Inversiones La Construcción S.A. (ILC) Earnings Call Transcript & Summary

Hello, everyone, and thank you for joining ILC's Second Quarter 2026 Results Conference Call. With me today are Juan Pablo Undurraga, Chief Financial Officer; Ignacio [indiscernible] Chief of People Sustainability [indiscernible] Affairs Officer; and Catalina Frías, Investor Relations Associate. Before we begin, I will invite everyone to download from our website the presentation prepared especially for this call. This document provides an overview of the key events and achievements of the period as well as the financial performance and context of each of our businesses. Today's call will be divided into 5 sections. First, we will review the economic context for the period, followed by ILC's consolidated results for 2Q '26. Next, we will analyze our subsidiaries' financial performance and key highlights for the period. After that, we will provide an update on our financial position. And finally, we will conclude with a Q&A section. Slide 5 presents the macroeconomic context for 2Q '26 compared to 2Q '25. Looking at the top left chart, the IPSA delivered 1.9% return in 2Q '26 compared to 7.8% in the 2Q '25. The S&P 500 posted a 4.9% variation in the quarter compared to 10.6% in the second quarter of 2025, while the pension of funds delivered a real return of 5.6% in 2Q '26 compared to 4.7% in the same period last year. Then on the monetary policy front, as shown in the monetary policy rate chart, the bank -- I mean, the Central Bank held the monetary policy rate at 4.5% throughout Q2, '26, a level it has maintained following the easing cycle of 2025. With a base scenario of stability for the remainder of the year. As shown in the bottom left chart, the quarterly CPI variation reached 1.4% into Q2 '26 compared to no variation in Q2 '25. The U.S. variation accumulated 2.5% in the quarter compared to 1% in the same period last year. Now regarding the main events of 2026, the following milestones stand out. On January 21, [indiscernible] complete the acquisition of Noosaadoreleman in Concepcion, one of the leading hospital centers in the Southern Chile. The transaction price promoted to CLP 33.7 billion. Second, and in the same line, on April Red Salud's Extraordinary Shareholders Meeting approved a capital increase of CLP 20 billion aimed at financing the mentioned transaction and maintaining solid solvency ratios. Third, Confuturo was awarded in fraction of the contract 13 of the visibility as our survivor insurance, covering the period between August 2026 on July 2027 with 3 fraction of men and to open of operating rates of 1.76% and 1.39%. Or on July 27, ILC's Board of Directors agreed to request Presalt Board to call an extraordinary shareholder meeting to approve a capital increase payable with the contribution of ILC's stake in Compania de saguros Pia Camara. The transaction is part of the simplification of the group's corporate structure, and ILC will retain indirect control of [indiscernible]. Now we turn to Slide #8. We highlight the results ILC achieved as of the end of the second quarter of 2026, driven by solid operational execution across our business lines. On a cumulative basis, First half profit reached CLP 160 billion, a 44.7% increase compared to the CLP 114 billion recorded in the same period last year. This performance was driven by improved banking results, the contribution of the pension fund managers and the expansion in the health sector. With these results, ILC achieved an ROE of 26.1% as of June 2026, up from 23.4% at the close of 2025. As shown in the historical chart, ILC maintained old profitability over the years, demonstrating both steady growth and resilience across different market cycles. Regarding the quarter, during the second quarter of 2026, ILC reported a consolidated profit of CLP 75.9 billion compared to CLP 74.5 billion in 2Q '25. Banco Internacional contribution increased by CLP 4.5 billion explained by higher volumes of commercial and consumer loans, they create their contribution of its subsidiary of [indiscernible] and lower credit risk expenses. [indiscernible] contribution decreased by CLP 17.6 billion, reaching CLP 8 billion in the quarter, mainly explained by lower investment results in its portfolio. [indiscernible] contribution increased by CLP 3.7 billion year-over-year, mainly due to higher legal reserve return and a higher average flexible in [indiscernible] contribution. AESA contribution increased by CLP 9 billion due to higher commission, better in cash return at [indiscernible] and the positive contribution of AndinaVida. [indiscernible] contribution increased by CLP 4 billion, mainly explained by the performance of Cisco contract #8. In the Health Care provider segment, [indiscernible] recorded CLP 1.3 billion increase in its contribution reported -- I mean, supported by the consolidation of SenatoriaBank by greater complexity in the services provided by the network. Consalud contribution decreased by CLP 6.4 billion. The variation was mainly explained by the provision for the early payments, the liability arising from the [indiscernible] for people over 70 years of age, which implied an after-tax charge of CLP 7.9 billion, partially offset by lower medical costs, period in patient and tariff at base price adjustments. Now we have reviewed ILC's for performance, we will take a closer look the performance of each of our main subsidiary. In this section, we will go division by division to better understand the key drivers behind each businesses, the challenges faced in the quarter, and the strategic progress achieved in line with our long-term plan. Now I will turn the call over to Catalina who will review the main operational events and key figures of ILC's financial subsidiaries.

