Morning, ladies and gentlemen, and thank you for holding. Welcome to Quali's conference call to discuss the results for the fourth quarter, 2023. Present with us today are Mr. Maurício Lopes, the company CEO, Carlos Vasques, Investor Relations Officer and CFO, and Mr. Eduardo Garcia, Investor Relations Superintendent. Bear in mind that some statements in this webcast may be forward-looking statements. Such statements are subject to known and unknown risks and uncertainties that may cause such expectations not to be fulfilled or differ materially from what was expected. This event is being broadcast simultaneously, and participants will be in listen-only mode during the company presentation. In doing this, we will go on to the question-and-answer session, when further instructions will be provided. I would now like to give the floor over to Mr. Maurício Lopes, who will begin the presentation.
Good morning, everybody. It's a pleasure to speak to you today, analysts, investors and Qualis that follow up on this conference and make things happen. I would like to highlight that we haven't had any change in the dynamic of the sector, nor change in the plans set forth in previous quarters. The planning was done, the turnaround has been structured, and we continue to execute the planning presented to the board of management very diligently. We have a focus on capital allocation, whether it is debt, cash allocation, CAC allocation. We're testing the validity of CAC in the retail market. There is more compression, and we try to understand the point of balance of the CAC, vis-à-vis the product we have to sell. Along with this, we're seeking a new level of internal efficiency to have a company giving us more results.
After the restructuring, we have carried out a right sizing in the company, and we are now working based on science to understand the pockets of profitability we have now reached, and we're also designing a product portfolio. Quali has the best sector in the market, in SME and with our existing products, although we still think the portfolio is below what we will have in the future. If we look at the dynamic of the sector as a whole, we still suffer pressure because of the product, the difficulty in cash and so on and so forth. But in this scenario, we have been able to have new possibilities of products, new possibilities for operators that are less incumbent, and this can enhance our sales performance.
This is the portrait of a retail going through a very strong restructuring, and Quali is the company with the greatest resilience in this sector. We remind you that the retail structure sustains most of the operators, but we do want to have a very good portfolio with more than 100 operators and more than 400 entities that we work with. In this structure, we are convinced that we are the protagonist of the restructuring of the sector, the restructuring of the retail market, and we're going to lead the changes that are necessary to favor the sector. I would now like to give the floor to Carlos Vasques to speak about the results, and I am at your disposal for questions at the end.
Well, thank you, Maurício. Good morning, everybody.
I'm going to refer to the figures in the company, what we attained in the fourth quarter. Now, the company reported total net revenues of BRL 414 million in the fourth quarter, a reduction of 6.6% quarter-on-quarter, due to a reduction of the affinity portfolio, with a reduction of 6.9% in the quarter, ending the year with 785,000 beneficiaries. Now, we had 2,103,000 clients in the portfolio, a drop of 21.7% year-on-year. We began with 1,005,000 clients in the portfolio.
But what is important to say is that thanks to the sale of 245,000 lives and a churn of 462,900 lives, a churn of 50%, which is still quite high, considering the normalized market rate. Now, the net revenue totaled BRL 1,749.9 million, a reduction of 10% year-on-year because of the customer base, with a reduction of 21.7%, partially offset by the increases of price readjustments during the year. Now, to speak about costs and expenses, the company in the fourth quarter had expenses totaling BRL 244.7 million. But, that represents 0.6% increase quarter-on-quarter, and if we look at the accrued figure, -5.1% year-on-year.
If we look at quarter-over-quarter, we already observe a reduction of 12%. Fixed expenses totaled BRL 138.2 million. When we analyze the table below and observe the cost, the package of costs, we can see a reduction very clearly, 12% year-over-year, and we believe that in the coming quarters, that trend will continue on because of all of the activities that are being carried out in the company. We remind you that this doesn't pertain necessarily to the fourth quarter. We're going to look at all of the impacts because the action began in the second half of the year of 2023. We look at variable costs totaling BRL 106.5 million in the fourth quarter, consuming 25.6% of revenues on a recurrent basis, 23.7%.
Now, this is a front that involves the new models that are being set in place and discussed with the partners throughout the period. It's a redesign of what should be done, therefore, we have several conversations with the channels, with Quali's, with the brokers, and this is a front that is underway, and it is a point of attention for the company management. We do hope to have good behavior here throughout 2024, that front of variable expenses. As part of variable expenses, we have the PDD, and what I would like to highlight here, two events in the quarter.
