Wiz Co Participacoes e Corretagem de Seguros SA
BOVESPA:WIZC3
Earnings Call Analysis
Q4-2023 Analysis
Wiz Co Participacoes e Corretagem de Seguros SA
The first quarter of 2023 showcased a significant strengthening of financial health, with EBITDA reaching BRL 182.7 million, a 126% increase from the same period last year. This figure not only represents a record high but also signifies a substantial year-over-year growth of 34.7% to over BRL 500 million in EBITDA. Net income too saw an astronomical rise with a 405% increase for the quarter, emphasizing the company's robust operating results and the positive impact of non-recurring items that were later adjusted for a clearer year-over-year comparison. With these adjustments, the increases remained high at 86.2% from the previous quarter and 44% from the same period last year.
Scrutinizing the company's performance by segment illuminates the versatility of its operations. The Insurance segment enjoyed a 43% rise in net revenue compared to last year, reaching BRL 148.2 million, highlighting its market influence. The Corporate and Inter Seguros sub-segments also boasted remarkable growths of 68.8% and 36.1%, respectively, underscoring the company's ability to continue expanding its portfolio with new and recurrent products.
The Credit and Consortiums distribution sector, comprising Promotiva and Wiz Parceiros, experienced a 209% surge in net revenue and a staggering 533% leap in EBITDA compared to the last quarter of the previous year. This is a testament to the successful first year of Promotiva's operations.
The Services segment did witness a contraction by 13.7% in net revenue, influenced by the downsizing in solutions and corporate insurance revenue streams. However, the focused efforts to drive profitability and service quality led to a notable 50.2% increase in EBITDA since last quarter, signaling an upward trend in efficiency and profit margins.
The first quarter also saw the credit arm of the business grow by 4.4%, a respectable achievement amidst challenging market conditions. The proactive strategy to expand its commercial network paid off, resulting in a 62% growth in production Cobans, consolidating the company's market stance and mitigating reliance on specific agreements.
While net revenue was augmented by BRL 60.7 million, up 59.4% from the previous year due to restatements in the financial statements, the underlying statistics, devoid of these effects, indicate a 1.7% decrease in net revenue.
On the cost side, Selling, General and Administrative Expenses (SG&A) were down by BRL 9.5 million, indicative of effective cost rationalization efforts that align with the overall corporate strategy. This belt-tightening contributed to a manageable 10.2% increase in costs related to amortization and impairment, with new write-offs due to asset impairments factored into the consolidated results.
The first quarter witnessed a 37.4% reduction in financial results compared to the same period last year. Nevertheless, there was a silver lining with a reduced tax impact thanks to interest on shareholders' equity, which resulted in an effective tax rate of 20%, softening the financial narrative and offering a semblance of fiscal efficacy.
Looking ahead, the company's management is bullish about 2024, banking on the positive effects of a potential decrease in interest rates which would lower the cost of debt and encourage credit expansion. Furthermore, the benefit of cost savings realized throughout 2023 is expected to bolster the company's EBITDA and support its growth momentum.
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Good morning, ladies and gentlemen. Welcome to the video conference of Wiz Co regarding the results of the fourth quarter of 2023. [Operator Instructions]Before proceeding, we would like to clarify that any statements that may be made during this video conference regarding the company's business prospects, projections, and operating and financial targets are based on the beliefs and assumptions of the company's management as well as on the information currently available to the company.Forward-looking statements are not guarantees of performance. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that general economic conditions, industry conditions and other upgrading factors may affect the company's future results and could lead to results that differ materially from those expressed in such forward-looking statements.For The Wiz Co team today, we have here Mr. Marcus Vinicius de Oliveira, CEO; Lucas Neves, CFO and Investor Relations Director; and Stefania Fernandes, Superintendent of Investor Relations and M&A operations.Now I'd like to turn it over to Marcus Vinicius for his presentation. Please proceed, sir.
