Hapvida Participações e Investimentos S.A. (HAPV3) Earnings Call Transcript & Summary

[Foreign Language] where we are going to share the expectations regarding synergies gains related to the combination of business between Hapvida Participações e Investimentos S.A. and Grupo NotreDame Intermédica, GNDI. Joining us today for today's presentation from GNDI are Irlau Machado, CEO; Marcelo Moreira, CFO; and Glauco Desiderio, IR Director. From Hapvida, Mr. Jorge Pinheiro, CEO; Mauricio Teixeira, CFO; and Guilherme Nahuz, IR and ESG Director. I'd like to stress that for those of you who need simultaneous interpretation, this is available in the platform itself. Just click on the interpretation icon at the bottom of your Zoom bar and choose the language of your preference, Portuguese or English. For those of you who are listening to the webcast in English, you can use the original audio in Portuguese clicking in original audio. We'd like to inform you that today's presentation shared in this webcast as well as material facts are already made available at IR site of both companies. You can also download the presentation using the chat icon in English too. [Operator Instructions] All the information from this presentation reflect expectation of both management teams regarding the future of Hapvida and GNDI by the closing date on February 11, 2022. From that date on, all the forecast will be related to the combined companies, subject to risks and uncertainties, estimates and indications that do not represent a guarantee of performance. They depend on the market conditions than the region conditions in which the companies operate. Any changes mean that the concrete results may differ from this forecast. Now I'd like to turn it over to Mr. Irlau Machado and Dr. Jorge Pinheiro. Please go ahead.

Good morning, everyone, and welcome to this webcast. This is Irlau Machado. It's a great pleasure to be here with you together with my colleague, Jorge. And right now, we are undergoing a good time for our operations. This is really the fruit of hard work and dreams we shared. We will be one of the major players in health care with a leading position in Brazil, one of the largest vertical health care players. We are combining the operations -- our operations, and we do have unbeatable MLR and profitability. This is true both for Hapvida and GNDI. With similar structures, we supplement each other. Even from the geographic presence, we will be now present nationwide. Hapvida, over the years, has focused on the Brazilian North, Northeast and the Center West. Also, present is in southern part of Brazil. And Intermédica focused on Rio de Janeiro, Sao Paulo, more recently, Rio Grande do Sul, Santa Catarina and the State of Paraná. So now our presence will be nationwide. Our value proposition is also above what is offered, and that is certainly one of the leverage -- one of the drivers for our growth. Our philosophy is always to provide high-quality services at an affordable price. This is the core of our business, so to provide access to our population for those who are willing to get a private health insurance and, oftentimes, do not -- cannot afford that. But our prices are accessible. There are clear synergies to be captured to gain on. We will also reduce costs, and we have been working on that for the last 6, 7 months with an external consultant company, also in complying with the regulations and sharing ideas on how we can transform this combination to provide benefits to our population, to beneficiaries and our investors. We are extremely excited with this new phase of our journey, a more powerful journey that will certainly add value to everyone in this chain. Now I'd like to turn it over to my colleague, Jorge. Jorge, please?

Great, Irlau. Thank you very much for your opening remarks. This is certainly a historical day to all of us, and I'd like to remind you all that we have a mission. And although they are slightly different, they are virtually the same. So to provide access to the Brazilian population. Today, approximately 70% of the Brazilian population has no access to health care -- to a high-quality health care, but we want to make that affordable to most families. This business combination has this power to increase that offer, not only considering the existing market but also should be the entry point for the 70% of the Brazilian population that has been unserved. This slide shows you our organizational structure and governance. And what we want is to achieve our goals. So as a holding company, Irlau and myself and our teams, we work as Co-CEOs. And we are certainly supported by different committees. And this is a strategic structure. The idea is to define, to map the synergies, their possibilities, be attentive to commercial area SG&A costs, to identify and exchange best practices so that on Day 1 we can tap all the synergies. We do have many opportunities. And as you can see below that we have the companies themselves, where we carry out our operations, Irlau and his teams. And we really, really admire them. They will remain independent, focusing on their day-to-day operations just as the great team from Hapvida. So in our day to day, we will carry on with our activities and options. This structure has 2 major goals. The first one is to start tapping on the synergies from the very beginning, and we do have many synergies. But this second goal is to allow each company that have been operating in supplementary regions. Please know that in spite of that, there is still a great deal to be done. There are many Brazilian states and regions in which we are not present. And there are some regions in which we need to increase our presence. So the second goal is to allow our teams to grow organically and inorganically, taking advantage of the opportunities and giving access to Brazilians to high-quality health care. Our next slide and very, very briefly -- looking back, we can see what has been achieved by these 2 groups and what can be done in the future. Here, you can see what has been done by the 2 companies. And so far, we have had a very constructive relationship. But please allow me to go over the numbers from Hapvida. So very briefly, from 2014 to date, you can see the number of -- numbers increased by more than 3.3 million lives. So you can see the number of people who believe in our mission. We have added 27 hospitals, nearly 2,000 beds, not to mention the number of clinics, more than 118 in different parts of Brazil. As for GNDI, its history is not different. So please, Irlau, if you can talk about GNDI.