One event relating—well, that we decided was a one-off event due to a migration of systems for the invoicing of the company, where the management adopted the necessary measures for a situation such as that one, partially migrating the systems, only part of the company, to begin the turnaround. And this has been done gradually compared to other strategies that could increase the risk in the operation. We carried out that migration last year. We did face challenges, and that is why we have that provision highlighted as being non-recurrent and representing BRL 30 million. In the second effect that you can see on the graph, the 106.5, this refers to the BRL 8 million that originates from the review of clients in the Gama group.
We had already seen a very high credit risk, therefore, we decided to interrupt some services to have a healthier credit condition through the coming quarters. If we look at the company EBITDA, the company posted an Adjusted EBITDA of BRL 169.7 million with a 40.9% margin. This still is not the standard that we desire. We're heading towards our standard. Notwithstanding this, the efficiency strategy of operational costs, as well as discipline and capital allocation, have enabled us to generate a CAC EBITDA of BRL 137 million, with a 33% margin, which is a much healthier margin. Now, the performance quarter-on-quarter reflects the base, and we hope that throughout the period, this will be re-gauging the investment in the different channels, enabling us to grow in a sustainable fashion.
Just now, look at our effective cash generation in the company. The company ended the quarter with BRL 109.4 million of free cash flow. This is the cash flow before amortization, before taxes, and before dividends. I would like to highlight that in that quarter, we paid the interest rates of debentures amounting to BRL 511 million. These are interest rates paid every half of the year. Now, if we look at the accrued figures, we see a company that generated BRL 511 million for the year. Now, these BRL 511 million were used to pay BRL 235 million in expenses for net interest rate from the financial expenses.
This ended up with a final generation of BRL 576 million, enabling us to continue on with our strategy of readjusting our capital structure, ensuring that the net debt of the company could end at BRL 1.22 billion ... I would like to add here that we had a material fact in the last few days for a new fundraising carried out by the company of BRL 200 million. This is part of the program for the reduction of debt that is underway, and we believe that this will reinforce the company liquidity significantly, so that we can have security during this process of implementing the turnaround plan that we have been discussing with you broadly. Now, with this, we would like to end the main highlights of the financial part, and we would now like to open the floor for questions and answers.
Well, thank you very much. We are now going to begin the question and answer session. Should you wish to pose a question using the microphone, type in your name, the company name in the Q&A icon, or press the Raise Hand icon. We will answer the questions in the order they are received. Please hold while we poll for questions. Our first question comes from the BTG Pactual. Yan, you can pose your question.
Good morning, Maurício, Vasques, Edu. I have two questions at my end. The first refers to dividends, which is the outlook for the payout in 2024, if you're expecting a payout with your minimum levels of 25%, or if you're thinking about something different. And the second question is about your budget plan. Has it been approved at the board already?
If you could give us more color in terms of your budget, if it contemplates a stable base of members during the year or any other comment that you may add? Thank you very much.
I'm going to begin here speaking about dividends. The dividends were paid in the fourth quarter, representing BRL 23 million, approximately now. These dividends come from 2022, and they refer to the minimum mandatory dividend. They were part of our balance since last year, and management has the obligation to comply with the minimum mandatory dividends. We carried out the payment in December. Now, looking forward to 2024, and for this, we have to look at the accounting results of 2023. Due to the restructuring costs through time, all of the plans that we have put in place here, this created an accounting loss.
We will not have any provision of dividends for 2024, precisely because of these restructuring costs. Now, our vision in the midterm is that the company will be profitable, will be lucrative, it will continue on with its restructuring and reduction of leverage, and comply with the minimum mandatory dividend payout. We believe that beginning in 2025, the company will once again resume the payout of dividends. And of course, we-- once we have results, we will go back to the mandatory minimum dividends. We need to be sustainable in the medium and long term. When it come to the second question, the stabilization of the base, I'll tell you what we're looking at, Yan. The base stabilization goes through some drivers.