Thank you, Gustavo. So let's begin with Banco Internacional. As of June 2026, Banco Internacional total loan portfolio grew by 9.6% year-over-year, reaching USD 5 billion, positioning the bank of the industry, which funded by just or 0.8%. The commercial loan portfolio grew by 5.8%. Meanwhile, consumer loans increased by 28.8%, driven by the expansion of Autopin's portfolio, which grew 34.3% year-over-year. As a result, Banco Internacional market share increased in commercial loans from 2.9% to 3% in consumer loans from 1.3% to 1.58% and in mortgage loans from 0.15% to 0.22%. In terms of client growth, the bank continues to expand its footprint. Commercial clients increased by 5.5%, reaching close to 9,000 companies. And in retail banking, it increased 22.5%, totaling more than 118,000 clients including Banco Internacional and [indiscernible] of which 71,000 are also [indiscernible] clients. With this, the bank has reached 127,000 total clients. On Slide 13, we see that Banco Internacional has continued to consolidate its funding structure, reflecting a clear shift towards greater diversification and long-term stability. As of June, the bank's funding base continues to shift towards retail deposits, which now represents 68% of total deposits, which with a 33% increase in resales balances. Looking ahead, we continue to see 3 main opportunities: first, scaling retail financing by improving client acquisition and retention, second, expanding the corporate funding base; and third, developing digital financing products aligned with an efficient onboarding growth. As shown on Slide 14, Banco Internacional's gross operating results grew 22.6% year-over-year, reaching CLP 5.8 billion. This increase was supported by higher commercial and consumer loan volume and improved financial management, together with a better operational performance of AutoFin, which contributed at CLP 3.8 billion improvement. Operating expenses increased 4.4%, reaching CLP 31.4 million, mainly due to higher personnel-related expenses of CLP 2.5 billion, reflecting higher head count and inflation adjustments. As a result, the efficiency ratio improved by a 133 basis points year-over-year, reaching 47.8% compared to the 6.1% of the second quarter '25. On Slide 15, the data shows that provisions reached CLP 4.1 billion in second quarter '26, a 6% decrease compared to the second quarter of the last year. This lower expense was primarily driven by lower provision in commercial loans and partially offset by the increase in out-of-time provision resulting from the expansion of its portfolio. In terms of asset quality indicators, the nonperforming loan ratio stood at 2.7% as of June 2026, representing 9 basis points decrease compared to the same period of the last year. The risk index reached 1.8% decreasing 17 basis points year-over-year. Meanwhile, the collateral coverage ratio reached 68.3% of total loans. Finally, Banco Internacional remains fully compliant with basal free requirements with a solvency ratio of 17.1. As of June 2026, common equity Q1 and capital adequacy ratio of 10.4% and 16.3% respective. Slide 16 chart shows Banco Internacional profit and ROE evolution. In the second quarter of 2026, demand reported net income of CLP 28.2 billion compared to the CLP 9.8 billion in the second quarter of '25. Consequently, the bank reported an ROE of 17.3% and a return over average assets of 1.28% as of June 2026. [indiscernible] accounted for 19% of Banco Internacional's quarterly earnings, reflecting its role within the bank consolidated results. Now shifting to the annuity market as shown in Slide 18. In the second quarter of 2026, we continue to see strong demand for annuities. During the quarter, the average annuity sales rate stood at 2.85%, 36 basis points below the level reported in the second quarter of the last year compared to the program with roll rates of 3.31%, which decreased 23 basis points. This spread continue to favor annuities and attractive retirement option, a 68.6% of pension industry premiums were direct to annuity during this quarter and in the first half of 2026, annuity reached 66% share versus program with all. Total annuity industry premiums reached USD 40.5 million in the quarter, BRL 15.8 million increase compared to the second quarter of the last year. So future annuity premium amounted USD 4.5 million, up 7.6% in real terms with a market share of 11%, positioning the company fit in the industry. We aligned our sales performance with investment opportunities