Yes. Thank you, Jorge. As you can see, when we go over this slide, we can see that the growth is similar, a very strong growth focus teams. So 2014, as you can see, our operating revenue was BRL 2.4 billion and now it's BRL 12.1 billion. You can also see the number of members from 1.6 million to 4.3 million. Our market share also increased. It's very interesting to see the similar growth in both companies, as you can see. Number of hospitals, also a very sharp increase, so from 8 to 34. Number of beds, also an amazing growth. So you can see that we are talking about approximately 7,000 beds now. Number of clinics, that's very important to providing primary care and also reflecting the growth in GNDI. And I'd like to say that we also provide many job opportunities by increasing the number of employees, as you can see. It's really a very large company. NotreDame Intermédica, in 2014, was present only in Rio and Sao Paulo. Now we are present in the southern part of Brazil. And we have increased our presence. That means that we really have now one of the largest company in Brazil. Now I'd like to invite Mauricio and Marcelo to move forward with the next page.

After this fantastic introduction of the companies for the past 5 or 6 years, here, we can see the national presence of the combined companies with very relevant landmarks in a number of countries, present in 19 Brazilian capitals out of 27 capitals. And there are also some relevant cities in the countryside area of the same states. So we can be present in most of the population. And also in all the representatives, GDP groups of the population. So national presence, and we are going to see how that unfolds into further synergies and opportunities. Let me now hand it over to Marcelo, who is going to emphasize the main pillars of our combined numbers.

Thank you, Mauricio. Good morning, everyone. The next slide, please? Then our synergy. We really have to look back to the month of January and February '21, when both companies got together to consider the merits of this combination. This is a transaction involving the 2 main HMOs in Brazil, 2 of the companies that have grown the most throughout the years, companies with high merit and deeply analyzing the potential combination of the 2 companies was something essential to us. So at that time, we created a very long list of strategies and benefits that could be obtained from the combination. And as Irlau and Jorge pointed out, during the following 11 months since the announcement on February 27 last month -- last year, I mean, we have really had a deep dive into the numbers and the objectives, of course, always complying with antitrust regulations, but really refining the benefits. And this is good news. This is what we would like to share with you. The merits of the deal can be clearly perceived. They have all been quantified. It's still at the estimate level, but we strongly believe we are going to achieve them and also identify further upsides. Moreover, there are things that are going to start benefiting us from Day 0. What are the main points that companies can do better by being together? What is the additional merit coming from this combination? So in blue, when we talk about revenues, because once we leverage our own network with services, we can really grow in selling more national health care plans, really building on the infrastructure that [ Marcelo ] has just shared with you and also speeding up the sales of individual plans at the national basis. As we are going to have over 80 hospitals, both companies are growing and are announcing further acquisitions. We have nearly 85 hospitals combined now, very well positioned with top infrastructure. And as such, we have a very clear understanding that the sale of hospital services to other HMOs will also be an important leverage from which we are going to capture our synergy. So very important from the revenue side. Now if you look into cost and expenses, we believe there is going to be an increasing level of verticalization once we are going to share our own networks. We have a very high level -- at first, I mean, we had a smaller level of overlap. However, as the companies evolved and brought into new markets, we've reached now a substantial possibility of getting more verticalization. So rather than using an external network, we can now resort to our own network. Thanks to our initiatives in the area of medication, we have increased our hospital efficiency, the efficiency of our clinical centers and others. And in terms of SG&A, let's say, traditional expected synergies, which will result from the use of our processes and systems. If we go into the next slide, please. Internalizing our revenue synergy, we got to a total of synergy which will mean BRL 800 million in EBITDA -- in recurring EBITDA as of the third year of the combination. And this is a combination of using a national product being launched of speeding sales of individual plans also throughout Brazil, which is something that we have as part of our plan, improving experience, using the verticalized network that the 2 companies have built and now is being shared and, in addition, covering hospital services. This is a potential where we would have probably reaching 2.1 million lives, just talking about the national product. If we analyze each of the companies individually, none of them offer that. However, by not offering that, we had a refusal of 40%. So some came to us, and we had to say no, but now we have a much greater addressable market. And by tapping into that, we expect a 2% market share gain, which will impact recurring EBITDA at BRL 800 million, something that will be constructed throughout the years. In the next slide, we can talk about cost and expenses. This results from an exchange of experience and levering our own networks and also managing our own volumes. Within our category of levels in our own network, the second highest item of expenses is material and medication, just second to labor. And this is very relevant to verticalized HMOs. And in fact, any hospital operator or provider would experience the same thing. So concerning expenses, we really got very deep into identifying best practices, into detecting the best negotiation that each of the companies had, trying to go beyond the best individual negotiations always to obtain the best results. So renegotiation of material, medication, the partner supplies is really essential to us. And we expect to obtain even more synergies than what we had anticipated at first. In addition, it also involves service contracts, and I am not speaking about our external network. I'm talking about services such as laundry, kitchen, food and ambulance, other activities, which evolve around our end activities and from which we have already detected potential of synergy and decreased cost. And as there is an overlap between lives and regions because Hapvida has taken some action into Brasília, Triângulo Mineiro, area of Paraíba river. So now there is a hospital in Joinville. And these are regions where we already have lives covered. And as such, we can start join our efforts and using our common network. And finally, the area of ancillary services, diagnostic tests, imaging. Here, we can see not only immediate synergies to be benefit, but both companies together will get further leverage, a great distribution. And as such, the simple driver, which has reduced MLR in recent years will help us go even further. So based on the cost we've already mapped, we had BRL 320 million synergies to be captured throughout the years. And in terms of expenses, the total amounts to BRL 260 million. And it's a combined pool of both companies of over BRL 3.3 billion of recurring expenses. Once we get to BRL 260 million, it means about 8%. It's a very representative figure, certainly, but something achievable. Both companies have realized and have already observed in recent years that this is the business of scale and this is exactly where we can have very good operational leverage. So it amounts to BRL 580 million in cost and expenses plus BRL 800 million in revenues. And this is how we get to BRL 1.380 billion. Let me now hand it over back to Mauricio so that he can share with us the time line.