One is what you're doing with the operators, and this connects directly with the churn, our capacity to sell our products, and the third is the macroeconomic situation of the country. Now, in terms of the magnitude of the readjustment applied, it is our perception that the situation is somewhat better than it was last year. In January and February, we have a more balanced readjustment with a lower pressure on churn. We're going to see the readjustment of July, and we'll see if the market is somewhat more balanced. We need to follow up on this. We still don't have a response on this. Regarding sales, as I said, we're testing the resilience of the CAC to see which is the point of balance. Our internal reading is that the CAC is lower than it should be, and that is why we're investing more here.
If we have a response from sales, we will find a better point of balance. If for some reason we don't attain this, we will have to work with a lower CAC without major problems. And finally, the macro situation, the capacity of payment of families in affinity or individual plans, rather imprecise. We have the internal perception that these three elements that we're working with, the CAC readjustment with operators and products, are being well worked on. And of course, macro is imprecise. We don't have guidance, but if we could speak about which are the three areas we're working on? It is these currents, and the third one we don't control.
Thank you, Maurício and Vasques.
O ur next question comes from Fred Mendes from Bank of America. You may proceed. Your microphone has been unmuted.
Good morning, everybody. Thank you for the call.
I have two questions here. The first refers to strategy. It has been seven months that the new management came in for the turnaround. I would like to understand your mindset about the status of the turnaround. Are you at the beginning, in the middle, or coming close to the end? And along those same lines, where do you see that Qualic orp will head for in the next two years? Will it be a company with more SMEs, with more affinity plan? This is the first question. My second question is for Vasques, referring to the debt market. You recently have worked with debentures of BRL 200 million secondary market. If you could give us an updated review and if it's necessary to issue more debentures, how do you consider this market for Quali? Thank you.
This is Maurício. Fred, thank you for the question.
Fred, what is it that we decided when the new management entered the company? We were going to focus on the fundamentals of the house, of back to basics, and in this back to basics, the first thing we looked at was debt, how to restructure this or stabilize the capital structure of the company, paying out debts and much more. The faster solution was to work with the right-sizing in-house, to have costs more adherent to what the company sees in the outside market, and I think this has been done. If we think about the internal structure and the structure of our suppliers. Now, obviously, we can't do a right-sizing in one month and resolve everything in the month.
What we can show you, and the fixed prices give us a good vision of this. This will improve in the coming months as we grew our gain. We have been able to work with a significant compression that will generate cash and generate results. Of course, there's much more going on, but this was a way of beginning the actions and to take them to giving us results, and that has been done. Now, when we speak about the debt and with this issuance that we carried out last week, to have a sufficient capital structure, the sales dynamic doesn't matter, the dynamic of the market doesn't matter. What is important is to have tranquility, to be able to navigate through this. So I check the box. This has been done. What we have been working strongly on is how to generate internal efficiency.
One thing is to work with the right sizing, another thing is to gain efficiency, to have a better look at our products, and we have been working on this during the last 2 or 3 months. We think we will have positive results. The time to launch a product must be much faster, not 3 or 4 months. The time to train and develop the sales force and commercial partners should not be a long period; it should be done in 30 days. But in the meantime, we were restructuring the commercial model of the channel. We did this in December and January. We rolled out a new brokerage contract to all of our brokers, aligned with the practices that we want to see in the long term.
In agreement with operators, we are requesting assertiveness in the sales, a very early churn, sales that focus on the clients with a better claim, with a better priced product, which means a client that potentially could have a bias in the sale done and where they should have a temporary coverage according to the legislation. We have been able to roll out of this until the end of January. This is where we're at, generating efficiency for the company and realigning the commercial channel. There is a third moment that will begin in some months, which is when we will begin to see the results of our new product portfolio. The market is under greater stress than we would like it to have. This covers the entire sector.
The market, therefore, is in a situation of stress, and it's always more difficult to hold discussions of having lower prices at different pricing or a market with different possibilities, and this brings ever more complexity to our work. Now, when we look at our product portfolio and the product portfolio of competition, our SME portfolio is quite full. We have all the right operators, and in the affinity portfolio, we have two or three players offering us better prices. We had 15% average discount, something that began on March 1st, and this, of course, will bring about significant changes. We're seeking exclusivity that is important in distribution.
