Bradsaúde S.A. (SAUD3) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our webcast of the first quarter of 2026. I'm José Roberto Pacheco, the IR Officer of Bradsaúde. I have with me, Carlos Marinelli, the CEO of Bradsaúde. Marinelli?

Thank you, Pacheco. Good morning, everyone. We are here today to talk about the first quarter of 2026, where as in respect and consideration to all the shareholders that have followed us through Odontoprev in the past 20 years, we'll present the results of the first quarter of 2026 of Odontoprev and provide managerial and voluntary information from Bradsaude. Today is a very important day for Bradsaude. Today is the day that marks the launch of our SAUD3 ticker. We were at B3 this morning. We rang the bell and began this new story of a company that's connected to the health care ecosystem, bringing in novelties, connecting leading companies, connecting companies that have their own purpose, but together do decide to deliver added value to Brazilian health care. We are very proud of that. And obviously, there was a lot of work. So far, many teams have worked relentlessly to deliver all the regulatory, operational and business needs for us to be here today to celebrate and provide the information that you will see. With no further ado, I'll leave you Pacheco. He will give you the information for the first quarter of 2026. I'll be back during the Q&A session.

Thank you, Marinelli. We have a few slides to narrate the company's 20-year path since its IPO back in 2006, two decades of expressive value generation. As we can see on this first slide, we went from revenues back then in 2006 under BRL 200 million, achieving our current rate in last 12 months of BRL 2.4 billion. The company did have some different cycles in terms of its growth profile. In the first cycle, you can see intense inorganic growth, many acquisitions and overall, the strategic partnership in 2009 with the Bradesco organization. After that, year after year, the company has grown its revenues in all years and specific one-off projects in the more recent periods. It's worth noting that in the capital market, our performance is interesting, exceeding the average growth of IBX of 9% per year. In the company, we had an average return in the period of 16% per year. The original market value of the company of approximately BRL 600 million in 2006 has achieved before February 27, the level of BRL 7 billion. Moving on to our specific figures for Odontoprev in the first quarter of 2026. We have net additions in 12 months of 0.5 million members, out of which I'd like to highlight the SME customers that represent a very important market for the company. And through the bank channel and Bradesco brand have had the privilege of presenting consistent and robust figures of approximately 200,000 new members per year. That was a metric last year that remains in our first quarter of 2026. Now moving on to revenues and net income. As we've seen in the previous slide, our revenues have grown every year. Now we have delivered of BRL 2.4 billion in the first quarter, presenting growth of approximately 5%. I would particularly like to highlight the net margin of the company, most expressive in the world in supplementary health care of 20%. That level is already represented and has been showing in consecutive years. This is our last slide that shows the overall strategy that the company has been pursuing in the past year, a pioneer spirit and opening up the frontier of dental plans in Brazil for a new customer profile, SMEs and individual customers, an addressable market that is equal or greater than the corporate market. In 2014, we can see that after that, the margin has -- contribution has grown 14% per year, meaning that BRL 1.2 million in contribution margin. A substantial portion has been obtained through the SME and individual customers. This customer profile has a higher ticket, lower claims ratio, and it's very difficult to be replicated by the competition. Now moving on to another session, the Bradesco Saúde session. Here, we have ANS data. Everyone has this in their models and their files and statistics. Here, we can see the evolution year after year of the company's net adds and a clear recovery as of 2023. We ended last year, as you can see, at 141,000 new members. And in this first quarter, the company has over 50,000 new members to its customer base, getting close to 4 million. It's worth noting the growth of the corporate plans, 30,000 new members in this first quarter, which is significant growth. Now moving on to revenue, particularly the issued premiums. You can see double-digit growth that the company has been presenting since 2021, particularly in this first quarter, 8.4% growth in the premiums obtained. Our next metric is net income. The company has been presenting a very positive path, growing of approximately BRL 1 billion of net income in 2023 and achieved BRL 3.3 billion. And in this first quarter, and it's worth noting that we have a 33% growth year-over-year. Now moving on to another session, Atlantica Hospitais e Participacoes. This is a factor that I'd like to highlight for those who have been following us and will follow moving on. It's part of the Bradesco Saude thesis. So how was the performance in this past quarter? We went from 3,600 beds at the end of last year to 3,900 this quarter, BRL 4.8 billion already committed and approximately over half of the BRL 2.8 billion have already been disbursed so far. The company has many different partners, excellent partners in different regions in Brazil with a highlight to the Southeast region. The last session of this initial conversation is regarding the non-audited managerial voluntary data, as Marinelli has mentioned regarding Bradsaude, starting with the revenues of the group of companies. Revenues of BRL 13.4 billion, very much resulting from net additions, not only in health care, but also dental in total, 193,000 new members this quarter, taking the total amount of members to over 13 million Brazilians, particularly 13.4 million new members, total of members. The ROAE was very significant and increased compared to the last period, approximately 25% in the last 12 months. Claims ratio, Here, we can see the recent history in health care and dental of 79% in health care and 32.7% in dental in the first quarter. Moving on to the financial assets and financial results of the company. Bradsaúde has no debt. It has a very robust capital framework. The financial assets were approximately BRL 29 billion in the first quarter, leading to financial results of BRL 875 million in the first quarter. And lastly, to in the initial minutes of our conversation, we have the net income of BRL 1.3 billion and the breakdown per business segment. As you can see and mentioned before, Atlantica Hospitais is already part of the profile of generating value for the net income of the company, but we do have the highlight of the health insurance plan from Bradesco Saude. Those are our initial remarks. I'd like to invite everyone to be a part of our Q&A session, which will take place shortly. Thank you very much, everyone.

