BB Seguridade (BBSE3) has released its earnings report for the first quarter of 2025, revealing a net profit of R$ 2 billion. This figure represents an 8.3% increase compared to the same period last year, although it marks an 8.1% decline from the previous quarter. The results, which fell 4.5% short of market consensus and estimates from Genial Investimentos, have raised concerns among investors.
Despite the disappointing performance, Genial maintained a buy recommendation with a target price of R$ 50.00, indicating a potential upside of 19.2%. In their report, analysts Eduardo Nishio, Nina Mirazon, and Luis Degaspari projected a net profit of R$ 9 billion for the full year, a growth of 11% year-over-year, primarily driven by an increase in financial results supported by sustained high Selic rates.
However, Citi analysts took a more cautious stance, describing the operational trends as disappointing. They noted that Brasilprev, the pension arm of BB Seguridade, experienced a net outflow of R$ 1.5 billion, contrasting sharply with an inflow of R$ 5.6 billion from the previous year. This situation reflects a broader struggle within the company, as the insurance unit, Brasilseg, also reported a 5.9% year-over-year decrease in premiums issued, falling short of the company's guidance of a 2% to 7% increase.
In particular, the claims ratio for Brasilseg reached 32.65%, up 4.91 percentage points from the previous quarter, which has significantly impacted profitability. Analysts from Citi, including Gustavo Schroden, Arnon Shirazi, and Brian Flores, stated, "We expected a weak set of operational trends after the February data from Susep, but it was worse than anticipated. They were disappointing." This sentiment was echoed by other analysts, who highlighted that the company's performance in the rural insurance sector was particularly weak.
Despite these challenges, Genial remains optimistic about the future, projecting a recovery in premium growth from 2.2% in 2024 to 4.5% in 2025, driven by improvements in agricultural and credit-related insurance products. The company continues to be viewed as a defensive asset in high-interest-rate cycles, with consistent dividends and attractive multiples, trading at 9.0x P/L for 2025e and an estimated dividend yield of 9.6%.
On the other hand, the financial results of Brasilprev showed a net profit of R$ 356 million, up 17% year-over-year, but down 3% from the previous quarter. Analysts noted that the increase was supported by lower expense pressures and slight revenue expansion from management fees, despite a 20% drop in contributions to pension plans compared to the previous year.
Overall, the consolidated revenue for BB Seguridade totaled R$ 2.52 billion, reflecting a 6.2% increase from the first quarter of 2024. The main subsidiary, BrasilSeg, reported a net profit of R$ 1.1 billion, marking an 8.7% increase year-over-year but a 12.4% drop compared to the previous quarter. The increase in investment income, which rose by 39.7% to R$ 283 million, helped mitigate some of the operational impacts.
BB Seguridade's shares experienced a significant decline on May 6, 2025, plummeting by 6.87% to R$ 39.06 following the earnings announcement. This drop comes after a strong year-to-date performance, where shares had accumulated a 15% increase. Analysts suggest that the disappointing earnings report could lead to a reevaluation of the stock's potential, with Morgan Stanley reiterating a sell rating and a target price of R$ 33.
In contrast, Monte Bravo maintained a buy recommendation with a target price of R$ 43, projecting a profit of R$ 9 billion for 2025. They emphasized that despite the weaker numbers, BB Seguridade's operational results and premium issuance are expected to align with their projections for the year.
Goldman Sachs also expressed a positive outlook for BB Seguridade, maintaining a buy recommendation and a target price of R$ 43. They acknowledged the risks associated with the company's weak start to the year but noted that the operational results remain in line with expectations. However, they cautioned that potential challenges such as a weaker-than-expected rural GDP and rising claims could pressure the stock throughout the year.
As BB Seguridade navigates these challenges, analysts will be closely monitoring the company's performance and the broader economic indicators that could influence its future trajectory. The upcoming months will be crucial for assessing whether the company can rebound from this quarter's disappointing results and fulfill its growth projections for 2025.