We will have a better control of DNC and the quality of what is being sold. We will have a channel that is more aligned with the company in terms of what operators are seeking, and this, I believe, is the third phase that is still incipient, but should roll out in the coming months. Now, regarding the future, what we see going forward, we're going to redesign the retail segment. It has always been the segment giving operators the most profitability. It could be scarce in terms of cash, it generates less cash, but generates long-term profitability. This is not something that we saw in previous quarters, so we have to increase the share of SMEs, perhaps individual plans. We're removing the SME for two lives in our portfolio because of the complexity, and operators have understood this.
The right place for these clients is in an affinity portfolio or individual portfolio. A large operator has already withdrawn this product from their portfolio, so we will have a capacity of distribution in the retail market. We can distribute everything. And when we look at the take rate of these products, they're all very equivalent. It includes the management spread and much more. So we're in the right position to market all these products, and we're working with the commercial channels and distribution channels to understand this. This is not something that happens overnight, but I think we will have a more balanced company in the midterm, in the retail sector as a whole, with a focus on affinity, also greater protagonism for SME and products where we have greater exclusivity. It's work in progress in the full sense of this world.
If I haven't addressed your question, Fred, please feel free to ask a follow-up question.
Now, that was very clear, Maurício, as always. I don't know if Vasques could refer to the debt market.
Yes, Fred, I have the question here. The company, Fred, played a significant role in the market. We have a debt that totalizes BRL 2.2 billion, and 100% of our fundraising is devoted to that channel. We saw that that channel was undergoing greater stress. We did not agree with the interpretation that was taking place in that type of funding, and that is why we have thought out funding diversity. We have spoken to our banking partners who follow up on our business, and we have opened up this new front.
And this new front, therefore, will be taken up by one of our partners. We're coming closer to the banking sector to convey a message of security to the capital market. Our process of conversing with the partners has had a higher demand than this volume because we're discussing price, but we can't see the liquidity. We don't identify problems of liquidity in the transaction, and this operation gives us the comfort that we will have a very low risk of having to roll the debt in the next two and a half years. So the company, therefore, is doing what it used to do in the past, which is to diversify its sources. 100% of the debt was linked to the capital market.
We're now working with the banking market, and we think that this operation, given the circumstances, will be better and at a cost that, for the time being, would allow us to work with this. But, once again, we have returned to working with the banking market to diversify, because in the capital market, the prices were somewhat restrictive. Once again, the company has liquidity that has been fully reestablished after the cash generation of BRL 275 million free cash flow at the end of last year, plus this fundraising. We diversified our channels, and we're going to continue along these lines. We might seek out other channels, and this is a win-win situation for everybody. We will have the banking market, the capital market, as well as other fronts that we are conversing with.
So we believe that this will enable us to have a better sound situation when conversing with the capital market.
Thank you. Thank you very much, Maurício and Vasques. Thank you for your clear answers.
Our next question comes from Gustavo Miele from Goldman Sachs. Your microphone has been unmuted, you may proceed.
Good morning, Maurício, Vasques, and other participants. We have two questions. The first focused on results, perhaps for Vasques. Let's go back to the provisions that you explored in the presentation. When you adjust those non-recurrent effects of BRL 31 million, we still see those provisions representing 8% of the revenues. It seems to be the highest in the company since the fourth quarter of 2021, unless I am mistaken. Is there seasonality in this process? When we look backwards, it seems the fourth quarters have higher volumes than other quarters.
Perhaps this is due to the higher readjustment that concentrate in the third quarter, or has there been another event that you could highlight in this more recurrent provision that we see in the fourth quarter? The second question for Maurício, a follow-up on a comment he made in the previous question. The duality of the SME and affinity product, this is one of the discussions we have with the investors, the displacement of the risk and how the category of products seems to be somewhat peculiar when we look at your historical average. So from Maurício, what is happening with your conversations with operators for the new price of SME products and the individual plans, as you mentioned in the previous question? If you could give us more details, that would be wonderful. Thank you.
I'm going to begin speaking about the, well, the question is pertinent seasonality. Seasonally, the fourth quarter does have higher provisions because of the interest rate adjustment, and this has an impact at the end of the year and at the beginning of the year. Seasonally, we are stronger in terms of default. Now, the largest effect here is the recurrent. Now, that has to continue to be analyzed, and we have highlighted the one-off event so that this would not hamper your understanding of the business. The cleanup of Gama, we looked at the portfolio. We had two or three small operators that had a very high credit risk. The risk was materializing, and therefore, we decided to restructure that portfolio. Now, secondly, a one-off event that may not have happened in the migration of the system.