So now we will begin our Q&A session. We also have with us Vinicius Cruz, the CFO of Bradsaude. Our first question is from Eduardo Resende from UBS. Sorry, Eduardo, we can't hear you. Could you repeat your question? We're having a technical issue. Just give us a moment, please. Eduardo, could you try again, please? Eduardo I'm sorry, we still can't hear you. Can you send it by e-mail, please? Okay. Now we hear you.

First of all, I'd like to wish you all the best on this new journey with Bradsaude. I have two questions on my side. First of all, I'd like to explore the drivers of the improvement in the claims ratio that we've seen in the first quarter to see if we had any one-off effects? And then after that, could you share with us what you've seen in April and May regarding the frequency and what you expect for the year? That would help a lot. And the second question is, I'd like to know about the priorities and capital allocation at Bradsaude, if you can share, especially regarding the dynamics of dividend payments and interest on equity.

Thank you, Eduardo. I'll talk about the claims ratio and then Vinicius can talk about capital allocation. So this quarter is favored by the seasonality. In this quarter, we have warnings, so to speak, of a weaker base because it's the beginning of the year, January vacation, Carnival holiday, mid-February, some families extend their vacation period to then start caring for themselves. So the families postpone their health care. In addition to the displacement, so to speak, of the claims being filed at the end of December. So at the end of December, we have the end of year holidays. Therefore, we won't see those claims yet only in the first quarter. So you'll have the whole period to process that and to get that filed. So there is a claims ratio aspect that is a result of the seasonality. So January and February, so vacation and Carnival as well as how long it takes for us to get the claims filed. And therefore, there's a lower frequency. So there's less seasonality, less lower claims ratios. I've mentioned this during other meetings that in 2025, meaning last year, had a very different profile when we think of the first and second half years. So first half year, we see higher frequency. We see the average prices on an upward trend per visit, and we see a detachment of some of the specialties that have a higher frequency than the general average. In that case, I mean, the therapies. So when we look at 2026, we have to be very cautious regarding the claims ratio. At Bradesco Saude, we're starting to see these points of attention. We're starting to see the elements that we can work better with our service providers, see what can be better negotiated, what can be done to have a more sustainable cost. But in terms of the claims ratio, it is a point of caution for us in 2026. Regarding the capital dynamics and dividend distribution of the company, we'd like to reinforce the message of the original dividend distribution for Odontoprev Bradsaude that we need to have clarity in the profitability and discipline in capital allocation. So as we have projects to assess and support the company's growth and develop new equipment, specifically hospital equipment as they are the ones that require more capital in the short term, we have very strict discipline in assessing the profitability and growing and expanding those projects. And soon, we'll provide more information about the dividend payment proposals for our shareholders.

