Bradsaúde S.A. (SAUD3) Earnings Call Transcript

Good morning, everyone. We are here at the Bradsaude Studios at Paulista Avenue today, August 4, 2026, to show you the results of the second quarter of 2026. I'd like to start off with our highlights. During this period, we've achieved 13.6 million members, 99,000 net additions in health and 130,000 net additions in dental. Our loss ratio last 12 months has remained stable at 83.3%. Our revenues have grown 10.8%, achieving BRL 13.9 billion. Net income of BRL 1.1 billion increased 24.8% in the period. Our ROAE increased 4 percentage points 25.8% in the period. Atlantica Hospitals is the highlight. The net income grew 312% at BRL 64 million for the period. Over to Pacheco. He'll show you the figures for this quarter.

Thank you, Marinelli. Good morning, everyone. This is the first release of Bradsaude. As you may remember, the company was created as of May 1, 2026. So I'll begin showing you the consolidated of Bradsaude. And after that, we will explore the results of the medical and hospital plans at Bradesco Saude and afterwards, Odontoprev and finally, Atlantica Hospitals. So let's begin. As Marinelli mentioned, the increase of new clients was very significant in the quarter and the half year in the last 12 months. We have a consolidated portfolio of 13.6 million members, and significant increase of 229,000 members and an organic increase of 855,000 members as of mid last year. So this is an unprecedented increase in the history of the company and the portfolio. I'd like to highlight the quality of the growth. So 1/3 of the net adds was originated in the SME segment, small and midsized companies. This is a very important addressable market that provides significant returns in health care and dental. The company has exclusive bank channels for distribution, and that has resulted in 104,000 new members in the last 12 months in health and 184,000 new members in the dental area for the same period. Revenues were BRL 54 billion in the last 12 months. I'd like to remind you of the first release at the end of February, where we highlighted a level of BRL 52 billion. The increase was double digit, not only in the half year assessment, but also the quarterly assessment, as you can see. The loss ratio remains stable, not only in the last 12 months, but also in the half year. Longer periods always favor an understanding of the dynamic of the loss ratio. Now moving on to the bottom line of Bradsaude consolidated results of BRL 4.2 billion last 12 months with a significant increase of 28% in the first quarter and -- first half year, excuse me, and 25% in the quarter. Now we're releasing consolidated data, and we go on to specific data of each of the business units. I'd like to start off with Bradesco Saude. At Bradesco Saude, there is clearly a transition. So a cleansing, so to speak, of the portfolio from '22 to '24, we go from 4 million to 3.8 million members. Since mid last year, a gradual recovery, which is recurring, specifically with the quality of having these new members and new contracts with disciplined in underwriting and a balance in the new corporate contracts and contracts of the SMEs. Net adds in this chart is very interesting. As you can see, a negative level in '23 and '24 with different kind of performance moving forward with new members and new clients in the last 12-month period up to June. In Bradesco Saude premiums, we have an average annual growth since 2022 of over 12% per year. You can see the same rate in the first half year and 2 digits in the first quarter of this first year of the company, achieving BRL 13 billion. Now moving on to net income at Bradesco Saude at BRL 3.5 billion last 12 months. You can see that this level is very different than what we saw in the past in 2023 and 2024. And for the half year, 33% more and for the quarter, 37% greater year-over-year. Now we will move on to Odontoprev data. As you well know, Odontoprev is the leader in dental plans in Brazil since 1998. The total number of members achieved 9.5 billion members in June with a significant growth in the corporate portfolio and SMEs. Company revenue as the market leader is approximately BRL 2.5 billion, a growth in the half year and also in the quarterly assessment. When we analyze the loss ratio, you can see that the pattern of loss ratio, specifically in Odontoprev compared to the health care market is very unique, less than half than what we see in medical and hospital plans. That enables the company as it has a technological platform to have superior returns compared to the industry. In net income, the net margin compared to revenue is over 20% per year. And given its scale and technological platform that is the reason. We had positive nonrecurring effects that increased the profitability to BRL 505 million and which remains year after year, always over BRL 500 million. Now moving on to Atlantica Hospitals. You can see a constant and continuous evolution up to 2030 with the projects that are already effective. We had approximately 1,800 beds in 2024. At 2026, we're at 2,900. And now we've inaugurated a new equipment in Bauru in the state of Sao Paulo and in Sao Conrado and Rio de Janeiro that should be ready by 2030. With that, an evolution of the total capacity of beds for the company will achieve over 4,000 beds. This is a very important slide, which Marinelli mentioned. So you can see that as of the second quarter of last year became positive and now reaching different levels. So looking at the second quarter of 2026, the net income of Atlantica is fourfold higher. With that, it accounts for a higher percentage of the consolidated data of Bradsaude, and that's we're demonstrating here. It was 2% and now BRL 64 million accounts for 6% of the consolidated figures of Bradsaude. So those are the main comments for this first release of Bradsaude. We presented original and new data to all of you breaking down the medical and hospital data and separating that from dental data as provided in public data to facilitate your analysis, making data available that will be able for you to follow the business in upcoming years. So I'd like to reiterate a consolidated portfolio of almost 14 billion members, 2-digit growth in revenues, net income that has benefited from a number of efficiencies and stability in the cost structure and finally, leading to significant reinsurance and even sponsored by the bigger and better performance of Atlantica Hospitals. Thank you for your attention. Let's move on to the Q&A session. Thank you very much.