Thank you, Marcelo. In recent weeks, we are working with our integration teams and the consulting companies, trying to obtain all the potential synergies with hospitals, HMOs and all the activities. And we have then set our time line so that we can get to BRL 1.4 billion of incremental recurring EBITDA. Day 1, today as of February, and we believe we can already capture 40% of our potential of synergy through procurement, our own credit network, the use of our own networks. There are some regions in which Hapvida uses an external third-party network engine that has a network there and the other way around. So we are going to use our combined networks, and that's going to generate significant savings. Optimization of life's portfolios, service to third party, the ancillary services, the national plan and cross-selling, so some clients that we hold and we can extend to other specific regions, commercial strategy and G&A of third-party services. Then there is going to be a second phase as of the second year when we can detect potential of dental products, adoption of new technologies for each company and reinforcing G&A again. And finally, that, on the second year, will bring us to nearly BRL 1 billion. And as of the end of the second year, beginning the third year, we are going to make investments in increasing verticalization. We are going to start to obtain the advantaged integration of systems and final integration of G&A, bringing us to the end of the third year, Step 3, with an incremental recurring EBITDA of BRL 1.4 billion or BRL 1.380 billion. And in addition, we are going to have benefits in terms of goodwill and also tax shielding. This is all going to be a funding resulting from the operation and the goodwill will really provide additional fuel for geographic expansion and M&A initiatives of the company. Can we go into the next slide, please? And here, we can see the buildup of each of this opportunity. BRL 241 million in supplies; G&A, BRL 188 million; then in commissioning standardization, BRL 72 million; accredited network sharing, BRL 49 million; diagnostic analysis, BRL 30 million. So getting to BRL 1.38 billion throughout time and some unqualified synergies, for example, such as best practice and network expansion with estimated cost of BRL 100 million to BRL 150 million which are the cost to capture such synergies. As you can see, throughout 3 years, we are going to increment further that potential gains creating recurrent structures. And the teams were -- together are going to come across more opportunities. Once we have them, they are going to be part of our integration plan, and the teams will execute them so that we can keep on tapping into the synergies and the great value that this combination can bring to our shareholders. Okay. So these are the synergies that I would like to share. And now we are going to open for questions.

[Operator Instructions] First question from Leandro Bastos from Citibank.

Thank you very much for your presentation. It was really interesting. I have 2 questions. First, regarding this last chart, Slide #10. I'd like to please ask you to add more color on the synergy. If we go over the gray bar, it really looks like BRL 1.4 billion. So just to really understand, if I understood that correctly, regarding further opportunities, is there a possibility to double the opportunities that have been identified so far? That is my first question. My second question, can you please also add color about goodwill, interest on equity, please?

We will ask Mauricio and Marcelo if they'll agree and also that they can talk about the synergies.