Good morning, everyone. Welcome to our earnings results meeting of the fourth quarter of 2023. Before turning over to Lucas, I would like to share with you a brief message. In the year when we celebrate our 50th anniversary and it's so rare to see such a long-standing company in insurance broken business, we have achieved solid results aligned to our goals, reaffirming our commitment to excellence and innovation. We celebrate the completion of 2023 not just because it was a landmark for the history of our company, but because we are proud of our accomplishments.2023 was characterized by volatility and uncertainties, influenced by elements related to geopolitical issues and also structural references. The Selic Rate was high and also credit issues in the Brazilian market have become additional challenges, especially for our units in Bancassurance and Credit and Consortiums.Added to that, we have faced the challenges of maturation and consolidation of our recent business units. However, we were able to adapt to market conditions showing resilience and flexibility, which are crucial to overcome challenges and make the best of new opportunities. Our proactive attitude to face diversity also led to a deep restructuring of our internal structure, leading to significant savings in costs and expenses with a 20% reduction in headcount, maintaining productivity levels and efficiency. We redesigned strategies, strengthened our cash and develop technologies. We launched new products and work together to pursue consistent results.Paying attention to the opportunities that we have in our market and reinforcing our potential of working as a group, we reinforce an important pillar of our culture: synergy, increasing new business in our units. We understand that the organizational culture, the way of being that we have at Wiz should be connected to the business strategy, and Wizzers are concerned with how Wiz is perceived outside. We know that together we'll always be stronger.We highlight the accomplishments on Wiz Corporate and also Inter Seguros with new records in efficiency and with great image or reputation gains. Inter Seguros has reached the landmark of 1.7 million customers, 41% growth vis-a-vis the last year, showing its capacity to combine a strong growth and recurrence. Parana Seguros unit in its first year of interaction has issued more than BRL 30 million in premiums, reaching high levels of commercial efficiency.In Credit and Consortiums, we'd like to highlight the results of Promotiva that conducted over BRL 6.8 billion in credit and consortiums reaching BRL 90 million in net revenue. In its first year of operations, that unit has expanded its footprint with expansion of its sales team by about 62% with a consistent growth throughout the year, setting new records in sales. We have also delivered different initiatives along the year to strengthen the generation of cash of the parent company.I would like to highlight operational efficiency projects and adjustments in the cash flow of the liabilities of the companies and payout reduction. Those actions have led to a more comfortable cash projection to conduct our business in the short term. We have moved forward in technology with Wiz Pro Platform launch that has led to more engagement and connectivity among our operations and business partners.In addition to that, we were also certified by the ISO27001 insurance in data security and reducing vulnerability risks to the company. We have reached significant advantages in ESG, especially in our integrity program. We'd like to highlight that we have achieved the Pro-Ethics Certificate, which is an initiative of the controllership of Brazil, the UN Compact and Ethos Institute, which intends to encourage integrity measures by companies. This accomplishment reflects the commitment we have in doing business ethically and in building a market business that is transparent and ethic.In 2024, we are confident about the potential of our business, optimistic about the macroeconomic scenario and expecting acceleration of our business results. Supported by our competitive advantages like technology, we will keep capturing synergy in innovation and in the development of new businesses. We'll also focus on maturation and consolidation of our operations.Finally, we would like to reinforce that we are deeply grateful to our board members, shareholders and specially our Wizzers and as well as also business partners because our Wizzers have also collaborated to build one of the largest companies in insurance in Brazil. We will keep building together the next 50 years of our history.Thank you very much. I'll now turn over to our CFO and Investor Relations, Director, Lucas Neves, who is going to talk about our results.
