Rede D'Or São Luiz S.A. (RDOR3) Earnings Call Transcript & Summary

Good morning to everyone. Welcome to the results Conference Call of the Fourth Quarter of 2024 of Rede D'Or. We have here with us in the call, Mr. Paulo Moll, President; Rodrigo Gavina, CEO of Hospitals; Otavio Lazcano, VP of Finance and IR; [indiscernible] of Health and Dental of SulAmérica. We inform that the event will take place for 60 minutes, and the recording will be available at the website of IR of the company. After the initial presentation, we're going to start the Q&A. We will receive further instructions before continuing, we would like to clarify that any statements that might be done during the earnings call regarding to business perspectives of Rede D'Or, projections, operational goals, financial goals are based on beliefs and premises of the Board of Directors based on information currently available. Forward-looking statements are not guarantees of performance. They involve risks and uncertainties. They refer to events that may or may not take place. Investors should understand that macroeconomic conditions and industry conditions and other operational factors may affect the performance of the company and may lead to results that are different from those stated from the forward-looking statements of today. Now I'd like to give the floor to Paulo Moll. He will start the earnings call. Please, the floor is yours.

Thank you. Let's start with a few highlights of our operation in 2024. We have results very solid. And this reinforces the combination of business that we have of Rede D'Or SulAmérica that happened 2 years ago, the M&A. And there are a few numbers that I would like to highlight that show the resilience and the solid growth that we've had even in a health care market that is still very challenging. And we see this in the sector. The gross revenue, we had growth of 10%, 9.6%. The EBITDA got to BRL 8.5 billion, a growth of 33.3% with a margin and consolidated of 16.5%. If we look at the adjusted EBITDA by the results, finance of the technical reserves of health at SulAmérica, we will have a margin of EBITDA, 18.4% and a total EBITDA of BRL 9.5 billion with a growth of 29% year-on-year. The net income, BRL 3.9 billion, very strong growth, 31.6% in regards to '23. This net income would have been BRL 4.1 billion if we exclude the accounting amortization of the portfolios of SulAmérica. The data of SulAmérica, I'm going to let Raquel go over them. I wanted to talk about looking at our numbers on the cash generation and cash allocation. We had a conversion of over 100% of our EBITDA and the cash flow. We are deleveraging the company. Our net debt EBITDA finished the year at 1.9x. It's a drop of 0.4x in regards to '23, even with the payment of BRL 1.45 billion in interest over capital and BRL 946 million in repurchasing the shares, BRL 2.1 billion in CapEx in 2024. This shows the rigor discipline -- financial discipline of the company, good finance management that we have and a good operational performance. The year was very important for our expansion. We had 5 new hospitals, [indiscernible] Luiz Alphaville, [indiscernible]. The number of beds, total beds has grown in the year, 11.2%, getting to 13,000 total beds. Operational beds, we get to 9,852, a growth of 259 beds. It's important to highlight this. We had an impact that is important throughout the year in the continuity of operators that we delisted, we were exposed on a contract. At the end of the year, we had a closing of beds that is natural given the reduction that we have of demand. It was higher than expected, even though it's normal within the seasonality, we had on the 13th of November when we did the last call for the earnings call that we had 9,981 operational beds. We imagined that at the end of the year, we will have a total number of beds that would be lower, but we reduced 124 beds. It's larger than our expectation. We would like to highlight that we are recovering. We're opening operational beds all throughout 2025, January and February of '25. They were not especially strong in regards to '24. Remember that in 2024, we had a frequency that was very high in the emergencies because of dengue fever and respiratory syndrome, and we had a canceling of the contract with [indiscernible], a client with a relevant volume at Rio de Janeiro. Regardless, we start the month of March above 10,000 operational beds. To date, we have 10,097 operational beds. It shows our capacity and the capacity of the company as a whole of growing with the basis of clients and good partners, a sustainable base and a consistent and quality-based base. Going back to '24, we closed the year with 79.6% of occupancy throughout the year, record numbers. I would also like to talk about the perspectives for 2025. We're going to have the continuity of our organic expansion, the utilization of the operations. We have, for example, 13 implementations of hospital systems. Obviously, once they are implemented, we will have more standardization with our processes. We want to continue to strengthen our JV Atlântica D'Or with the Bradesco Group. This is an important vector of growth. The hospitals have done a strong ramp-up on the launched hospitals, and we're going to continue to do good opportunities on cash allocation. We have a strong cash position, very comfortable of leveraging a lot of cash generation. We're going to continue paying attention to the good projects that we can add through the company, whether they are organic or inorganic. Once again, I would like to highlight the strength of the business combination that we have between Rede D'Or and SulAmérica. We can bring a lot of possibilities of growth and a great symbiosis amongst the operations and the reduction, obviously, of the risk of execution and the expansion of beds with Rede D'Or and SulAmérica, we end up having a number of opportunities that is very big with the consolidated company with a cash allocation with return rates that is very attractive. And regardless of the size of the business, we continue to see a level of growth that is high because of the amount of opportunities that we have for the growth and the cash allocation opportunities. And we have a dynamic of conversion of EBITDA and generation of free cash flow that we have to highlight. Very few companies in our sector have the capacity to convert 100% or more than 100% of the EBITDA in the cash and with the position that we have with the leverage, a good problem, which is the generation of excess cash, we're going to be paying attention with a lot of care and discipline to the best capital allocation for the company. Lastly, we would like to say that we have a natural hedge of the results. Given that the operation of service provision, the operators and the operation that they have similar scales. So the drop of frequency that we observed in the fourth quarter or in other moments because of an epidemic or a high frequency, high utilization, we end up having a neutral effect within our consolidated operation with the consolidated numbers. So this compensates the other side. And we have a stability of results with the perspective of continuity of growth that is very strong. Now I will give the floor to Raquel, and I will be with you during the Q&A.