Thank you, Marinelli. Thank you, Vinicius. Our next question is from [ Flavio ] from Bank of America.

We have two on our side. The first one is that we'd like to understand the competitive environment better for health insurance. So we've seen that this niche has been tighter and probably some players are looking for more market share. How do you see that scenario? How are you reacting? And not only in growing your customer base, but also in transferring the ticket prices and also SMEs that you've been very vocal about that. My second question is about the Bradesco Saúde numbers. You've shown profit growth of almost 34% year-over-year. So when we do that math regarding the premiums and remove the expenses from the claims ratio based on the information you provided, the operational results growth is lower. So how can we reach robust increase in profit and what influences a significant improvement?

I can start. Yes, and then I'll add. We can see robust industrial results with an improvement in the claims ratio that has supported the growth of the bottom line of Bradesco Saude when we look at it alone. But we've also counted on significant contribution of the company's financial results, strong cash position that has benefited from a higher Selic interest rate in the period, especially when we compare year-over-year, and we have a higher asset base and significant or a slight increase in the Selic rate that affected the net income than just the operational aspects, as you mentioned.

To add to Vinicius's point, the figures that Pacheco has shown us, they show our growth in number of members, the recent growth. And that recent growth is a result of our strategy, be it in the point of view of retaining the members, but also launching new products and also higher competitiveness in the competition that we have in the market that's being pursued by other operators. It's important to mention, though, that one of our pillars is the strength of our products and differentiation of our products, not only the current products having that characteristic, but also we've been designing new products as we have many launches last year like Efetivo Plus that was launched in the city of Curitiba, City of Porto Alegre in many different places, many different Brazilian capitals that has positioned us with unique products in some of these markets. And another very important characteristic that we should highlight is the fact that a characteristic of our company has a high renewal of these contracts of these corporate clients. So our strategy is often organized in a way where we enter a given market, combining commercial conditions and unique products. But the entrance in that specific market or in order to capture that market share, there's an idea of continuity moving forward. So we do not want to just be a solution for them to switch, but we also want to keep that client for a long period of time, given their satisfaction with the product and the unique aspects in renewal. And obviously, in terms of claim ratio, that's organized in a way where they can count on us on the annual renewals that they have. So the growth that we've been seeing is not a strategy for that quarter or just that year. It's for the business. It's about sustainability. We want to bring in more clients that are satisfied, they continue to renew with us and do appreciate the differential that our products offer.

Next question is from Leandro Bastos from Citibank.

We have two questions on our side as well. The first one, going back to the claims ratio in health care. You mentioned the effects of seasonality. I'd like to know if there were any changes that would explain that in the sequential vision. And also in that message of caution for the year, I think it's mainly inspired by a higher frequency than necessarily a concern of a more competitive market or price. Is that understanding correct? I just want to understand the claims ratio factors better for this year. That's the first point. The second point regarding Atlantica, you have a very interesting calendar for your projects. I'd like to understand the ambition of new things. And if you'd like to mention the decision process -- decision-making process, different partners in these hospitals. So how do each -- does each project go into each box? It'd be interesting to understand the growth in that front.