Thank you, Marcus, and good morning, everyone. I'm going to start presenting the financial data on Slide 3, where I'm going to talk about operational and strategic highlights in the period. Before starting the presentation of the excellent results of the quarter and of the end of the year, I would like to briefly talk about the restatement of the financial information related to the quarter. This restatement was necessary because we needed to make improvements and adjustments, and the company identified that with the support of independent auditors basically related to the combination of business that infected investments, accounts payable and the intangibles balance as well as tax impact.We also made the restatement and also restated data and also in the lender insurance product. That did not lead to any impact on the structure of the company. The net income was BRL 4.5 million negative or minus 3% than what was previously presented. BRL 390,000 was the impact on the cash, 0.1% lower than expected. We also made adjustments between the lines without making changes to the final balance. That information and other information related to the impact of the restatement of the financial statements are in the explanatory notes of December 31, 2023. The analysis related to that statement related to the restatement data.Along the lines of the initiatives that we presented in the last quarter to strengthen cash and the structure of the company, we established loan agreement with our shareholders of the controlling company totally BRL 115 million. They were established with a remuneration rate of 100% of the CDI plus 1.8% a year pro rata due upon the agreement expiration in 2028. This operation is aligned with the capitalization strategy of the company due to the obligations that we have agreed.Another important point relates to our advances in ESG. In the fourth quarter of '23, we obtained a Pro-Ethics Company Certificate, an initiative from CGU, the controllership of Brazil, and Ethos Institute that seeks to encourage the adoption of integrity measures by companies regardless of the industry or size of companies. Those companies go through a complex assessment process showing how they commit to the best practices in fighting corruption and fraud. This reinforces our commitment to deliver results aligned with an ethical way of doing business.Now moving to Slide 4, I would like to show the financial highlights of the fourth quarter of '23. In that quarter, we had BRL 268.8 million in net revenue, a 48.8% increase vis-a-vis the same quarter last year. Excluding the cash we had current net revenue that was 46% higher than the fourth quarter of '22 totaling BRL 208 million, that was leveraged by a strong increase in the insurance business with a 43% increase in insurance revenue and also leveraged by the Credit and Consortiums revenue that had a 209% increase vis-a-vis the fourth quarter of '22, especially due to the Promotiva business. Later on, I'm going to delve into those figures. Also, we had a record adjusted consolidated EBITDA BRL 172 million in the period, 86.2% increase vis-a-vis the fourth quarter of '22. The adjusted consolidated net income totalled BRL 117.5 million which is 71.5% higher than the fourth quarter of '22.Now moving to Slide 5, I would like to show you some highlights. As Marcus mentioned, we have reached very strong results in 2023 due to the strategic focus on the maturation of two operations, on capturing synergies and also on operational efficiency. In the year, we totalled BRL 2.8 billion in insurance premiums, a 26.7% increase year-over-year, reinforcing our relevance in the insurance market in Brazil. Along '23, we had expansion of our units with renewal of our product portfolio to improve the value proposition to its customers through a more complete and personalized portfolio with more profitability.BRB Seguros, for example, launched 14 new products and reinforce its presence in the digital market. Also 1.7 million Seguros new one of the biggest players in Bancassurance in the company. Parana Seguros in its first year has issued more than BRL 30 million in premium. In Credit and Consortiums, we have reached a volume of BRL 13.2 billion in Credit and Consortiums sales, which is 107% higher than year-over-year. Promotiva which was incorporated in the end of last year, added BRL 8.6 billion in this period. So we totalled BRL 914 million in net revenue ex commissions, 22% higher year-after-year, year-over-year despite the challenges in the macroeconomic scenario.Now moving to Slide 7, we have a summary of the consolidated results. In the first quarter of '23, our EBITDA with BRL 182.7 million, which is 126% higher than the same period of year, the highest ever value, over BRL 500 million in EBITDA, a 34.7% expansion year-over-year given the record commercial performance in several business units of the company, and a focus on operating efficiency implemented over the year.Now moving to consolidated net income. We had a 405% increase in the quarter because of the good operating results we had and also non-recurring effects that I'll go into detail later. The net margin or the controlled stake net income totaled BRL 58 million in the fourth quarter, 492% higher vis-a-vis the fourth quarter of '22, BRL 48 million increase.Now moving to Slide 8, we see the effects related to our adjusted result. In the fourth quarter, we had BRL 13.4 million for cancelling -- for the run-off Rede Caixa unit related to the lender insurance, and it was reversed in the first quarter of '23. They were adjusted for best comparison with the results of '22.And in the first quarter '23, we also adjusted BRL 1.4 million related to tax credits of INSS taken by the company in this period. Annually speaking, in addition to those items, we also adjusted BRL 42.7 million related to the reversal of tax provisions. With the adjusted of these effects, the EBITDA would had