Thank you, Paulo. Good morning. It's a pleasure to be with you. Let's talk about the main highlights of SulAmérica. And I want to talk not only about the quarter, but the full year of 2024, which was very good in terms of achievements. Continuing with the reduction in the claims in 2024. We have an operational result that was negative in 2022. To continue to be in the blue and contribute with the relevant numbers, consolidated numbers to the company as a whole. We are growing the base of beneficiaries in 153,000 lives net in health and 216,000 in dental. We go over the 5.3 million total number of beneficiaries. We also evolved substantially in the combat of fraud and abuses, an agenda that you've heard for some quarters, contributing with the use -- conscientious use of the resources of health that affects the claims also. We increased our breadth with the launch of new products, 29 new products launched in different regions of the country, more intelligent, more modern and more sustainable. The index of administrative expenses also has to be highlighted below 6%, much more healthy now. And we continue to improve continuously the services to our beneficiaries. With more and more technologies, our apps, they are the best evaluated of the company -- of the sector and strategies implemented according to the profile. So the consolidation of our concierge line with services that are absolutely differentiated, exposing every day as a manager of -- our company as a manager of health, in fact. And at the same time that we start the natural process of reduction of the readjustment index after a difficult period, but absolutely necessary of strong adjustments in the portfolios. All of this is a result of us a lot of work, consistent work, and I would like to thank the commitment of our 4,000 employees. All of that is based on a long-term strategy. This trajectory, as you know, started 2-3 years ago and little by little, we and our companies are gathering the fruits of our labor. That's it. I am certain that we will continue with the same rhythm in 2025 with the same objective of achieving sustainable growth. Thank you. And now I'll give the floor to Gavina.

Good morning. Very good to be with you today. I would like to highlight a few points that Paulo already mentioned. Regardless of everything that we lived in 2024 with the delisting and rearrangements that were necessary, we managed to grow the volume of the patient day year-on-year, 2.3% almost. And as Paulo has said, our average rate of occupancy is about 79.6%, which is a rate of occupancy, very good. We haven't had it the annual occupancy rate, we haven't had it for a long time in these numbers. And now talking about the growth of occupancy rate in a patient day, we managed to keep the volumes of surgeries and complex surgeries, we increased them as well. It's a big challenge because that brings us possibilities in the different geographies that we work with. We can work with the teams and show the patients the safety of our hospitals and how that surety can bring benefits for the patient. Regardless of the growth, that we've been having regardless of what we had in terms of loss. We also want to use the -- rationally the health care system. That has to be in a balance to avoid waste and that we can continue with a system that is more adequate. Change in the page. And without trying to be repetitive with the hospital beds, Paulo already mentioned, we grew with the operational beds, and we always try to work in an optimized fashion. We grew a lot in the total beds. We grew almost 11% in year-on-year on total beds, but operational beds, they also grew. And we have to work optimized so we can continue to bring resources for the company. In the lines of Raquel and the other ones, we would like to thank the 75,000 employees that we have, plus the 50,000 physicians that work every day in our hospitals. Without them obviously, this company wouldn't have delivered the results of 2024. The challenges that we have for '25, not only with the employees, and we have an executive group also that backs up the growth. Now I'll give the floor to Otavio.