Sure. So let me start talking about goodwill. Well, this was based on an assessment of GNDI shares. So when we think about GNDI transactions, it's BRL 43.6 billion. Our equity -- net equity is BRL 7 billion, 1 billion in common shares. So this difference is what we call goodwill, BRL 37.6 billion. Now if you add growth to fiscal benefit will be approximately BRL 12 billion -- BRL 11 billion to BRL 12 billion. And obviously, we need to consider the time line. But without considering the time line, this will be approximately BRL 11 billion to BRL 12 billion. This is also the synergy that we have been discussing. So this is the number in the background. As for nonmeasurable synergies and, obviously, this gray bar really does not represent the amount itself. What we want is to provide you more details in the future. But right now, we will have to work on that after closing, and this will be a joint work between my team and Marcelo's team. Marcelo, would you like to add anything else? I'd like just to remind you that so far, we have been complying with the regulatory agencies. Obviously, there are some restrictions in providing further information right now. We have been mapped much more, but certainly, there are many other opportunities. And Irlau and Hapvida team have established committees that have been working. And after this combination was approved by CADE in order to go in depth. And in the next month, we will certainly be able to also identify further synergies that have not been identified yet. And as I mentioned, there were some restrictions, but we know that there are further opportunities, and we'll start working on them right away. I do not know whether Marcelo or Irlau would like to add anything.

Your comment was perfect. Yes, when you consider this chart, obviously, we can talk about these new opportunities and also on refining these numbers. We're talking about numbers on which we have a high degree of reliability, but this does not stop here. We know that there is a huge potential. And I'd say that there will be an upside on these numbers, some new activities, new actions. And also, when we think further ahead, as the 2 companies will be better combined, new synergies will also be identified.

Our next question is from Joseph Giordano from JPMorgan.

What about potential fiscal synergy, goodwill and interest on equity?

Joseph, I am going to turn it over to Marcelo and Mauricio, but I believe that they have already addressed the goodwill benefit.

With regards to the goodwill, well, this is the difference between what we had last Friday against also the BRL 6 billion of -- that is the difference. That is the goodwill and this is supported by our legal counselors. This is really usable. So we have BRL 11 billion. And as for interest on equity, when we consider the new shares issued by Hapvida, this is also -- well, we're talking about the market value, BRL 40 billion. So -- and also the basis for interest on equity also increases. And we need to consider also efficiency also to that. So also -- also to check whether we also have some fiscal profit to offset that.

Our next question comes from Samuel Campos Alves with BTG Pactual.

Two questions. First, just to check if I understood. BRL 1.4 billion, this is for your 2024 forecast, is that right? And second question, with regard to the BRL 800 million of revenue, does that include only national products? Or does it include what you also conveyed during your speeches regarding individual plans and also hospital plans?

Let me start talking about the revenue. When you talk about BRL 800 million, this is the revenue, right? So we're talking about the national product itself and expansion nationwide of hospital services that today is limited to certain regions as well as to individual plans that were also not so nationwide. So the national product plus the national expansion of some services and products that were just localized will add to this BRL 800 million. So this is really the combination of the different sources of revenue. Now if it's a par value number, well, this is today's number. They reflect today's scenario. We did not perform any forecast with regard to the average ticket or anything. We just used the current information available. Now let's see whether that will certainly depend on the inflation rate, medical inflation rate, that will be certainly -- also have an impact. So that means that this has not considered inflation in the future. Just to clarify, this is at costs reflect today's cost and also current average ticket. So current EBITDA and also over time. So we certainly need to see their inflation for 3 years.

Next question comes from Marcio Osako, sell-side analyst of Bradesco BBI.

I have some questions. The first concerns the guidance of BRL 800 million in revenues. Is it the potential, analyzing the best case scenario and new contracts coming for the corporate plan or this is a number that you actually expect to deliver by 2024? Second, do you see any impediments to a broad offer of national plans in areas where Intermédica is using Hapvida model? So the national products in the regions where Intermédica are, have you also included potential synergies in your BRL 800 million synergy? And thirdly, don't you see more space for synergy in SG&A, a much higher value than what you announced of BRL 180 million?