a 86.2% increase vis-a-vis the fourth quarter of '22 and 44% difference vis-a-vis a year-over-year, BRL 579 million, and in net income we also adjusted non-recurring effects without cash impact and a highlight are to the depreciation and amortization and impairment effects totaling BRL 51.8 million in the quarter because of the adjustment of the amortization of intangibles related to acquisitions and adjustment related to a write-off due to impairment related to the Polishop Seguros subsidiary.In the financial results, we also adjusted them to present value of the future installments of cost of investments and the adjustment at the earnout fair value and option to purchase the investments. Also, some variations of financial instruments hired were taken into account. So the results we had was 71% superior to the first quarter of '22. In the year the adjusted net income total BRL 378 million, 33% higher than '22.Now moving to Slide 9. We analyze the results of the parent company. They relate to the runoff of the Rede Caixa business and the Wiz Parceiros business incorporated by the parent company in the second quarter of the last year. So we have different expenses here in the first quarter of '23. The parent company had BRL 63.2 million in EBITDA, which accounted for a BRL 47 million or 297% increase vis-a-vis the first quarter of '22.The good operating results in the quarter relate to the record sales results in different business of the company. In the first quarter of '23, we had BRL 29.5 million in equity method, MEP, which was 170% higher than the results in the fourth quarter of '22 because of the improved performance and participation of results of the controlled companies and also a reduction in equity of identified issues that used to be recognized in depreciation and that it was reclassified to the equity method line.Also a [ BRL 23 million ] increase in ex net commissions because of the new company and provision of cancelling of revenue in the run-off Rede Caixa unit in the first quarter of '22 because of the restatement of the '22 results. So there was a partial reversion in the first quarter of '23, which impacted the comparative analysis. In the year, if you adjust for the nonrecurring effects, the company would reach BRL 293 million in adjusted EBITDA, 26.4% higher than '22.In net income, the company hit BRL 58 million in the fourth quarter, the best results, accounting for BRL 48.3 million increase vis-a-vis the first quarter of '22. This was leveraged by the EBITDA performance and by the reduction in financial results year-over-year in accumulated results, BRL 141.6 million, 8.4% higher than the same period following the evolution of EBITDA. So adjusting this recurring events, we had BRL 232 million, 26.8% higher than the same period of last year.Now moving to Slide 11. We see the consolidated results by segment. You can also see this information in the attachment that we also released. In the year, 66% came from our current operations. The business units consolidated by Wiz in the insurance market, accounted for 52% of our current results. In comparison to the same periods of last other years, we see diversified results aligned to the continuous increase in revenue. This performance was only possible because we focus on strategic results and strategic deliveries.Now moving to Slide 12. You'll see the operating results of different segments. Let's start with the Insurance segment. In the quarter, we reached BRL 148.2 million in net revenue, a 43% increase vis-a-vis the same period of last year. This was related to a record commercial performance of some units like BRB Seguros that had a 37.9% growth vis-a-vis the first quarter of '22, representing the best historic operation of that unit. Also Corporate grew 68.8% or BRL 28 million vis-a-vis the fourth quarter of '22, leveraged by signing new businesses and also because they have renewed and recurrent products in their portfolio.Inter Seguros also reached BRL 47.2 million in gross revenue, 36.1% higher than the first quarter of '22, BRL 5.9 million in equivalents for that in the same period. Parana Seguros, in its first year of operation reached BRL 8.5 million in gross revenue in the first quarter of '23, BRL 0.9 million addition to Wiz. In EBITDA, the segment totaled BRL 109 million, which is 73% higher than the fourth quarter of '22 because of the higher commercial and operational efficiency because of the control of costs and expenses. That has led to a 12.6 percentage point increase in EBITDA margin.Now moving to Slide 13 that shows Credit and Consortiums distribution, Promotiva and Wiz Parceiros. In the quarter, we reached BRL 35 million in ex commission net revenue, which was a robust growth of 209% vis-a-vis the same period of last year with an EBITDA of BRL 121 million, 533% higher than the fourth quarter of '22. This reflects the good results of Promotiva's first year of operation.With that, we have debt accounts for 70% of the consolidated revenue for the year. In the first quarter of '23, we had BRL 1.7 billion in credit, 4.4% higher than the first quarter of '22, a consistent growth even in an adverse credit scenario. The operation keeps focusing on expanding its commercial network and accredited agreements ending the quarter with over 645 Cobans in production, a 62% increase vis-a-vis the fourth quarter of '22, which strengthens its presence in the market and reduces the dependence on specific agreements.Now moving to Slide 14. We show the Services segment, Wiz Concept and the run-off Rede Caixa operations. In the first quarter of '23, the Services segment had a retraction of 13.7% in net revenue ex commissions vis-a-vis the fourth quarter of '22, impacted by the retraction on the revenue from solutions and corporate insurance and also the telesales and the corporate insurance solutions. The year of 2023 is characterized by focus on business profitability, discontinuing