Thank you, Gavina. Once again, good morning, everyone. On Page #8 of the presentation, the gross revenue and average ticket of the hospital services, starting with the graph on the left. The company reported the gross revenue for the segment in the fourth quarter of BRL 7.904 billion, a growth of 12.6% in regards to the fourth quarter of '23. A small drop of 2.1% facing the quarter -- the third quarter of '24, an increase in the average ticket of 1.2% and a drop of volume of 3.4%. At the center of the page, the company reported a gross average gross total revenue of BRL 31,293 billion, the growth of 10.1%, the result of an increase of the average ticket of 6.8% and the volumetry of 3%. In the right, we have the annual evolution of the average ticket since 2017. Next page. Now we are talking about oncology, always starting with the graph on the left, the company reported the gross revenue of BRL 829 million in the fourth quarter of '24, a growth of 16%, facing the fourth quarter of '23, a growth of 0.8% if you compare it to the third quarter '24, a result of the increase of the ticket of 1.8% and a drop in the volume of 1.3%. In the center of the page, gross revenue total of oncology in '24, BRL 3.197 billion, 16.8% higher than the one verified in '23, the result of the increase of the average ticket of 12.1% and an increase of volume of 4.1% in the same way. In the graph on the right, we have the evolution annual of the average ticket since 2017. Page 10. Cost and expenses, hospital services. On your left, the company reported the total costs of BRL 5.594 billion in the fourth quarter of '24, a growth of 16.5% if you compare it to the fourth quarter of '23 in the center of the page. The company reported the total cost in '24 of BRL 21,270 billion, an increase of 9.9% facing '23. On your right, we have the General and Administrative expenses [ due ] to small one-off positive in the first quarter of '24 regarding the victory that the company had in a dispute that had some expenses record -- historical expenses, but we verified a stability in the SG&A of this segment of the business often time totally stable and something close to 3.7% of the gross revenue of the company. On your right, far right, the company reported the administrative costs general in 2024, BRL 1.211 billion, a growth of 13.7% if you compare to the FY '23. On Page 11, EBITDA and net income. On your left, the company reported for the segment of hospital services an EBITDA in the fourth quarter of BRL 1.532 billion, a growth of 7.6% if you compare to that reported in the fourth quarter of '23, a margin of EBITDA of 21.8%. At the center of the page, the company reported an EBITDA of the segment of hospital services once again in '24 of BRL 7.168 billion, a margin EBITDA of 25.8%. On your right, the company reported net income consolidated adjusted for the fourth quarter of '24, the FY of '24 of BRL 932 million and BRL 4.146 billion, respectively. Next one. Some data on SulAmérica. Starting on the graph on the top left. Net revenues in the fourth quarter of '24, BRL 7,861 billion, 12.7% higher than the one verified on the fourth quarter '23. On the full year, the net revenue of SulAmérica BRL 3.023 billion is 11.3% higher than the one verified in 2023. In the clockwise fashion on the top right, the consolidated loss ratio of '24 of 80.2% is fourth quarter is 4.9 percentage points lower than '23. On the right, we have 4.4 less percentage points in the full year for '24 in comparison to '23. Here, there is an evolution of the beneficiary basis health and dental beneficiaries, 5.3 million beneficiaries in the fourth quarter of '24. On the left and below an adjusted EBITDA of SulAmérica in the fourth quarter of '24 of BRL 726 million, which is 141% higher than the fourth quarter of '23. In the year, the EBITDA adjusted of SulAmérica of BRL 2,300 billion and 131.5% higher than the FY of '23. The consolidated EBITDA of the company and the consolidated and adjusted by the financial revenue of the guaranteeing assets of the company is BRL 8.479 billion and BRL 9.468 billion, respectively, in the FY of '24. Page 13, debt profile. The company is extremely well capitalized, very -- a lot of liquidity. We have over BRL102 billion of total assets at the end of FY '24, including a position -- cash position equivalent of BRL 40 billion. Excluding the technical provisions, even so a position of cash net of BRL 19,850 billion, gross debt of BRL 37.6 billion, a net debt of BRL 17.8 billion, net debt EBITDA in the more conservative reading of 1.9x. And when we include the provisions for insurance reserves, we get to a relationship of net debt of 1.3x. The company today has the ratings attributed by S&P and Fitch and above the sovereign risk. This is extremely relevant for a company that doesn't have assets abroad and doesn't have revenues in dollars or euros. At the center of the page, we have a cost of capital cost of debt and CDI plus 3% with a 5.6% average term in years. On the debt amortization schedule, the main until the exhaustion of the debt. Last page, managerial cash flow, reconciling the EBITDA that was reported by the company with the variation of cash, always moving to the right, starting with the EBITDA of BRL 8.479 billion. Thereafter, we have a positive variation of working capital of over BRL 3.5 billion. And on the right, other balance sheet items, negative BRL 253 million. Then the leasing expense of BRL 731 million, the payment of taxes in the amount of BRL 1.2 billion the financial activities cash flow, negative in BRL 601 million. The cash flow that stems from the investments negative in BRL 2.1 billion, we get to a variation of cash of BRL 7.56 billion. On the right, we have graphically the evolution of the average days receivables, DIO and DPO of hospital services. I close now the presentation, and I open for the Q&A. Thank you.