and the generation of shareholding spread. [indiscernible] remains 1 of the leading players in the annuity market, supported by sustained demand and regulatory development. On Slide 19, we show the investment result of [indiscernible] portfolio in the second quarter of 2026. [indiscernible] proprietary portfolio delivered an investment report of CLP 96.6 billion in the second quarter of this year, 12.4% below the same quarter of the previous year. The decline was concentrated in the investment funds, which contributed CLP 17.4 billion less than the second quarter '25, mainly reflecting weakness performance of local and international [indiscernible] [indiscernible] real state added CLP 13 billion the results, partially of the decline of CLP 1.9 billion in equities, CLP 7.2 billion in derivatives and other investments. Investment income from funds also associated to [indiscernible] increased by 37.9% as a result of -- as a result, this is reversed in other income accounts given the fiduciary nature of these funds. On Slide 20, in the second quarter of 2026, [indiscernible] reported a net income of CLP 13.7 billion compared to the CLP 28.9 billion recorded in the second quarter '25, 62.8% decrease and on a commodity basis, first half profit reached CLP 39.4 billion, 2.5% above the 6 months of the last year. The quarterly variation was mainly explained by lower investment results from the proprietary portfolio mentioned before on the figure. As of June 2026, [indiscernible] remains the third life insurance company in terms of number of pensioners and the fourth largest by AUM. The company's staying focused on its long-term investment strategy, especially by growing its portfolio of alternative assets, including real estate, to improve future returns and diversification. Moving now to [indiscernible], as shown on Slide 22. In the second quarter of 2026, revenues reached CLP 67.4 billion, a 4.2% increase compared to the second quarter '25. This growth was mainly supported by higher fee income from mandatory contribution driven by a 7.9% increase in taxable income per contributor. As of June 2026, Avitas contributors had a taxable income, 33% higher than the industry average, reinforcing the company's strong position in mid- to high-income segment. It was partially offset by 6.5 percentage decrease in number of contributor year-over-year. Also now its SG&A expenses increased 5.6%, reaching CLP 27.2 billion, and legal reserve returns reached CLP 34.2 million, that's a 10.3% higher than the second quarter '25. This result was driven by a better performance of the funds especially the ones that have greater exposure to equity. As shown on Slide 23, both our international operations, Peru and Colombia reported better results in the second quarter of this year, supported by growth in fee income, higher legal returns and the incorporation of the DNS insurance in [indiscernible]. In Peru, [indiscernible] increased 18% year-over-year, reaching CLP 13.6 billion. [indiscernible] returns improved totaling CLP 6.5 million compared to the CLP 2 billion of the second quarter of last year. At Colfondos in Colombia, revenues decreased 3.9% year-over-year, reaching CLP 21.9 billion. We are the returns increased reaching CLP 14.9 billion compared to CLP 6.5 billion in the second quarter. And Benavides contributed a profit of CLP 16.6 billion this quarter compared to CLP 2 billion in the last year, reflecting the incorporation of the D&A, the Insurance business and a larger pensioner space, primarily from Colfondos. On Slide 24, we show the evolution of profit before taxes and in cash from [indiscernible] and ISA. FP [indiscernible] reported a quarterly profit of CLP 56 million compared to CLP 46 billion in the second quarter '25, a 19% increase, mainly explained by the higher legal return. Excluding this effect, profit before taxes and legal reserves reached CLP [ 4 ] billion. As you an see in the second quarter '26, with 5.2% above the same quarter in the previous year. It posted a profit before taxes and deal reserve of CLP 22.6 billion as we see 55.9 increase compared to the second quarter in and a net income of CLP 39.9 billion compared to the CLP 17.5 billion in the second quarter '25. This result was primarily explained by higher revenues in [indiscernible] at Aida Benoit Colfondos, Corpondos, together with the contribution of Andinavila. Now I will turn the call over to Gustavo, who will review the main operational events and key figures of ILC [indiscernible].