Thank you, Leandro, for your question. Well, about the claims ratio, specifically, there was no specific movements in provisions that would have implied in the dynamics of our claims ratio for the first quarter of this year. It's important to further address that because we have a group of provisions that are very robust, especially in the events that occurred and were not expected. They have the date that it was filed and the date of the claims. So we have over BRL 7 million in provision in that line. And what we've observed across time is that we follow the rate of payment of the claims. Approximately 64% of those payments are regarding claims that took place in the actual month or the month before the claim that we're paying in that movement. So in that speed in paying our claims, we have a lower need to create provisions because of that tail of the claims that are coming. And where did that speed come from? We have many digital initiatives supported by Horizon in the speed of processing and discussing the accounts, processing the accounts and the denials in discussing the amounts with the accredited network as well as the investment in technology that Horizon has developed for us across time makes us have an analytics that are fast and discussing that with the network to determine the right amounts and the amounts that are due regarding the bills that we get through the claims department. Another important movement is the speed in reimbursements. We had higher pressure of reimbursements in the past, and the average flow is higher than the filing by the network. And when we normalize reimbursements through the percentage of reimbursement that's more reasonable, we're also an element that favors the speed of paying the claims. So all of these movements lead to a lower constitution when we compare that to the IBNR of the past. So the claims ratio affects the IBNR, but IBNR is more stable given on the medical accounts, be it through the network or our members through reimbursement.

I think there was a question about the claims ratio about -- and the competitive environment. So I would like to highlight that the claims ratio is a relationship between the premium and the claim. In a more competitive environment, you have less conditions of transferring that price. It's a more intense fight, so to speak, for prices in the market. In an environment when the volume of claims and frequency of claims is higher, and we see that in the market overall, we see behavior that is meant to get you ready for the future variation of the average hospital costs. So there's a moment where you have to prepare for that future claim. And exactly because of the point that I mentioned before about caution, we not only have to work in the claims overall, but also get ready in terms of price for the contracts that we're renewing, considering medical inflation pressure, and we know that's happening as one of the topics that you mentioned in terms of frequency. But that's also related with adopting new drugs, new items on the official list and drugs that are coming in more that we didn't have as much before. So that composition is a bit more complex. And we analyze that closely and identify when these variations affect the behavior of future results. So the forecast that we have enables us to be more aggressive in commercial terms, but also understanding how far we can go because the claims ratio is the ratio between the claim and use -- so when we talk about caution regarding claims, we see that the market also has that concern. And we already see a dispute in the market with the competition, maybe not working at the promotional level and prices that we've seen in the past. So we continue according to the response that we see in the market. We want to maintain our contracts and sell new ones, but we do have to understand the claims that we see an increase in frequency and average price per visit. So we're ready for that. Another topic regarding what Vinicius mentioned is about how we see the claims volume moving. We don't simply sit there. And talk about the caution and pay as we always do. We have intelligence in-house to identify any variations. Some of them are more acute, some of them are more one-off. So we need to look at the claims ratio and try to understand what's going on over here, for instance, or what's going on in this specialty? What's going on with this provider. And then in that case, we may have a variation according to what Vinicius mentioned about the speed of payment because we do have to have more scrutiny and on those accounts. So it's continuous. Sometimes it moves faster, sometimes slower, but that's all regulated according to the provisions. And as Vinicius well mentioned, in the first quarter, we see the maintenance of the provisions regarding the speed that we're seeing in paying the account.

And I think you talked about Atlantica new projects, governance and the partnerships that we have in that topic.

Correct. Atlantica has a number of projects that are currently constantly being assessed. So we mapped out the need for quality beds and to be a part of the Atlantica portfolio. But as I mentioned in the first question, always looking at the capital, the need for new beds and quality beds and about also analyzing what we already have available in those regions. So it's observing the expected growth and day rates for the upcoming years that help us to assess the new places where we will take our projects. And on the other side, there's the projects that are submitted by our partners for evaluation. And working together in that strategy and connecting to those avenues of growth and needs for bed, and we need to analyze that the need for effective beds or differentiated beds to justify a given movement or investment in new beds. We consider that jointly and then we make a decision based on that. At Bradsaude and Atlantica, we have the ability of assessing those demands and opportunities for investments so we can deliberate and determine how we'll move forward with those projects.

Next question is from Mauricio Cepeda from Morgan Stanley.