[Operator Instructions] Our first question is from [ Andre Rosales ] UBS BB.

I have two. First, about the new projects in '25. Do you have an expectation of new centers for beds 900 beds. But could we have some color on the timing of the launching of the new beds and new projects? Should we see launches on the first semester or this is going to be focused on the third and fourth quarter? Second question is about SulAmérica. Considering the new products being launched, how should we look at the evolution of the consolidated loss ratio of SulAmérica long term after '25. What would be reason about you think about the consolidated loss ratio that is eventually less than the -- than what we observed in the pre-pandemic?

Thank you, Andre. I'm going to answer the first question. The second question to Raquel. The best information about the investments of the company as the one that is in the reference form that there is a lot of information there. We, last year, gave more granularity on the information on the last version of May of last year, we consolidated more of the information because of strategic issues, but the projects are ongoing. I'm going to tell you 2 examples of work that are advanced. So Lucas in Aracaju Sergipe and the works of expansion of Assunção Hospital in Sao Paulo. The best information for you and for the investors and the readers of our balance sheet is the one that is in the reference form.

Andre, this is Raquel. Thank you for the question. In regards to the consolidated loss ratio, I cannot give you another answer than the one that we perceive of continuous improvement. That's going to be always our focus. I'm not going to mention any specific points, but I would like to say that the products that were launched, not only in '24, we are with the strong rhythm of launching products since '23 when we launched another '24, if I'm not incorrect. Understanding the profile of each place of each geography, understanding the competitors of a region. What is the profile of co-participation of the product that is being sold, launching the products with the service providers and other service providers depending on the region, and remembering the maxim that our desire is to have a consolidated loss ratio and claims control and one that presents an improvement but always doing lower readjustments as well. That increases broadens the base of beneficiaries without a share of doubt. Another point. Besides the intelligent products, I would like to highlight the issue of our fight that continues in regards against frauds and abuses. We had a reduction that was extremely relevant in the representativeness of the reimbursement for the total payment of claims. It's dropping to less than half. So today, reimbursement is less than 8% of our claims. So, we don't have a silver bullet. There is a series of actions that we have to take into consideration in terms of this consolidated loss ratio, but this is happening. Another point that I see a strong trend, and I see it in the entrepreneurial, but now I see it for the wholesale, it's the co-participation. In the small and medium companies, we have over 22% of the entirety of the base of the stock of these SMEs with co-participation and the sales in over 44% in co-participation in the entrepreneurial that was 50% of the stock and 86% in the sales. So we have to add all this and not forget the point of synergies that Paulo has mentioned in his initial speech, and that we can prove at this moment with all the synergies by the hospitals, we can have a differentiated position of highlight that leads us to a better improvement of consolidated loss ratio and costs that are lower when comparing to the market. Thank you for the question.

Next question. Raphael Elage from XP.

Thank you for taking 2 questions. First question is in regards to the issue of the operational beds at the end of last year. You mentioned yourself an effect that is lower than what was expected, but I wanted to understand, do you foresee any other factors that are not, for example, seasonality or another factor that is not so expected. And even something that is acute that happened last year. That would be the first question. And then maybe would have had an extension to the beginning of this year. Second question, trying to explore the dynamic of the growth of the base of SulAmérica. In the third quarter of last year, you had that growth that was more robust in regards to the other quarters of the year. The data of ANS, the National Agency Supplementary health care signaled an interesting growth at the beginning of this year that we have a strategy of growth. Can you give us more details on that and also thinking on the values that we saw the last year and the growth of Rio de Janeiro, we saw some growth there. We know of the presence of the company in this geography. However, the dynamic of growth of this geography is more difficult in terms of the number of beneficiaries. So if you can discuss this, that would be great.

I'm going to start with the first question about the operation of ads, 2 factors. The listings that we've done and we continue to do out last year, and an effect of seasonality that I think that was stronger. We expect December that is weaker, but this year, it was more intense. So when we did the last call on November 13 that we had the 9,981 beds, we didn't have the expectation of closing 124 beds knowing that something we would close to keep the efficiency of the hospitals and the rate of occupancy of the hospitals to keep the results. At the beginning of the year, there was another factor. At the end of last year, we do the delisting of [indiscernible] and we stopped to service on February 18. So we had to deal with this first quarter in the loss of these volumes. But as I mentioned, we can leave this behind in the past, and we are at a threshold that is above 10,000 beds -- 10,097 beds without [indiscernible] at the base and ready to have a rhythm of growth that is interesting. With a ramp-up of our units and, of course, getting into the months of higher demand and more frequency. I'll give the floor to Raquel.