Well, Mauricio, let me just give you a general overview, and then you can jump in and help me. So national product, whether this is wishful thinking only or if we can trust it. So let me see what I can tell you. We have analyzed the addressable market, and we believe it's much greater than that. The full potential would be much greater than the BRL 800 million. But we cannot really anticipate that we are going to succeed full time. So we've had a forward statement, the number we are sharing with you today, we strongly believe it is achievable and we can do it throughout the next 3 years. And as Mauricio has said, this is something starting from D0. Our 2 commercial teams, since the [indiscernible] authorities okayed the combination that both commercial teams started working together. Well, the upcoming months, we may improve further the technology, the tools that can really make things even easier. But we want to launch immediately a national product. Now concerning individual book at GNDI, which is your second question. Yes, we want to speed it up, and we also want to leverage further. I think that what we've been observing in the country from an economic perspective leads us to doing it. Part of the regulatory risk has already been taken, so to speak. We've seen a negative price increase of minus 8%. So all our indicators from now on are going to show that the environment will be much more beneficial in terms of price adjustment of individual plans, something much more realistic than what used to be in the past that was set off by the deflation of the price. So this is something which is already included in our BRL 800 million of synergy. And finally, concerning [ G&A ], I don't want to say whether it's a lot or a little. It doesn't matter. This is the number we've got so far, considering the assumptions of the deal. So both companies operating independently to some extent, especially in their own regions so that the synergies of the recent initiatives that have taken place in the South, Minas Gerais, country Siberia, of Sao Paulo, all the M&As of the companies independently can still be properly used by the new group. So I think it's a very good starting point. The synergies that we have detected for SG&A so far are good. By doing them, we are not going to impact achieving of other goals, which are much more ambitious, which results from the integration of recent M&As. Mauricio, would you like to add anything?

Great answer. This is Jorge speaking. If I may add, I think Mauricio was also asking about national plans, which is another huge possibility. Neither Hapvida nor GNDI offers a national product today. Both do not offer a quotation to a number of potential clients because they do not have that offer. That's different from dental product. And then synergies are different in dental, commercial area, sharing of network, et cetera. But in medical care, we can see a huge potential because there are very few players in Brazil that can sell products with such a large coverage, and we are going really to be extremely an advantage because we're going to have our common network embodying best practices, including understanding of case complexity so that we can lead to better outcomes. So we can see really huge opportunities resulting from an individual national product better saying that is currently not available to Hapvida nor to GNDI.

SG&A, again, 180 million means that both companies are going to operate independently, have I got that straight? Within a 3-year time line, you could go into further integration of the companies. And then SG&A capture and synergies would potentially go further. Is that what I got?

Well, yes, it's all a trade-off, isn't it. Right now, we've been working on it to capture potential short-term synergies that involve the integration of companies that our 2 independent companies have already acquired. At the same time, we are going to maintain our M&A programs in both companies, and this is going to strengthen us towards the future. When we get to that moment in which we've obtained the know-how and our -- understanding of our mutual technology, when we can together understand the best practice and putting to a seamless operation, we will, of course, embrace further synergies. But we are here talking about the best timing to do it.

Our next question comes from Fred, sell-side analyst of BofA.

I have 2 questions and just a complementation, once again, talking about commercial synergies. Historically, the most difficult part of capturing synergy and something higher than what we had at first. Are you already including the fact that once you are not competing one against the other, maybe you won't have to be so aggressive in terms of price. Have you already accounted for it in your potential synergies? And secondly, considering that you are still going to work individually for the next 2 years, SG&A will just be accounted for and perceived as of the third year?

Thank you. Well, let me answer the first question, and then I'll hand it over to my peers to answer. Our reason for being is accessibility in many different markets because of the different regions where we used to work in the past, we were not necessarily competing one against the other. And I would say that this was not our practice, to be honest, but we've been able to interpret the market and bring the efficiency to it through our models, which tend to be quite similar offering products at affordable cost to our consumers, and we want to expand the market. The fact that we are together doesn't mean we are going to offer higher prices. Now we are going to obtain more efficiency, and that may be translated into better prices to our end consumers.

I don't know whether the second question has something to do with that further in terms of competition.

Well, Fred, in terms of [ G&A ] synergies presented in Slide 10, BRL 178 million. This total amount will be captured within the next 3 years, BRL 188 million, as you can see, with [ G&A ]. This has been calculated considering the governance model that Jorge shared with us. Still having the companies operating independently to really unfold the potential of the companies that have been acquired in the past 18 months, quite representative initiatives. We have -- about over 1 million lives purchased by the 2 companies together, a large volume that has to be properly addressed, but will lead eventually to more efficiency. So right now, BRL 188 million in SG&A. Once we get to a more mature point, ready to go into the next steps, then we can go into a new wave of synergies. This is something quite expectable and something that we have already anticipated from both sides.