Among all of the playbook, we chose a regional company, a small one, and expand the system transition, vis-à-vis a model that would not place the company at risk. So this represents less than 5% of the total revenues of the group, but we think problem with invoicing. Once again, this was a one-off effect, and now that we understand that, we think there will be more of that seasonal effect and not that one-off effect that was caused by Gama impacting the invoicing of the company. Now, we should always recall the seasonal effect at the end of the year. Thank you. Thank you very much. Now, if we look at the second, point, P, SME versus Affinity, the structure of distribution of SME in the last few years will lead to difficulties in the risk pool through time.
Operators have brought into this risk pool... Well, you know that there is the geographic breadth of the product, whatever, the readjustment will be the same. And we have focused on structures that are completely asymmetrical, and this, of course, is not sustainable, and we have been very focused on this agenda with operators. We have two jobs here, technical convincing, which is easier. The discussion is quite simple. If it's not dogmatic, and the second, more complex part, after the technical convincement, how to alter the route of the operator structure? How can the operator deleverage from this small company and move to Affinity, which is the right place, where the contracts of three, four lives should be? It's not a simple task to hold this discussion, but it has proven to have good materiality during the last few months.
We have a large operator that in January or February, if I'm not mistaken, suspended the SME for two lives, and there will be followers, three to four lives will be taken off the shelves in the coming months, because this is the right thing to do. If Affinity shows a good sales performance, and it's not just about selling, it's selling in alignment with what the operator and the client want to see. A sustainable portfolio, a sound risk assessment that will allow for mutual agreement, not working with highly adverse risk. Now, the better this design, the faster we can move to Affinity in detriment of SME, and we're at this point in our journey, and day and night, we offer arguments to operators to convince them.
I'm convinced that this will work, but of course, we still have a few months for this to happen, and we deploy a great deal of energy to this, and we will maintain you updated in terms of the type of product we'll work with.
That was very clear. Thank you, Carlos Vasques, and everybody.
Our next question comes from Leandro Bastos from Citi. Your microphone has been unmuted.
Good morning, everybody. We have only two questions. First, to speak about products, the remodeling that you are fostering. If you could comment today on the main drivers of your portfolio product, if you're thinking of co-participation or reimbursement, and you said that this is work in progress, so what do you foresee in terms of product design? That is the first question.
The second question: which is your evolution of claims, not only in your portfolio, but for the market as a whole and your partners as well? If you could test the temperature of what is happening there.
Two excellent questions, because they explain the short and medium-term trends, which are the two most important points of this structure and the restructuring of the retail segment. This, product model at present, with a very broad network, high reimbursements, and without co-participation, will not be for the long term for the retail segment. The retail segment cannot deal with this. We will have this in large corporate contracts, where we have that mutuality in the contracts, that's where we will find this. It will set aside the retail market for great profit. This was not the case in the past. Well, perhaps it was there in the past.
These fundamentals were forgotten. Everything was put in the same bag, the retail market and larger group, and now the time has come to work with a separation once again. Now, large operators have co-participation. They have a very low level of reimbursement, but we see still some mixed networks. And we see very little attention on very broad products. What have we done so we can work with the operator? We have changed the invoicing of co-participation, which is something that has become ever more prevalent. It did not exist in the past. We believe that we want higher added value for the network, so this will attract the client more, and so the system can be more sustainable. Hospital products, for example, that are very difficult to sell, we're working with specific campaigns to work with these.
They have a very low claim level, and they help sell the portfolio. When we look at the operators in our portfolio that have well-calibrated products, we see more interesting claim levels. Other operators, on the other hand, that have lagged behind in the launch of new portfolios, more aligned with the market needs, have shown to have higher claim levels. So we can work with installments in the contract or have readjustments that are higher than we would like to have, and we have managed this situation as best as possible. We have reinforced the retention team. The retention team has been fully redesigned by the board of Quali, a senior board with a very long experience in this, and we have changed the structure.