Good morning, everyone. Once again, now we will open the Q&A session. From now on, we're also counting on the presence of Vinicius Cruz, CFO of Bradesco Seguros and CFO of Bradsaude. Our first question is from Leandro Bastos from Citibank.

I have 2 on our side. The first one to explore the loss ratio in the past quarter, you brought in a message of being conservative. And you can see that in the quarter, the loss ratio was actually a bit stable year-over-year. So how could you comment in the utilization and considering the base of the fourth quarter that's usually more accessible? Do you remain the vision of being conservative? Or do you see any improvements in the loss ratio for the rest of the year if you consider the second half of the year? That's the first point. Second point, talking about the commercial side. The net adds robustness is very clear. And as a result of that, we see an increment in the sales expenses, so a 2 in 1. So the CAC idea and commissioning, so do you -- could you explain your direction of the sales expenses moving forward?

Thank you, Leandro, for participating. Thank you for your question. Without a doubt, we do have a movement that was very important in the first quarter. And obviously, in many of our conversations, we're surprised about the loss ratio, and we mentioned caution. So mentioning caution doesn't mean that we're being conservative. It's that we're in the industry for a long time. We understand the dynamic of this industry, and we have the granular information. So we understand that we have to understand that not as just 1 quarter, but we have to consider that in the mid and long term. That's why we mentioned caution, and we gave that adequate message in the first quarter, as you see. Now -- so it's very important, and we've been highlighting the fact that we have to look at the loss ratio in the year, the stability, as we mentioned. And Pacheco really showed that in his presentation as the company went to another level of loss ratio. It reorganized itself in the post-pandemic period to build the claims, be it through use, frequency and actions that we've taken as well as the reorganization in the strategy to consider growth again. So Pacheco showed us a drop in the number of members, and that's something that has to be controlled. So you maintain the good contracts, you maintain contracts that you can bring on better profitability. And as time goes by, you bring in contracts with very good underwriting discipline, be it through the point of view of new contracts or the renewal of these contracts at the right price. So that movement that's being done now and the loss ratio, in our opinion, is stable or relatively stable. At this time, we're looking at 2026, and we see the comfort in explaining to you that we do have relative stability. But the quality that we are building is very important. It has to be highlighted, be it where it's being built. So in the segment of SMEs, it's very important for us and has been very strong in building these new contracts, but maintaining the underwriting discipline and also including new products that has a differentiated claims mix. But obviously, when you go into certain markets, you want to add more members, not only in health, but also in dental. So we go in being more competitive and turning that lower loss ratio at some point with better price competitiveness at some point. And about what you mentioned in sales expenses, that's what is reflecting. It's the dynamic of our industry. So as you have stronger growth in the number of members in a total market where the total number of members does not grow, it's a moment that you have -- where you will have sales expenses that are higher at first. So that has to do with our strategy. And as we mentioned in the first quarter, there was certain caution regarding that number, even though the number is stable for the quarter and has a slight improvement when we consider the whole year. But the growth that we've seen that we had not seen in previous periods is new growth, so to speak, in terms of intensity will naturally reflect on the sales expenses that we have. That's part of the strategy that is being executed with discipline and expected according to what we have in terms of growth diversity of the organization as well as what we had mentioned before that Atlantica Hospitals, would have a higher share in the makeup of our results. And when I talk about competitiveness, I'd like to say that 2/3 of our results are coming from the industrial results. So the financial result is part of a company with this type of characteristic, and it's well desired in this type of company where we take advantage of moments where we can have a unique return in finance. That gives us robustness and quality in our results and the reliability to move on into the mid and long term.