Thank you, Catalina. Moving now to the Health segment. Slide 6 shows salt activity indicators. It is important to note here that at the beginning of 2026, the company completed the acquisition of Santa Dordelman, expanding the network coverage to catchment area of 2 million people. This transaction adds more than 150 beds and 135 patient consulting rooms and recorded commodity revenues of CLP 24 billion for the period. In the second quarter of 2026, Betsalute's revenues reached CLP 251 million, a 19% increase compared to the same period of the last year. Growth was mainly driven by the incorporation of Santa de Reeman and by improved performance in the outpatient and dental center areas across the rest of the network. Excluding Sanadreleman, hospital revenues grew 8%, ovation, 7% and dental centers, 4.9%. In patient care, revenue growth was mainly driven by greater activity in operating groups, hospitalization and the critical patient unit. Bed occupancy across the network reached 78.4%, up from 76.3% reflecting a more complex case mix. But patient revenues grew 7.1%, driven by greater activity in imaging and procedures, which increased 7% and 12%. On a consolidated basis, including Senate relevant, revenues in metropolitan region, regional hospitals and outpatient and dental centers grew 8.2%, 52.4% and 7.9%. During the quarter, the public insurance [indiscernible] accounted for 49.9% of the sales, while Isapre represented 13 -- I mean, 30.4%. Now if we move to Slide 37, Red Salud's EBITDA margin reached 11.6% during the quarter compared to 12.9% recorded in the same quarter of the previous year. This variation was mainly explained by the higher receivable impairments, mainly in the Metropolican region, higher personal expenses and lower activity at the regional clinics, especially at [indiscernible]. This was mainly offset by the consolidation of [indiscernible] and the [indiscernible] publicity in the services provided by the network, reflecting higher demand for operating room and critical patient unit services. Cost of sales increased 2.7% compared to the same period last year. When we exclude Sanadodeleman, the cost to revenue ratio reached 75% compared to 74.2% in the same quarter previous year, primarily explained by clinical material costs in line with our revenue mix more oriented towards the inpatient secondary. On Slide 28, we can see Rexalude's EBIT evolution over the last 6 -- I mean, 8 years. We can see [indiscernible] consolidated EBITDA reached CLP 29.2 million in Q2 '26, a 7.3% increase compared to 2Q '25 with an EBITDA margin of 11.6% compared to 12.9% in the same quarter last year. When we analyze by business unit, EBITDA decreased by CLP 230 million in metropolitan and real hospitals reaching a margin of 12.5% compared to 13.8% in 2Q '25. Regional hospitals increased their EBITDA by CLP 775 million with a margin of 7.6%, compared to 10% in the 2Q '25. Outpatient and dental centers, EBITDA increased by CLP 693 million, reaching a margin of 17.3%, in line with the 17.6% recorded the same period last year. Now if we move to the mandatory health insurance, the Sabra industry. This chart shows the evolution of inflows and outflows, I mean, in the Sabra industry. Regarding the car industry, we have seen that the implementation of the Sabra short law has restored legal uncertainty to the system. This, together with lower medical lift costs has reactivated sales across the industry. Over the last few months, we have once again recorded positive sales. with a net balance between inflows and outflows returning to a positive territory. Slide #30 illustrate how Consalud has consolidated the recovery of serve since the implementation of the short low. Lower medical lease costs also contributed to the quarterly results with a number of medical leads increasing 22.7%. This decline was mainly driven by a lower volume of licenses related to mental health and respiratory