Thank you for the question. In regards to the strategy of growth of our base of beneficiaries that SulAmérica is a challenge for 2024 of objectives for the team. The challenge was very high in 2025 is still high challenges. What I wanted to make clear is that the responsible pricing conscientious, those that planned good that will reap the results for their good portfolios and still in the strategy of growth, their incentives to focus in one type of portfolio, one type of group, one type of geography now. We continue to focus on the retail and in the regions that are obvious, we cannot leave Sao Paulo, Rio de Janeiro, the big capitals are now getting into Rio de Janeiro. We still have a strong strategy. And we have opportunities that are born there from stem from the need of certain beneficiaries and having a network that we can complete today is very relevant. And of course, because of the issue of the relevance of the amount of beds by Rede D'Or. So we continue as one of our main priorities and maturation when we discuss the big negotiations. The maturation of this type of business is lower -- So slower. So there are some contracts that we take one year for the beginning of the negotiation and the implementation itself. So we continue to work firmly -- some of these contracts were implemented in 2024, some in 2025. So we continue with a lot of good stuff in negotiation. I would like to highlight the regions that are not obvious that we are always talking about the obvious ones, but we have also the last product that we've launched was in [indiscernible]. So we continue to observe opportunities regardless of the geographic limitations. Thank you.

Next question Gustavo Miele, Goldman Sachs.

I have 2 questions. Still within the context of hospital services, I wanted to hear about personnel. In the cost, but also if you can do an analysis, adding DNA and to avoid classification between the lines. So there is a small pressure in personnel, you looking year-on-year. Is that due to the additional capacity that the company has delivered over the last 12 months? or eventually, is there any extra extemporaneous factor that we should take into consideration when we're modeling personnel for 2025? And maybe do you foresee a space for the dilution in the first quarter, given that, as Paulo commented at the beginning of the call, a lot of the beds are starting to be operational from this start in 2024. The first question. And the second question, looking at the EBITDA, we've had the questions on what would be an [Indiscernible] of recurring cost of income in 2025, we look at in the fourth quarter of '24, which is stronger than we imagined. So we wanted to understand what is recurrent, what is not looking at the recomposition of tax income and the interest of our capital. If you can talk about this.

This is Otavio. I'm going to answer both. As as Paulo has said, we lost some operational leverage, seasonality, the delisting that Paulo mentioned in the fourth quarter of 2024. But when we look the record, the relevance of personnel with the percentage of the gross revenue of the company, we are obtaining gains of productivity that are very significant. In 2019, just representing 27.7% of ROA. In 2020, the most difficult years in the dynamic, it was 29.1%. For 2021, it dropped to 24.6%, '23, 23.9% and '24, 24.1%. So it seems to be something acute and not structural. And of course, with the advance of the works and the opening of the beds. The enterprises that we have a ramp-up from the harvests and the reduction of additional cost will be very will let us verify all of these investments and the return on the company. On the second question on the effect of [indiscernible] for '25 it's very difficult to give a guidance. The company is very conservative in the communication. We don't give guidance for the market to avoid any mistake in the communication. I'm going to tell you qualitatively, SulAmérica is presenting itself as a business that is more lucrative, theoretically. It takes the effective [indiscernible] of the company as a whole. But on the other hand, the company has a set of tools that we've exercised throughout the years to keep the effect of [Indiscernible] under control. And I would like to say the base negative of CSL, the income tax that we pay, and we accept the claims and the provision of the accounts receivable and when we accept it, we have another PIS and COFINS. So we have a set tools that allows us to understand that the effect of all of the company will be under control for many years. The amortization also is another tool that we have is everything is described on the explanatory note on #17, if you take a look at it, you will have a good idea on how we handle all of the tools to keep the effect of [indiscernible] of the company under control, okay?

Next question, Flavio Yoshida, Bank of America.

Paulo, Gavina, Otavio, Raquel. I have 2 questions on my side. The first one is in regards to the consolidated loss ratio of SulAmérica. We understand that they are -- that it's improving, but at the same time, the level of technical provision is increasing a lot. We understand that you adopt a certain conservative position in the provisions. But I wanted to understand up until when do you get the conservative? How do you see the technical provision levels in which the company finds itself today? The second question is in regards to the ramp-up of the hospitals of Atlantica D'Or. In general, we have a perception of a new hospital that starts with low complexity. In that sense, I wanted to understand if the ramp-up of the Atlantica D'Or hospitals, do they start with a level of complexity that is higher. And because of that, the ramp-up of margins is given in a more accelerated way when comparing to a hospital that is outside of Atlantica.