If I may add something and something that we've already said, but I think it's still relevant in [ G&A ] and let's set apart [ people ] and third part. One of the main gains that we have here is to combine 2 teams, which outperform against the market and have delivered great results. Brazil is still highly fragmented. There are hundreds of providers in Brazil, low penetration, over 75% of Brazilian population do not have private healthcare plan, and they wish to have it. There are many cities in Brazil, where we do -- we are not represented. We have made acquisitions and will require migrations. There is a pipeline of further acquisitions of each company. There is a wish list of M&As at GNDI and Hapvida, because we still have a highly fragmented market in Brazil, but a country which is getting more and more mature in its healthcare industry. Therefore, we are going to use our best teams to consolidate and to offer to Brazilian population our optional product in more regions, which is one of the greatest gains of these operations. But in SG&A, we have to consider that this is a preliminary study that have already been carefully done. And because we were under the limitations of the trustee authority study. But now we are going to go further. We are going to count on consulting systems. We have potentials of integrating systems and a number of initiatives. We haven't had time to do everything. But these are very good estimates that we have already get to. But this is going to be repeated throughout the months. We can see huge opportunities right now. We are focusing on those that can produce short-term results. But our committees are going to keep on mapping further opportunities so that we can benefit throughout the time.

If I make one last follow-up, something concerning MLR, which you seem to be conservative. I know. I know you have had not much time, but can you please describe the reasoning because I suppose most of those potential synergies that you have mentioned, and I know you're not going to give any guidance, but I suppose that the synergies can result from MLR even though we are being very conservative.

It's important to point out that from -- during the past 2 years, we've been experiencing an unheard of crisis, a century crisis throughout the whole world and has affected us enormously in Brazil, increasing medication costs, shortage of supplies. There have been expected and unexpected waves of increased demand. So yes, we've been conservative. However, from now on, we expect to have, let's say, [indiscernible] times since the main peak of COVID pandemic in April last year. And now we can see being still conservative. I have to say, we really want to see that once we got to some level of normalcy, how could we really employ our knowledge of reduction of MLR. We're using with our own network. GNDI, for example, there are 7 emergency departments and clinical centers and the construction, a very important number of constructions for verticalization, which is the best way to reduce MLR in Brazil. MLR is a correlation between revenues and expenses. And what we have to constantly focus on is accessibility. So yes, we are conservative. We expect to have many more opportunities resulting from how we analyze outcomes, clinical pathways in our both operations to see really what works the best and what produces better outcomes to our patients and users. And with that, we are going to obtain further reductions in MLR.

Next question, Vinicius Figueiredo, sell-side from Itau BBA.

Can you provide more details regarding 1 million members? Is that related to the number of individuals that look for this type of coverage or is there any additional aspect? And also, so if you can talk a little bit more about this market. And do they look -- this type of client, do they look for medical corps? And my second question, I think you have already addressed part of that, but can you please talk about the synergies in reducing costs and [ G&A ]? Could that also lead to decrease in what you offer and thus also observe an increase in organic growth?

Okay. I can start, Jorge, and then you can jump in. When we talk about 1 million members -- customers, we are commercially very active. We do have many clients that request us to provide them some quotes. And what we see is that oftentimes, we need really to decline that offer. So for example, for GNDI, Sao Paulo, Rio de Janeiro, for example, but we would not offer that same quote for Brazil, for example, or in the Amazon. And this company would have 2 options, either to have 2 different companies or perhaps to talk to a medical corp or some other players in the market, but we don't have many who offer a nationwide service and not with, like what we offer regarding price. And as for GNDI right now, oftentimes, our ticket approximately BRL 220. And our next competitors who could provide that just would cost 2 or up to 5x what we are offering. So our ticket is really appealing. And answering your second question, you're right. They could look for medical corps sometimes with some insurers that are present nationwide, but also by working with us and also with -- and having some other players in other parts of Brazil. But right now, we believe that we will be able to offer a single product. So one-stop service. So one contract only and then covering all lives of that employer. And we're talking about large employers with many employees. So these are the benefits that we expect to capture. Jorge?

I don't have anything else to add. What I can say is that today brokers and even our clients, when they -- that's what you just described is a reality. They really want to have a one-stop shop, not only at corporate level, but also in retail. So let's think about small and midsized companies in which you have employees who travel across the country. So today, we cover that. So we see many opportunities in retail and also at corporate level. Just as Irlau mentioned, our competitors' pricing is very different from what we offer. So if we were to quote that in areas in which we don't have an accredited network, this number would be very similar to what is offered by competitors. But now we have a single network integrated with this philosophy, sharing the philosophy. We will maintain balancing pricing, and we will be more competitive. And I think you also asked about the possibilities of dividing synergies in pricing. Yes, that's one of the beauties of this business combination. So obviously, we will study local strategy pricing as determined locally and then nationally. But part of what's going to be generated, we will certainly return that to 2 users in order to also increase our penetration. So once again, 70% of the Brazilian population has no access to private healthcare. And that's why we wanted to become also more competitive and also fulfill our mission.

If I can ask you one more quick question. Regarding potential costs, those BRL 100 million to BRL 150 million. Just to make it clear, is that the total number considering what you have to do by 2024 or just current number -- total number?