condition, which translated into a lower cost of CLP 10.6 billion. The loss ratio stood at 81.8% in the second quarter of 2026, 56 basis points higher than 2Q '25. Revenues increased 3.9%, reaching CLP 196.1 million, explained by the inflation effect and the ES and base price tariff adjustments. This was partially offset by a 3.1% decrease in beneficiaries. [indiscernible] reported a net income of CLP 3.3 billion during the quarter, compared to -- I mean, CLP 9.7 billion in the same quarter previous year. This was mainly due to the provision for the early payment of the Lake Porta liability for people over 70 years of age, which implied an after-tax charge of CLP 7.9 billion. When we see the gray bars, our recurring results have followed a stable trend, reaching CLP 11.2 billion during the quarter compared to CLP 9.7 billion in 2Q '25. Moving on to Slide 31. We can see that BidaGamara continued to expand its operations during the second quarter of 2026. Total beneficiaries reached 665,000, up 2.3 years year-over-year, individual health insurance beneficiaries grew 1%, reaching 63,000 people supported by policies associated with preferred provider agreements with [indiscernible]. This growth translated into higher premium income, which reached CLP 36.9 million, 10.5% above 2Q '25. Claims costs increased by 3.2%, mainly driven by higher patient coverage in group health insurance, while the loss ratio reached 74.8% in 2Q '26 compared to 80.1% in 2Q '25. As a result, [indiscernible] recorded a profit of CLP 836 million compared to a loss of CLP 684 million in the same quarter last year. Slide 33 shows ILC well managed debt maturity profile and liquidity position. As of June 2026, net financial debt the [indiscernible] level total CLP 434.8 billion, with a net financial debt-to-equity ratio of 0.31x compared to 0.33x at the close of 2025. Liquidity at ILC's individual level stood at CLP 119.1 billion, composed mainly of cash and equivalents and an investment portfolio of liquid assets. To sum up, turning to Slide 35. I would like to highlight the key advances towards our strategic goals. First, at Banco Internacional, we continue expanding our client base, reaching 127,000 clients as of June 2026, delivering 9.6% loan growth above the industry 4.8%. [indiscernible] we maintain the position in the annuity market supported by the efficiency and value creation, achieving an 11.9% market share in the quarter with a 49.5% of its premium originating through the direct channel well above the industry average. [indiscernible] remains focused on the mid- to high input segment while continuing its preparation for the [indiscernible] and the focus on efficiency. In the health care business, Total reinforced its leadership in private coverage, increasing high complexity services. EBITDA reached CLP 29 billion with 11.6% margin during the quarter while Bidan Camara's individual health insurance grew 51% year-over-year, reaching 63,000 beneficiaries. On the regulatory front, the implementation of the Sabra [indiscernible] together with lower costs from medical leads has contributed to studying the health insurance system with positive effects at Gonzalo, which reached first half profit of CLP 18.9 million. Finally, ILC consolidated level, we closed the first half of 2026 with record results. reflecting the strong performance across all the companies that are part of the group. These results also set a demanding standard going forward being able to sustain this level of performance over time. To that end, we will remain focused on consolidation of our operation and moving ahead with long-term view. One that allow us keep advancing projects and investments that generate social and economic value for our beneficiaries, clients and shareholders. This concludes today's presentation. We will now open the floor for questions.

[Operator Instructions] We have a question from Daniel Vallenas from Moneda.