lines with low results and investing in improvements in customer relations and also excellence in service. As a reflection of these efforts, the EBITDA of BRL 4.8 million had a 50.2% increase vis-a-vis the first quarter of '22 and EBITDA margin of 7.8 percentage points.Related to run-off Rede Caixa, here the results of the stock of revenues related to sales conducted until February 14 of '21. It added BRL 60.7 million in net revenue, that was 59.4% higher than the first quarter of '22. Due to the restatement of the financial statements, we can sell the lender insurance product and as a result of the restatement of the financial statements. This partially was reversed by the realization of reversals of this provision in the first quarter, and that has an impact on the comparative analysis. Excluding these effects, we would have a retraction of 1.7% in net revenue, 4.5% retraction in EBITDA comparing the 2 quarters.Now moving to Slide 15, I would like to highlight the main points related to corporate results and below the EBITDA. In the first quarter of '23. SG&A line totaled BRL 13 million, BRL 9.5 million below the first quarter of '22 as an effect of the revisions conducted on Wiz to optimize its structure, which is in line with the company's strategy in pursuing higher operating efficiency and alignment of the corporate strategy.Related to the lines below EBITDA, there was a 2% increase due to amortization and impairment -- 10.2% increase. And this is due especially because of the acknowledgment of BRL 16.2 million in write-offs due to impairment in assets in the consolidated results. In the [ fourth ] quarter, we also acknowledged BRL 10.8 million in additional amortization as an effect of the adjustment of the amortization of intangible nonrecurring assets because of the acquisition of BRB Seguros and Bmg Corretora. That will lead to an additional amortization, which is recurring of about BRL 2 million per quarter in the next quarters.In the first quarter of '22, there was an additional DA recognition because of the restatement of the results. We had BRL 8.6 million in financial results which was a 37.4% reduction vis-a-vis the first quarter of '22 because of the reversal related to adjustment for inflation because of Finanseg current Wiz Parceiros. That totaled BRL 9 million.As a result of these recognition of new results, we had BRL 4.1 million that was recognized. So from BRL 18.8 million and now BRL 13.7 million. So that line would have had a 5.3% reduction as an effect basically due to AVP vis-a-vis the third quarter of '23. We had nonrecurring reversals of the accounts payable related to adjustment for inflation.I would also like to highlight the IRPJ and CSLL. There was an increase vis-a-vis the first quarter because of the incorporation of new business, also a change of the tax regime of BRB Seguros and Wiz Corporate, now our actual profit system. And these values were partially compensated by the tax credits from the payment of the payment of interest on shareholders' equity. We also had an effective tax rate of 20% impacted by the acknowledgment of interest on shareholders' equity. So we would have 35.5% tax rate in line with the previous quarters.In the fourth quarter of '22, because of the restatement of the results, we had BRL 14.7 million recognized, which reduced IRPJ and CSLL values that were recorded for that quarter and also because there was a change in understanding of the long-term incentives paid to executives and how that could be deductible. So in the first quarter of '22, we registered BRL 4.7 million as a positive result.On Slide 16, we show the composition of our cash flow. In working capital, BRL 23.6 million related to the reduction in the balance of accounts payable and increase of the balance of tax to be compensated. BRL 1.5 million in investments due to the disbursement of BRL 7.8 million with BPOs that were purchased. It also considered the reversal of a positive effect in results because of the updated values of the accounts payable in acquisitions totaling BRL 6.3 million.These values were partially compensated by the effects in cash because of the AVP adjustment to present value and also adjustment for inflation of BRL 12.3 million related to the acquisitions of the company. And in financing, BRL 0.2 million relates to the payment of BRL 7.9 million in interest and amortization of the principal amount lent and also Polishop Seguros and Promotiva. This was partially compensated by the debentures recognized in the company, totaling BRL 8.1 million.Finally, in dividends, BRL 68.5 million was disbursed. Part of that was the second part of the dividends and interest on shareholders' equity related to the net profit as approved in the General Assembly of April '23 and BRL 28 million in dividends to shareholders of the companies that are not part of our controlling companies. BRL 296.6 million and BRL 103.6 million were the total amount of cash in the controlling company.Now final results -- final Slide 17. Here are the prospectus for the company for 2024. As Marcus mentioned, we are optimistic about the perspectives for this year. Indication of a potential reduction in interest rates will positively impact our business because it reduces the average cost of our debt and establishes a positive scenario to increase credit in the business where we operate. We will also annualize cost savings that were captured along 2023, which tends to leverage the company's EBITDA.As strategic priorities, we'll keep working on business synergies and in bringing more profitable operations and pursuit of new business. We will work to strengthen the capital structure to allow the company to keep growing. We will endeavor efforts in our technology to strengthen our competitive edge.This concludes this earnings presentation, and we will now open the Q&A session. Now I will turn over to Stefania Fernandez, who will start the Q&A session.