The structure is robust, disciplined, it has been trained, and we're working with models where the client has been submitted to readjustments that are higher, and that's why we're creating something more sustainable in the new portfolios and with all stakeholders, whether they are entities, brokers, platforms. We have redesigned the incentive systems. What we are preferring are readjustment of portfolios after 12 or 24 months, and so on. We did not work with this. We would work with higher rates at the entry and then work with readjustments through the life of the portfolio. Now, this is not a good direction for those who want to have a permanent portfolio. So we're working with different commissions after the first readjustment, after the second readjustment, and so on successively, which should increase the lifespan of the product.
This will help us in terms of permanence, and it is well aligned with what operators want. Now, we have had a quick reduction in claims throughout this year because of this, for those who have done their homework, and this will be the future of the retail segment. And, this is what we have to focus on in product portfolio. Thank you.
Thank you very much, Maurício. Have a good day.
Our next question comes from Felipe Amancio from Itaú BBA. Your microphone has been unmuted.
Good day, everybody. Thank you for taking my question. The first question was already asked by a colleague. If you could remark on your mix, compared to previous years, do you think that the vertical products continue to be important or not in your new sales?
The second question, if you could give us an update on the company initiative to help enhance the visibility of the Quali and the claim of the portfolios that you're offering to operators. Thank you very much.
Can you hear me very well? I was talking to the wall. I do apologize for that. In the gross adds, I cannot comment because it's not stable. We have put all of the contracts in the brokerage until the end of January or February, but we still don't understand how the channel is going to respond to this new model of contracting, and we are making changes. What are we doing in the company? We had a structure that was one size fits all in the North, west, East, and South. Regardless of the product being premium or not, the channel was compensated in the same way.
We have now worked with a third change in the last seven months. The commercial team, the commercial managers, and the brokers, they have compensation structures for affinity that will change by type of product, type of operator, early churn, early claim, and the use of our service channel. These are some of the dimensions, and this is still very unstable. We truly don't know what will happen, but we think that we have ascertained in terms of our changes, that at the end of the second quarter, if you could please ask that question again, I think we will be able to give you a better answer with a better interpretation, and to say if the mix is 80% affinity, 20% SME, or 60%-40%. São Paulo, Bahia, today, we still have a great deal of turbulence with great variations month after month.
In some months, we have huge increases in one market, decreases in another, and this points to the fact that it is unstable. Thank you.
Thank you very much. If you could give us an update on the company initiative to improve the claims among the operator?
I'm sorry, I did forget that second question. In October of last year, we began to rework on the acceptance structures. We saw what was a lot of red tape, was uncomfortable for the client and was not efficient. Nowadays, in terms of our acceptance structure, the teams are dealing with this. They have deep knowledge of how acceptance works within an operator, so we're replicating the structure of the operators in the company. We're working in alignment.
We have brought in-house the main partners to look at this and to work with a benchmarking to see what are you doing that we're not doing and vice versa, and we have received a great deal of feedback from them. We see that we're equivalent or we're somewhat above in terms of what we thought we were doing. We have brought in a new medical technical director in-house to work with the operators, a seasoned person in group medicine and hospital networks, and the team that has come with him has worked a great deal with operators. Obviously, all of this will lead to better claim levels in the short and midterm. What is the problem with this? We will have more conflict in our sales cycle with the commercial team, and we're trying to resolve this in the flow of acceptance.
If we're more rigorous in the interview, we're being more relaxed in terms of the interview. Nowadays, then the end of December, I could be mistaken, but I will confirm with you the right date. We're working with rapid attention interviews. The client can come in any day, any hour, to confirm the health conditions that he or she has. Additionally to this, we're giving the client a very quick response in terms of which is our response, and having a very quick turnaround in terms of the acceptance process. We will have the confirmation from the regional sector that is interviewing clients as well, so that we can reduce our fraud levels. I think operators have looked upon this very positively, and this allows the operator to better understand what we're doing.
Thank you very much. That was very clear. Thank you for the answers, and have a good day.
Our next question comes from Ricardo Boiati from Safra. Your microphone has been unmuted.
Good morning, Maurício, Vasques. Good morning to everybody. My first question regarding the churn. If you could give us a bit more color of what happens with a client who has canceled the health plan, if they're going to a competitor, perhaps in the affinity segment, if they're still migrating to an SME plan, who is migrating to individual plans, vertical plans, or if they're uncovered by health plans. If you could add any more information regarding to these cancellations and what happens to the clients, this would help us in working with the company dynamic. The second question refers to a specific line item in the balance, the premium.