Next question is from Mauricio Cepeda from Morgan Stanley.

Marinelli, Pacheco, I have 2 questions with pretty much the same theme about the cushions moving forward for the business. So first, the court orders in the industry. Could you give us an update on that, especially in SMEs? And also how it's a bit higher than last year. Would you be considering a transition for hospitals to absorb the impacts of the court orders? And the second one question also has to do with the cushions of transition and a bit with the previous question. In a case where we can go into lower interest rates, would you think in sales side so that the premium can absorb the lower financial results and offsetting that in operations? And I believe that, that's a topic because of the carryover of the portfolios and commercial decisions currently.

Thank you, Cepeda, for your question. First point, we obviously would say that court orders aren't desirable in the industry. We would like to have better predictability, but it is a reality in our industry, not just in health care, but in many industries in Brazil, an intense use of the judicial branch to request and meet some demands that are not part of the contract. So there is the clarity of complying with our contracts. But when we consider that under the point of view of loss ratio, at this time, everything that goes -- comes through into court orders, if they come in, we are going to comply with that, and that's in the loss ratio automatically. And that's in what we have already presented. We don't see any major elements or actions that could change in structural terms because of the court orders. So in our loss ratios, we have our thesis for defense and that build that based on the knowledge that was acquired not only by us, but also by the other HMOs. We're very connected to the industry. And structurally, this is part of the court orders, and we don't see anything that would currently change that structurally. About lower interest rates, without a doubt, that's something that we should move towards. It's not something that we are really that concerned because at the end of the day, we have a large and diversified portfolio of reserves, and we also believe that's part of the result. But without the industrial result, they wouldn't be able to operate the company. You can see our combined index of the previous years and the more recent ones. So clearly, we do have the possibility of generating results based on the industrial component that we have. As Bradsaude has many different sources currently and obviously expressed in profitability, there's still a significant part coming in from Bradesco Saude and Odontoprev. That's why our growth movement is so important. We've made that in a structured manner, strategic manner with a lot of underwriting discipline. And at first, that means being more competitive and promotions in terms of price, bring in portfolios and believe in the characteristic that we have in SME and in corporate that we have or have a high maintenance of our portfolios, bring in those members, replenish the portfolios and gain more robustness, especially by negotiating with our providers considering the number of members that we have. And through a brand that's desired and respected, we built something where our clients want to stay. So that would be future profits. So the tripod growth, profit and loss ratio is something you always want to maximize. But the main point is the quality of how these elements are working together. So we're working with stability, relative stability in loss ratio, stability of profit and growing our members. So that's the equation that's part of our strategy in the mid and long term.

Next question is from Samuel Alves from BTG Pactual.

I would like to go back to the loss ratio. You mentioned maintaining that. So I'd like to hear about the seasonality of the ordinary loss ratio for the third quarter. Should we expect a worsening of the loss ratio in the third quarter and then an improvement -- a significant improvement in the fourth quarter, considering that flat dynamic that you mentioned about loss ratio? That's the first question. And second question is, could you mention the recurring levels of payout. So there was a distribution in the second quarter, so could we consider that quarterly? And what do you expect in a reduction of taxes in the recurring level?

Thank you, Samuel. I'll talk about loss ratio and then Vinicius and Pacheco can talk about the payout of interest on equity. So when we look at 2025, 2025 is a year where we have a loss -- had a loss ratio that's not comparable to any other years. It was much better than the previous years. So you'll see that there's a trend during the year. If you look at a longer historical series, you'll see that loss ratio in the third quarter is usually higher than other quarters. So since we don't give guidance regarding the loss ratio, but we are talking about a relative stability in the year. Just compare last year with this year, and you can see that eventually, there is a trend because of the third and fourth quarter loss ratio. But like I said, relative stability, a year that had the lowest stability -- loss ratio in history. And that already says a lot about how we see loss ratio for the rest of the year.