It will -- that is really the total number for that period.

Okay. So that means that starting 2025, that will be 0?

Yes. So we will work on that, then we have pricing and that it will start -- we will start it over.

The next question comes from Beatriz, sell-side analyst of [ UBSVB ].

I think you've already addressed it to some extent, but we would like to ask you about the operation of individual book in 1 million new lives that you expect to obtain, does it also include individual plans?

1 million lives are just lives from the national product.

The next question comes from Mauricio Cepeda, sell-side analyst of Credit Suisse.

I have some questions about the assumption and potential future strategies. A very important part of the synergy comes from supplies. And you already have large scale. Your companies individually, they are big in themselves for materials and medication. The gains that you identify in contracts are gains that wouldn't be obtained if you maintained your own supplies optimization strategies? Now the second question concerns strategy changes because GNDI has been selling hospital capacity outside the company, and now it's going to be extended to the whole country. Doesn't it go against the fact that you are still not verticalized enough in some regions. So maybe you don't have idle capacity, probably still need some more capacity. And thirdly, a strategy that GNDI has here in Sao Paulo is to verticalize plans. It also has some credit or own network in some regions. Do you expect to do that also in the Northeast, for example, to capture premium lives? And finally, one last question, which is more of a tactical nature. What's going to be used for the sell side. I expect that you are going to report your results together. So how are you going to communicate that to the market, all the synergies that you obtained from your combined operations?

Irlau speaking. Let me start by addressing hospital services first. This is a very interesting niche, and we've been using to have the appropriate balance of hospital occupancy. 5 or 6 years ago, we had BRL 106 million, resulted from third-party hospital services. Now last year, it reached nearly BRL 1.2 billion with an incremental potential, which is great. We know and we can in our operations because of the way we work when we have [indiscernible] hospitals. Hospitals that are effective, efficient, accurate, precise. So it sometimes generates very affordable cost to third parties. It is an operation that will be looked into by other third-party HMOs and this is something that will still help us. Now what comes first? Sometimes we go into a region in which we have no lives covered. However, once we acquire the hospital operation, we start there in the run. We have medical structure, technology, infrastructure. We can start creating specific products to focus on the asset acquired in a specific region. In other words, it makes sense. Throughout time, we try to strike a balance between what's necessary for verticalization and the availability for selling third-party services. It's used as a modulator of hospital occupancy, which is highly profitable and very interesting and has very sizable margins. I'm sorry, I cannot recall the other 2 questions. Maybe someone can answer that.

Now speaking on behalf of Hapvida, as you all very well know, it has never been a strong strategy to sell services to a third party. With our constant expansion of our own network, we expect to get to 85 hospitals all together or even more as a result of the short-term plans that each company has. It's a very important game that can be captured at Hapvida using the best example of GNDI. But we doubt in [ harming ] our own essence and philosophy of efficiency, considering our own operations as something that deserves to be properly managed. We have many different hospitals and different projects. We intend to expand number of beds. There are 3 hospitals being built in the countryside of Sao Paulo, another 1 in city of Campo Grande, 2 projects in Brasília, 1 in Manaus. We've recently opened 1 in Mossoro, another 1 in Belem, Recife has 2 projects. We expanded the hospital in Natal. GNDI has just announced 7 new hospital projects in addition to the expansion plan it has through acquisitions. So as you can see, we are going to have a very significant network with the possibility of offering our own products and as a complemented business, also obtain relevant revenues from offering the services to third parties. So benefiting from cost savings and revenues coming from that. Now I don't know if Mauricio or Marcelo would like to address the next question about the report of our potential synergies.

We have a highly detailed plan of all initiatives and how much that's going to generate in terms of value. And our integration teams will monitor that. We will order them and see how well it has been executed and what was the synergies resulting from them. Maybe we are going to get even greater synergies than what initially forecasted, and that's going to be reported plan by plan through our integration committees, which we will meet quickly. And then eventually, we are going to report that to the market. So how well the plans are being executed and what were the results from them. Of course, it's going to impact the combined companies. The synergy may improve the result of one company or the other. And once we present the consolidated results, we will see that as well.

What about the gains from procurement, what if you have already derived benefits as a result of your current size, why only the combination would really unlock the benefits of this procurement? And what about partially open network in other regions?