I want to start reply the second question and then I will give the floor to Raquel. In fact, the ramp-up of the hospitals of Atlantica is more accelerated than the average of the greenfields of Rede D'Or. We've had 2 out of the 3 hospitals getting in the second month of operational breakeven. You know the numbers, the records of the company. We usually talk about 4 to 6 months to reach the operational breakeven. And this is because we are in places with an important population that is covered by SulAmérica Bradesco, that has been service since the first day, and we registered other operators, and this has made the ramp-up more accelerated than the records. And 4 to 6 months to reach operational breakeven is an achievement when you compare to the greenfields that are done in Brazil, but outside of Brazil. Usually, the hospital is a type of asset that takes longer to mature. Therefore, we can reach higher -- quicker to higher profitability levels. Of course, we don't expect that for the two first quarters of operation, but I would like to say that for the second semester of operation, we can see these hospitals with an interesting level of margin. And even with margins aligned with the numbers of the company. And I'll give the floor to Raquel.

Thank you for the question. You're reading is correct. We are reinforcing this in a very clear way in the call and the individual conversations of our position, a provision that is more conservative and more aligned with what we believe. So this rhythm has been kept since the beginning of 2023 until the end of '24. There is no type of intention of changing this. And we wanted to show you that with numbers in December of '23, we have 3,780 ended December of '24, [ '25 ], BRL 218 million plus BRL 100 million in the long term. So your reading is correct. We can present an improvement that with a change in the format of the provision. So a provision that is more conservative. If that change hadn't occurred, the consolidated loss ratio would have been lower, but nothing changes because this is effectively what we believe that we should do.

Our next question is from Vinicius Figueiredo from Itau BBA.

I wanted to start my question which is a follow-up of the previous question in regards to the conservative provisions. When we look our model, the biggest difficulty within SulAmérica is to project [indiscernible]. And now looking at the deficits of A&S and the depth the individuals that you publish at SulAmérica, we can observe that we still have a constitution that is strong from [ Piona ], specifically. And -- this helps us understand this very strong conversion of EBITDA to cash. But I wanted to understand now that looking at the number of the intercompany eliminations Rede D'Or being more relevant within SulAmérica. You're improving all the processes, the network being more streamlined. Shouldn't we have that concentration of [ Piona ] decelerating regardless of the conservativeness and eventually, we can see a gap between the consolidated loss ratio, decreasing this gap. Another point that I wanted to try and explore is it's very clear in regards to breakeven of Atlantica D'Or of these hospitals, but I just wanted to understand and to do a cross check with these number of operational beds. When we look, usually, we're talking about greenfield hospitals opening 40, 50 operational beds at the beginning and then getting to the 80 in 12 months. Doesn't make sense here that these hospitals within Atlantica D'Or can reach the 80 beds in less time, just to try and understand what has been observed with Macaé, Alphaville, et cetera.

Thank you, Vinicius. I'm going to start with the end. The answer is yes, of course. We're reaching the breakeven in the second month of operation, we are ramping up the bets quicker. That rule that we've given as the average in the IPO, the opening of 80 beds per year with a greenfield, we're doing that quicker. So we have hospitals with 120 beds at launch and with 90% occupancy, and we are increasing the beds. We have situations such as this. That is a result of this registration of the 2 insurance companies since the beginning and the regions with the lack of -- regions with lack of reference beds in those operations. Now going to the provisions, we are doing the provisions in a way that is conservative that we understand that are adequate, we are still going to have the posture that is as conservative as possible, but within a context that is technical. Raquel can talk about this better than myself, but of course, backed up by the technical group within SulAmérica. Our posture will be as conservative as possible. This is the type of operation that we are well provisioned and it's important for any future isolation. So we're always going to -- within the technical limit and whatever we can make in decisions, we are always going to be as conservative as possible.

And to add something else, Paulo. It's important to highlight that we report in this way with [ Piona ] because of the regulatory issues, but our calculation that involve PSL that is the review for the liquidation. And Vinicius, I give you a lot of comfort in how that it's calculated looking at the lags between occurrences and the payment effectively observing the issue of the claims that are generated within Rede D'Or. The communication is more fluid. So this provision is very much adjusted. So the word conservative is giving you an impression that we are -- we have accesses. No, we are conservative as the insurance activity requires, and we are comfortable looking at all these times, all the lags also the participation of Rede D'Or within this.

Next question is Samuel Alves, BTG Pactual.