[Operator Instructions] Stefania, please proceed.
Good morning. So let's start with our Q&A session. Let me start with [indiscernible] from Itau BBA. He says good morning. Thank you for your presentation, congratulations on your results. There are 2 questions. The first regards the Insurance segment. How do you see the main operations for 2024? BRB, Bmg and Inter, should we expect an acceleration in the issues of premiums? And overall for 2024, what operations do you see have the greatest potential?
Thank you for your question, William. In 2023, the beginning of the year had a 13.75 Selic Rate. That really involved all the credit of banks that operate in Bancassurance business, and logically, that caused a lot of difficulties for us. So once that time was over and with a reduction in the Selic Rate, we were able also to capture synergies. We did our homework and that improved our expectations for '24 because our -- so for 2024, we see potentials of growth.BRB, for example, launched a senior protected product aimed at 71 to 80 year olds. So it's a very innovative product in this market. And it was customized by Cardif insurance company. This was very welcome in the market, and it's going to be matured in '24. In the fourth quarter, we launched the BRB resolving product that aimed at higher penetration expansion of products in BRB. And for 2024, we expect the channels to hire BRB products like BRB Vida or Super Premiada or BRB Odonto, we expect these products to increase. In '23, we had 14 new products. So in 2024, we aim to consolidate those products as part of the BRB network.Our perspectives are very positive. In '23, in terms of issued premiums, we had BRL 62 million. And for '24, we believe we will achieve higher values than '23. The credit portfolio is well sized, and with a reduction in the Selic Rate, we will see a direct connection to our sales force and the bank.Now talking about Bmg, and similarly, this credit portfolio of that bank [indiscernible] is very favorable and a reduction in tax rate is very favorable too. In Bmg in '23, there was an expansion in portfolio, which will be increased in '24. Then we will have customers that will be more profitable and more loyal. Three new products were launched. The key one was Bmg Med. That has about 30,000 items sold. Very interesting levels. And that continues to be a product with very good acceptance in Bmg channels. They also launched the consortium product and corporate insurance products that have been selling very well in the bank. And in addition to that, in '24, we expect some product adjustments aligned with Bmg goals. They are gaining traction so that we can grow the volume of premiums issued by Bmg itself.Now talking about Inter, in Inter bank, as mentioned before in '23, we reached a customer base of about 1.7 million customers. They can associate strong growth and profitability. In addition to the significant growth in their customer base, Inter also had a 41% improved results, and they also had a life insurance by increasing the credit of the credit card. And in 2024, they will focus on the experience of customers and also modernization of how you can hire the products. And I believe that premiums will increase as well in '24.So we have very positive expectations for '24. We expect those units to keep growing, and they will be among the top 5 business that we have at Wiz Co. In addition to that, we have very strong growth from Promotiva. This is our operations that manages Cobans Banco dd Brasil. We were able to grow in the distribution network by 62%. Over 650 Cobans. So we have very positive expectations for '24. I can tell you that the first quarter of '23 is going to be very interesting.That's basically what we had to say, and I hope that we're able to answer your question. Lucas, would you like to say anything?
Yes, I would like to add something. Marcus talked about the performance of each business. We're very optimistic for '24. And we believe that when you can combine the top line growth of our subsidiaries, especially those in Bancassurance, with the annualization of cost reductions we've had in most of the cost cuts happened in the first and second quarter, the cost structure has been leaner for the past 12 months.Now with the growth in revenue and with the reduction of financial expenses, due to the payment of our obligations or because of the reduction of the Selic Rate, we believe that 2024 will be really a water shadier for us.