Let me give you some color about it. In some specific regions of the country, even though we are present there and sometimes even Hapvida is present there, we don't have the necessary volume independently to attract, let's say, a specific distributor, which would reduce the management cost in that specific region. There are a number of regions that I could name here. But one thing is getting to the supplier and talking about a specific number of MRI or a much higher number. So we are together going to have an untapped potential, which is going to be much higher. So for example, clinical engineering costs and all that. So there are very important synergies because we are going to have much broader geographic reach, more hospitals, more lives. One thing, 35 hospitals. The other thing is 85 hospitals. So we are going to have a joint power when negotiating contracts that can be beneficial also to our suppliers, of course, because they are going to have interesting margins in gaining more scale, but at the same time, translated into cost reductions to GNDI and Hapvida. While about the offer of plans that we will do in Sao Paulo, partially opened, we are now discussing that. So for each city, we are present in. In order to constantly improve our own network and we are also investing both GNDI as well as Hapvida so that we can also address the premium target. And our goal is to have this premium service being acquired within our own network that does not mean that we are not going to offer PPO plans in other areas.

I think that much of our work has been focusing on what we already have, right, a great network, the best technology, the best services. This is certainly what sets us aside from competitors. And when we consider the CapEx and what we also estimate for the future, we know that we will certainly have a network that will provide the best results. And I have seen this in GNDI. For example, in Belo Horizonte, GNDI has just acquired a hospital, which is a really high standard hospital. So Belo Horizonte and also a third acquisition of specialized hospitals that were the best in that specialty. And this already is and will be really what will set us aside from competitors with our own network with the best services, best professionals.

And just to add, Jorge, many people are not aware, but many of our hospitals have been accredited by [indiscernible] joint commission and we have been on accreditation regarding hospitality, engineering equipment. So we are certainly transforming healthcare in Brazil.

Our next question comes from Caio Moscardini, sell-side analyst, Santander.

I'd like to understand the additional EBITDA, how much of this BRL 800 million come from verticalized plan? How come -- how much comes from this idle capacity and also from individual coverage? I believe that there is different risks for each of these initiatives. So if you can break this down, please.

We are not going to provide separate guidance for each one of this. We are certainly measuring how much we have achieved in order to release total BRL 800 million. But unfortunately, we are not going to be able to give you the breakdown.

Okay. So no problem. Can I ask you how much is the additional CapEx in order to provide this national verticalized plan and reach 1 million lives? Or is the current infrastructure enough in order to meet this new potential demand?

Well, that's a great question. Thank you. The plan was entirely built considering the existing infrastructure and the CapEx that each company has already scheduled. So this is not additional CapEx. This is what is -- was set already. And I think that now together, we will study that really with the support of the input of our commercial teams also considering markets in which there is a huge potential to grow. So by combining M&As that we have already performed in the past so infrastructure plus organic growth in order really to provide this verticalized plan according to our ambition. But the numbers that we shared are based on what we have today.

The next question comes from Ricardo Boiati, sell-side analyst of Safra.

Most of the questions that I had in mind have already been answered. But one last point and it's a question to Mauricio and Marcelo. Do you have any expectations of financial synergies, something that has not been accounted for in terms of capital cost for the company? Do you anticipate any benefit of cost of capital of equity or not?

Well, we haven't accounted for it yet, but analyzing the rating of our companies, Hapvida has AAA and -- AAA Hapvida and AAA+ GNDI. And of course, it can be translated into greater spread of capital raising. We expect that the combined company will have AAA rating. And I don't know if Marcelo would like to add anything. We've recently had some capital raising initiative at very competitive levels, our company as well. But I believe we are going to get some benefits because of the combined rating. We haven't accounted for it yet. Let's see how it turns into reality through all the time. Marcelo, anything else?

No. No, that's exactly it. We hope to improve our rating once we combine both companies, and this is something that's going to be translated into more attractive spreads. But with the new design and structure of our companies, we can reallocate our debt into better or attracted by better tax incentives and more interesting interest rates. This is going to be a result of a very detailed work that our teams embrace.

There are no further questions. With that, we close our Q&A session. Now I'd like to turn it over to the company's CEOs for their final remarks.

Jorge, would you like to start?

Very briefly, I'd like to thank you all for joining us. I'd like to thank Irlau and his team. We're very happy to be together in this team. I'd like to thank the effort of our teams, also our partners, our investors who are supporting us in this project and our commitment to users and to really provide the best with the best quality possible. Thank you very much. And we are really committed, motivated, excited in order to carry on with this project. Right, Irlau?

Yes, this was really a major dream. I think we are tackling it properly. So with the integration of our teams, fantastic teams on both companies, we are now looking at the future with a new highs with an increased ambition, which was already big. And now just wait for the next chapters, but we certainly have the pillars to support this large company. We already have those pillars. So thank you very much for joining us, and we'll see you soon. Thank you.

GNDI and Hapvida, thank you for joining us. The IR area of both companies are also available to answer further questions. Thank you very much. With that, we close this webinar. [Statements in English on this transcript were spoken by an interpreter present on the live call.]