Paulo, Raquel, Gavina. 2 questions. First question, once again about operational beds. Paulo has given us a great context on the first quarter and the effects of the delisting, how that was compensated. When you ask about '25. Do you change the -- your mindset for 2025 seeing these listings that happened at the end of the year? Or intuitively, can we think of a ramp-up of operational beds that is very important if you can give us some color on the quantitative, if it can be the double than the ramp-up of beds that we've seen in the last year. And that's the first question. The second question is more about the margin of hospitals for the year. You were commenting on these launches for the hospitals, when it ends up that we have a record -- recent record of launching of hospitals that naturally hurt the margin at the beginning, but Paulo commented that the hospitals within Atlantica D'Or are maturing quicker. So I wanted to understand how do you see the margin of the hospitals in the year? Can you see a growth in margin throughout the year? And once again, if you can share the quantitative number on the budget, that would be great.

Thank you, Samuel. Well, I'm going to start with the operational beds. We do not give the guidance for 2025, the exact number, but we have the expectation that 2025 is going to be very much stronger than 2025. And in the opening of beds, given that we have the ramp-up of several hospitals that we launched, and we have other delistings important that happened, Sao Luiz Campinas, and we have the new Barra D'Or which was transferred from one side to the other, and they're going to do the ramp-up of throughout the year. So we have a good expectation of growth than the last year, even though we don't have the exact number for you. In regards to the margin of the hospitals, we have, obviously, the seasonality natural seasonality, but looking at the close year of 2025, mainly stemming from this expansion that we will have a beds in the dilution and leveraging this will be much more intense in the second quarter than the first quarter. And we hope and when we see space to have an operational leveraging of margin when we look at the full year. But making it clear that this will happen gradually. And naturally, the biggest benefits are in the second quarter because we're going to see a lot of these hospitals operating with margins that are similar or some superior to the average of the company.

Next question. Joseph Giordano from JPMorgan.

Paulo, Otavio, Gavina. I'm going to focus on the hospital side. I wanted to explore one point. The cash generation is very robust given all the investments. But I wanted to explore within this context of delistings, the best sources for payments, how should we think about the math of the receivables from now on? It was stable 120, 122 days. Do you foresee any space to unlock some cash flow in that front?

Hello. Well, this movement that we've done, they protect the quality of our receivables. So we are at ease with the quality of the receivables that we have. Obviously, we have internally when we looked at the average of the company is 122 days. We have hospitals with better performance than others. And we are always looking for things that are within reach and they do not depend on renegotiation. It's gain of efficiency -- internal efficiency. And of course, we have goals and expectations of getting reductions. I wouldn't say that in the consolidated, that is very representative. The expansion that we had in the past of another 7, 8 days, some of them were renegotiations on our model of delivery of accounts you don't deliver the accounts every day, so you deliver it twice a month and this is definitive and I don't have the expectation of this is going to be a daily delivery for these operators. SulAmérica was one of them. So really, there is the expansion in the number of days, which is negotiations that we understood. They were reasonable to do within the important operators for Rede D'Or and we have the opportunity of improving processes and trying to bring some hospitals that have a worse performance than the others, to bring the process that is more efficient. I talked about the implementation of systems in 13 hospitals. These hospitals go within the system. And on average, we can get a cost of days receivable that is less with systems that we know better that are more efficient and then other actions and processes. But I don't want to commit to you with reduction it's an internal goal for us. And for modeling, we are stable in the days receivable, and that's what I would suggest to you.

Next question, Mauricio Cepeda, Morgan Stanley.

Paulo, Raquel, Gavina, Otavio. Two questions. Regarding SulAmérica and regarding the sector of operators. First one, if you can give us a regulatory update on how the sectorial discussions on the set of norms that A&S has suggested at the end of the year, how are these discussions and also in the same front, in a more institutional, how has the sector for the excessive judicialization, if you can give us an update. And the second question looking at the performance of SulAmérica -- and what do you believe that has been the biggest commercial differential? And is that sustainable for the next years because I see that this performance is very good.

