresee, considering that our greatest exposure is in auto insurance, we have two.
Basically, price and which, while we are quite competitive, it is difficult to anticipate this. It depends on the competition. We have different visions for the country, for market share. This could have a significant impact, the financial result, because of the decisions on the Selic. We are working with an expectation for reduction. We have included this in the price. Abrupt market movements that will completely change our mark-to-market, generating a poor situation, and the dynamic of violence, and all of this will depend on public security and the fiscal situation of the states. Speaking very broadly, I am referring to the situation of the police security intelligence. We have had an increase in theft in Brazil. This corresponds to 40% or 50% loss ratio, and it is a significant percentage.
Our next question comes from Gustavo Schroden from Bank of America. You may proceed, sir.
Good morning. Thank you for the opportunity. My question refers to the auto market. We have spoken about an organic growth. I would like to speak about a growth through acquisition. The profitability of Porto Seguro is above that of other players. Considering the difficulties faced by this segment in general, do you foresee any possibility of carrying out an acquisition in the short term? I know that this is always part of your considerations, but considering the difficulties, perhaps you now have a greater appetite to carry out an acquisition. If you could specify if this is part of your outlook, would it be more geared towards a region or to a segment? For example, a company where they focus on upper-end vehicles or the lower-end vehicles. Thank you.
This is Fabio. Gustavo, going forward, insurance brands that are well-positioned, well, those do not exist anymore.
We have that car share operation we carried out last year. A second operation. We continue to all work in the same states where we operate now. To say that we are not interested in analyzing opportunities, I cannot say this. If we are proactive, no, we are always open to hearing about opportunities and the strategies of other insurance companies. Now, to carry out the acquisition of an insurance portfolio is always a very difficult issue.
As I mentioned in the past, we already have three brands that are competing with different portfolios. We would need to assess the portfolios of brokers, if their brokers have anything to do with us, if we can renew our three brands. It is very difficult to analyze these portfolios. There is no proactive movement on our part. We are always willing to listen to colleagues that would like to make a change in strategy.
Thank you. Simply a follow-up. You have greater profitability. You also have a better pricing ability than other players. Perhaps you could make the most of your expertise and know-how, and bringing a portfolio that is poorly priced. Perhaps you could bring this portfolio into the company to make it more profitable. I do not know if this would make any sense to you.
Oh, it makes sense, Gustavo. The issue is that oftentimes we have insurance companies that are part of our strategy. They have to have a good composition of products and portfolios. If we do work with these portfolios, it is going to impact our distribution channels and our relationship with the market.
When you speak about buying a portfolio, the insurance company that takes on this will not only take on the reserves, but also the calculation of the differences of the balance. The company is not always willing to do this. It would be necessary to make tariff readjustments. This would extend for 12 months. Buying a portfolio means sitting down and carefully analyzing this. If we buy the portfolio of a competitor that no longer wants to operate, we can apply our expertise, our pricing know-how, and we take on the risk of the portfolio until the operations begin to take place. This possibility does exist. Last year, we made two of these movements. For this year, we have nothing in the near future.
Thank you very much.
As we have no more questions, I would like to return the floor to the company for their closing remarks.
I would like to once again thank all of you for your participation, for the questions, for your provocations, and for your interest in our company. Should you have any doubt, please feel free to speak to our investor relations area. Visit us at our site, www.portoseguro.com.br/ri, the Porto Seguro conference call. Here we would like to thank all of you for your participation, and we wish you a very good day.