I would like to understand if there's a specific reason for the increase in premiums, if you're awaiting a normalization of this line item, if this is due to a typical seasonality in your operation? Thank you very much.
The churn, I think, is a portrait of the confusion we see in the retail market that we commented. Clients go one side to the other side, or for individual plans. Operators that are offering individual plans for those who are older than 59 years of age, have also proven to have a high capacity to attract clients. There is a great deal of confusion. Now, where are clients not going to? They are not going to competitor products or competitive managers.
We have a very broad portfolio in the company, and we don't see broad portfolios in the rest of the market, although our portfolio has shrunk considerably. So they're going to SME as well as to individual operators focused on senior customers. This is not a stable position. It will change during the year because of everything that we discussed. Now, this portfolio will not explain what will happen the rest of the year. Let's wait and see.
Thank you very much, Maurício, and perhaps Vasques could speak about the premiums that have to be paid or transferred.
The premiums are part of the company dynamic and the working capital of the company. We collect... We collect the tickets, the collection, there's a management rate and the carryover for the company, and we have the payables at the other end.
As part of the working capital of the company, sometimes we have some displacements. It's simply part of the working capital management, what we do with operators, with beneficiaries, with Gama, it's some of the effects of what we have just said. So we have to cut this and understand each element separately. We have a strategy for each of these elements because they are relevant. We're speaking about BRL 600 million in liabilities, and of course, this requires attention. Now, that part is part of the working capital of operators, that line item.
Thank you, Vasques. Thank you very much.
Our next question comes from Estela Strano from J.P. Morgan. You may proceed, ma'am, your microphone has been unmuted.
Good morning, everybody. Thank you for taking my question. A quick question: Which is the approximate duration of a portfolio?
I don't know if you can break down this figure, or give us a qualitative viewpoint. You said there was an increase in the duration of portfolios in this year of restructuring and follow-up of the question of a colleague when we talk about mix. If you could speak not about mix type of product, but of segmentation, the entry segment, the intermediate segment, and the premium segment. Thank you.
I'm going to begin here with the first part, which is part of the discussion of churn of our initiative. What we have adopted here is the logic of amortization of DAC. It is being amortized in a period of 30 months, and this is what we're going to work with. We have other products that have a higher turnover, other products that remain more time, so this blend leads us to that 30-month period. Thank you.
Thank you, Stella, for the question regarding the segmentation. As I mentioned in the previous question, we have found a great deal of volatility in terms of how this is being done. Some operators have volunteered faster in the premium. We have had a relevant reduction of prices in one operator from the middle downward, and in the middle segment, we will have prices aligned with the inflation in our sales portfolio today. I believe that in both cases, we should have somewhat more volume in these categories. Now, when it comes to the basic portfolio, we were holding contract negotiations with a large operator. If there was no result, there would be an increase in the mix of premium. But as we're working with a closed contract, we will once again be able to sell a basic product that has a large scale.
I don't think there will be a change in the mix at present. Thank you.
Thank you very much. That was very clear. Have a good day.
Our next question comes from Caio Moscardini, from Santander. Your microphone has been unmuted.
Good morning. We have two questions at our end. Maurício mentioned that some operators are open to discussion, offering Quali better commercial conditions. Now, have you seen the perception among operators in general? Are they able to perceive the efforts of Quali to increase the sustainability of the product, and if this can translate into better growth sales going forward? Additionally to this, I would like to understand if this better relationship with operators and efforts to improve the claims of portfolio could lead to an improvement in take rate in the company going forward. Thank you.
Thank you for the question. Regarding the claims, we have had a great deal of evolution. We have an open door at all of the operators. We have had good technical conversations, very productive conversations. The timing is poor. The market moment is quite complex. I think, we have had resounding conversation. Now, in terms of what the operators expect in terms of their production with us, they have the expectation that we will increase the volume of production. We also expect the rate. We have to work with the re-gauging of the CAC. We have to work with the re-gauging of commercial teams. In another quarter, we should be able to stabilize how we believe the CAC should behave. In my viewpoint, we think the CAC is low. We should work with the CAC with greater efficiency now, and the conversation with the operators is doing very well. I think that's our answer.
Thank you.