Exactly, Marinelli. About the payout, it's worth noting that we closed the operation on April 30. And in first half closing, we had the first announcement of the distribution of interest on equity to shareholders. Obviously, it starts at a lower base than the full base that we will capture during the year, and we will recurrently revisit the payout. First of all, we will follow our policy of 50% of the result, which has not changed and is the same as before the transaction with Odontoprev and looking at our funds to see that we can recurrently use this mechanism has already had a significant improvement considering the rate in the period, and we will continue to do that as time goes by compared to projects. So the first signal in such a short period of time of that implementation of the company is to signal the discipline that we will have for the results and distribution to our shareholders.

Next question is from Gustavo Miele from Goldman Sachs.

I'd like to explore 2 points as well. First of all, your ticket. When we look at the health ticket, removing the managed product, we have a modest growth year-over-year of 2%. So I believe that they may be hiding different dynamics of mixes and portfolio price adjustments. So I'd like to understand a little better how that 2% growth breaks down between portfolio price increases that you have in existing contracts? And what is an impact of more efficient products, but cheaper products. So if you can give us an order of magnitude there, that would help a lot to model the future dynamic of your tickets for the insurer. That's the first point. Second point is I'd like to hear a little bit about the competitive scenario, especially in Sao Paulo. We see that there's a growing trend here, as you highlighted in the beginning, it's very strong. Is that just a result of a stronger micro agenda in the growth and/or do you see a competitive scenario in Sao Paulo that's a bit more -- with a bit more reasoning, less aggressive maybe and that may have helped? Those are the 2 points.

Thank you for your question, Gustavo. The 2 questions that you asked are very much connected because at the end of the day, competitiveness, it's price, right. Be it price replenishment or new prices, new products. So that directly impacts the first item that you mentioned, which is the health care ticket of the managed contracts. So the growth that we've seen year-over-year in the managed contracts has to do with promotions and the launch of new products in many different markets, and is also connected to the growth that we've seen. So it's important that when you come from a moment where we've reorganized the portfolio to better profitability and lower loss ratios, we would reorganize the investment coming from lower loss ratio into lower competitiveness. Otherwise, we wouldn't grow. So it's a trend. Profit, loss ratio and portfolio growth. We've delivered growth that has been very significant in terms of members in health. And across time, with a unique product that is desired and that we know that we have the ability of having churn rates that's under the market average, be it in corporate or in SMEs and that we have structural work in-house to reduce that we would have a better profitability moving forward. So replenishing competitiveness, bringing in the growth and improving the results in the future, that's what we're looking for at this time. So about the competitiveness, and that's very much related, we have significant competitiveness, especially in SMEs. We've talked a lot about products, promotions, new markets, regional products even that we've been launching. And when we talk about corporate, and this is a bit different than what we've seen before. We've seen a lack of rationality in some decisions. So our growth brings in a movement to the market, to the industry. And sometimes, we face some offers that we do not see any rationality in that or profitability in maintaining that portfolio considering what we're being exposed to what the market has to offer. So it's very simple. We're very disciplined in that sense. The portfolio has to be profitable. It's no use to have a customer that will stay with us for another year. And then in the future, they'll have a huge problem with loss ratio in the portfolio. So we've been highly disciplined in that. We're guaranteeing the profitability of the portfolios and working stronger on that. So we've seen that happen intensely last year and less intense. And afterwards, in the past months, considering our growth, it seems like we have a more aggressive competitive scenario, as you mentioned. And we are privileging the discipline of underwriting and price reorganization in our portfolio.

Next question is from Joseph Giordano from JPMorgan.

I'd like to explore 2 points. One, top line about competitiveness. I'd like to explore the opportunities that you have in regional plans. So what's the mix between the national and regional plan sales and the opportunities that you have considering the large Bradesco base? And second, expenses. So now the company is integrated, I'd like to know what we could see in synergies and inform the main areas of integration, for instance. And considering that, when you look at Odontoprev in expenses, it's not an operation where there are many mistakes. And now when we look at the bottom line, it's much beyond what was expected. Did you have any one-off expenses that were relevant in terms of maybe carryover in the transaction that has affected the results in the quarter?