Cepeda. So I'm going to start thanking you. We, in fact, agree SulAmérica has positioned ourselves in a very highlighted way in the sector as a whole. Well, we don't have a silver bullet to reduce the claims and the consolidated loss ratio. All the products that were launched in 2023 and '24, this observation by the area of products and opportunities and regions that are not obvious, but to launch a product in a certain region that can add 3,000 lives a year. Well, it's a market. So we've done this deep dive so we can understand the opportunities whatever they are. So our commercial area, I think that deserves a specific talk working with the other areas of the company, we have an internal maxim that we are all commercial regardless of the area that you are. You have the obligation of finding business opportunities, you have the obligation of finding synergies with commercial partners and service providers in general. And I can say that we've seized these opportunities a lot. So it's a bit of everything, and being in the market every day. On the regulatory side and judicialization Cepeda. I believe that we've seen this with concern is not different. The regulatory framework that guides us has -- is from 20 years ago. The intergenerational impact, which is the younger that pay for the older and even the productive age of people when they stop. So our age for pricing, it stops at 59 years of age. Well, 59, 60, 70. There's a lot of people that are productive. So there's a lot of things in the middle that I, as the whole sector supports a more complete review. What we cannot have is to have this done too quickly. So these are revisions and studies that are important that lack an evaluation of regulatory impact, we cannot have another change of rules as it was the limitation of the removal of limitations of the therapies, for example, that wasn't done on an evaluation of previous regulatory impact. And we didn't have a directive of utilization, for example. So we have to study this, but the issues are too big so these issues, they have to be sliced and we have to have time to evaluate each of them with consultancies, entities that we represent the consumer with the judiciary powers and the regulatory agency and so on. So the idea is, yes, we saw it with concern, and we are trying with the agency to keep this dialogue open and getting our standpoint and the sector, and now I'm talking -- I work at FenaSaude and this is a common concern of the sector. We have time and do not take any decision too quickly that might affect the sector very important. So there is co-participation selling online, the technical review of individual plans, a series of things that bring impacts that can be very detrimental to the productive chain as a whole. And absolutely everything that is a part of this, whether it's consumers, operators, they manifest in the same way. We expect to have this agenda open with ANS to work with this in a calmer fashion. Judicialization was and still is a concern, we work -- we defend the active participation and the active consultation of the judges to the technical core systems. So it's difficult for a judge to receive a demand on Friday of a surgery, saying the physician that is an urgent surgery that the person is going to die, and this is a bariatric surgery. So it might be because of the release. But if we had an opinion if the core of technical support was really -- you would know that there isn't an obesity surgery that is urgent. So a lot of these entries could drop and this is regarding the awareness of the beneficiaries and the consumers, 80% of the plants are entrepreneurial plants. And we have an agenda of awareness with HR and entities that represent the executive class of the country.

Next question Ricardo Boiati, Banco Safra. Next one, and then we go back. Next question Leandro Bastos from Citibank.

Just a follow-up on the part of the receivables of the hospitals that you commented. We realized that over the last quarter, there was a drop of the receivables. The -- it was stable. So these are the two questions. First, I understand what was that movement concentrated in the fourth quarter? And how do you see the level of provisioning for this scenario of delisting, what do you see in this part?

This is Otavio. About the provisioning, in general, we think the level of provisioning for the company for the receivables is absolutely comfortable facing the scenario that we have today and the market conditions. Specifically about our the billings claims, we have the cash generating unit looking at the experience over the last 5 years. And after 2 years of the titles expiring, we dropped the accounts receivable against the provision of the claims, one-to-one we are -- it's not that we're not trying to get the values of those expiries over the 2 years. But besides that, at the company's convenience and seeking to keep the effect of [indiscernible] under control and observing the company a number of company number, we also accept the claims, metro billings rejections. And when you accept that I take back 34%, 3.5% of PIS and COFINS. And we do that company by company. So theoretically, companies that are more lucrative, I have more incentives to do this quicker. Companies that are less lucrative, I have lessons in times of doing this quicker. Companies with accumulated a base negative of CSL. I don't have any incentive for this, and I am just limited to the compensation. So in the fourth quarter, we had more claims accepted, however, because of these reasons that I just presented.

Next question, Caio Moscardini, Santander

Question for Paulo. I gave -- when you see the portfolio of hospitals, do you think that the quality of this portfolio is where you would like? Or is there any adjustment, and any listing that should be done over the next months. And a question of SulAmérica. I want to understand if SulAmérica is seizing the new hospitals to launch new products of these regions, Alphaville, Guarulhos, I would like some color on that.

Thank you Caio. Good. Obviously, this is very dynamic. And we are always analyzing and evaluating our relationships and eventually, we might have some delistings. So with the base of contracts and relationships, there is nothing that will bring a lot of concerns once we've overcome this contract with [indiscernible] and that one was the one that we communicated there was a point, a point for us of concern, if we were going to have that continuity along time, we ended up taking this decision at the end of the year and we stopped servicing on February 18. When we look at the base of clients, there's nothing that we have a prediction of discontinuing the relationships are good. They are balanced, but this is very dynamic, and this can change. Should we go -- should we start to have some larger difficulties on the receivables or the relationship with a specific operator. But once again, nothing outside of the expectation. Now I will give the floor to Raquel.

Of course, we are seizing, obviously, this opening of the hospitals from moment 0, the availability in our network activating with sales doing that link with the commercial side that we're having we have regions that maybe we wouldn't have a lot of participation in sales such as Guarulhos. So all of them are available.

The Q&A session is adjourned. We'd like to give the floor to Mr. Paulo Moll for the closing of the session.

Thank you very much to all that took part on our call. We will see you briefly. Thank you.

The Earnings Call for the day is closed. Thank you for your participation. Have a wonderful day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]