And if the better relationship with the operators and as the claims of portfolios drop, if this will lead to an increase in take rate, for some time already, perhaps five years, the operators have ensured that part of the commissions are linked to the results with the product. That dynamic will not change. It is permanent. We have spoken quite a bit about this. If the claims drop, we would like to understand how we will be remunerated, but there's no substantial development at present. The conversation exists, but it has not been fully materialized. We're speaking about the portfolio, and we're speaking about sales. We're going to focus on the distribution of products, products that are sustainable in the long term. And this second conversation will appear naturally, but we're only in the first stage.
We haven't gotten to that second stage yet.
Thank you very much.
Our next question comes from Mario Osako, from Bradesco BBI. Your microphone has been unmuted.
Good morning, Maurício, Vasques. Two questions at our end. You have had the withdrawal by some operators, and the withdrawal, withdrawal of operators that have gone to the competition. Have you seen this type of movement, and what is happening with the mix of your sales portfolio when you compare this, you have a base of beneficiaries that no longer have sales at one end, perhaps those figures will decrease because you no longer have the sale? And the second question, which has been the impact on the sales of this more rigorous selection to avoid fraud and higher claim levels, if your rejection of proposals has increased significantly? If you could refer to that, please.
Thank you for the two questions. The operator is called [Declinar]. This is the name they use. You have seen this in the retail market, and the Quali dynamic have participated with this. The operator is sovereign, and they will define what to do with their portfolio. At the end of the day, it is the operator who makes this decision. What we have found in this process is that the operator sent something drastic, huge cancellations, a more confusing process, and after we sit down with them and negotiate, trying to favor the client in the technically correct way, the size of the problem will decrease. This has been the dynamic in the last few months, and I think we have done very well advocating for the clients and advocating for the sector as a whole. In terms of acceptance, yes, our acceptance is ever more rigorous.
We're not convinced that our acceptance process is correct, and it has to be something mutual. The risks have to be included correctly. If the person has a temporary coverage, we have to continue to offer them that. If the person has no coverage, if the health condition does not lead to other risks that are offered in the product, the customer will have to gain a coverage. Now, the commercial team is having greater difficulties in placing those products in the brokerage channel. We think that in the retail market, regardless of the product, it will only have sustainability in the long term if we work correctly with acceptance. Now, having said that, the retail market will never disappear. An operator may withdraw a product. Operator number two will offer that kind of product.
People that need a health plan, and health plan is a second or third greatest desire of the population. If there is demand, there will be supply. And you're looking at it from your side as analyst of the sector, perhaps the more traditional operators have become more restrictive, and we have a group of operators that are more aggressive, that are coming about. The incumbent will have, but they also will have difficulties through the new cycle. And these new operators have grown during the last few years. It's part of the retail market, and this is definitely a retail product, and we want to have protagonism in the distribution of all of these products. It doesn't matter how the retail market has been conformed, we have the capacity for the distribution. And as claims decrease, some operators will become more aggressive and sales will increase.
I don't have that pessimistic viewpoint that the retail segment products have ended. Quite the contrary, there's restriction in traditional products, but there will always be products, and they will work for any retail segment. They can be medical products, consumption products, or others. And in terms of the cleanup, we're struggling with it, making sure that what has to be done will be done, but we're working to favor the beneficiary.
Thank you, Maurício.
The question and answer session ends here. We would like to turn the floor over to Maurício Lopes, the company CEO, for the closing remarks.
I simply wanted to thank you, reinforce the view of the management that all of the levers that have to be changed to carry out the turnaround in the company and to gain protagonism in the retail segment are being used.
I'm surprised with the execution capacity of our Quali, the devotion of our leaders that are helping us to work with this turnaround, with acceptance. The market that is very complex, but with cash, with a better cash situation, with the company within a better right sizing, with everything in place and the ability to recover margins, we will emerge stronger. Once the curve of the sector is altered, at some point in time, it will be altered. We will see a reduction in the volume of complaints that have been quite large with the operators, but we will have that ability to gain resiliency in this sector. So I reinforce my commitment with it, and I reinforce the commitment of the Quali team in working in this turnaround. Thank you all once again. Have a good day.
The fourth quarter 2023 earnings results conference call ends here. We would like to thank all of you for your attendance. Have a good afternoon.