Now moving to the second question of William, it asks about the financial expenses. Could you explain the reasons why there was this improvement quarter-over-quarter? Were those recurring changes? What is the level of this line? What kind of expectations should we have for the next quarters?
Let me answer that. This was a typical quarter for financial results. At the end of the year, we assessed the accounts payable. And if you take the average of financial expenses of the first, second and third quarters, in average we had BRL 28 million in financial expenses, and we believe that in '24, we will have a reduction in comparison to the BRL 28 million, a 10% drop for the quarter.
Now moving to [indiscernible] from BTG. This question is complementary to +the previous one. In the quarter, we saw a major increase in revenue for BRB Seguros. Considering the origination of credit, should we expect a recurring level for the next quarters?
Marcus talked about that. I would just like to add that the good performance of BRB is a mixed result of the initiatives related to new products and also increase of the lender insurance product age. But historically, the first quarter is always the strongest quarter. We believe that from now on, you see that in different business units of Wiz related to credit. So we see that the performance for '24 will probably reach the levels of the second half of the year '23, not specifically the level of fourth quarter.
Another question from [indiscernible]. After the adjustments of costs conducted last year, reduction of payout and the debt with controlling companies, any other measure you expect to implement in '24 to improve the capital structure such as the sales of nonstrategic assets?
Well, the first thing that we've been doing quite significantly and the fourth quarter shows that, we want to increase the generation of operational cash, operating cash of Wiz. So that improves the capital structure. The second point, which is also a recurring and recurring agenda for us is that we always assess ways of refinancing the liabilities of Wiz in a way that you can match the payment of these obligations with the generation of operating cash. We keep assessing this topic in the debt market.Talking about the sales of assets, we do not expect to do this at this point. Right now, we are simplifying our narrative, doing less things but doing things well done, but that's not something we expect to implement in the short term.
I would just like to add something. In our cash flow, you see that the cash flow is stable for 2024. There will be no need to do it. But if we find an opportunity to do it, that's something to be analyzed in the future, but we don't have anything on the table right now.
Next question. The returning increase in administrative cost was an one-off thing or the level of administrative expenses is expected to be higher than in the last quarters?
Along the year, we have made several cuts in costs. We believe that this level of administrative cost for the first quarter is going to be a recurring level, and that's what we expect to see in the next quarters. This should be our baseline when we analyze the next quarters in terms of Wiz costs and expenses.
[Operator Instructions] Now let's move to Guilherme Grespan's question from JPMorgan. Congratulations on your results. We have two questions. First, looking at 2024, do you believe that you can expand the EBITDA margin vis-a-vis the 64% level of the first quarter of '23 given the runoff of Caixa will be a win that will be against you? What about the discipline in cost? Could that be a win in favor?
Well, as to margin in the controlling company, we see that the equity in terms of investment should grow faster than the reduction of run-off, and I need to maintain the discipline of cost. If I can balance that, we can expand margin. When you look at the results of the first quarter and the growth we had in the equity method, we are very optimistic for '24 because it's only natural that we'll be able to bring margin gains, but now focused on gains and productivity of our subsidiaries more than in administrative cost control. Most of our homework was already done in '23.
His second question is, could you give us more details about the AVP movement in the quarter? We had a reversal of AVP at BRB, Bmg and Promotivo. Would that be like a counterpart in the drops of accounts payable of these joint ventures?
Well, we had a lot of one-off effects because it has to do with the business combination process we went through. We hope that the AVP adjustment to present value adjustments are similar to what we had in the first quarters of '23.
Next question about Polishop. The loss at this level was a nonrecurring extraordinary effect. Any expectation that Polishop can generate positive results in the short term?
It's important to say something first about Polishop. It's being impacted like any retail company in Brazil. It's not a specific case. It's just part of something that is going on in the industry. Another point I would like to highlight is that the total revenue of Polishop insurance is less than 1% of the net revenue of Wiz. So a reduction would not change a lot the results of the Group as a whole.We keep confident that they will uptake their results, but we believe that the return is going to be worse than we expected when we had this transaction. In this quarter, we had a partial acknowledgment of the impairment of this acquisition.
So now we complete with video conference, and I would like to thank you all for participating. Have a good day.[Statements in English on this transcript were spoken by an interpreter present on the live call.]