After a chaotic day in the health sector — with Dasa and Oncoclínicas falling around 13% each — Hapvida delivered a relief: a fourth quarter slightly above sellside projections.
The accident rate — the main indicator that the market has looked at in recent quarters — fell to 69.3%, the lowest number since the merger of Hapvida with Notredame Intermédica and the first time that the company has surpassed the 70% mark.
This number — which was in line with analysts’ projections — compares to 72.9% in the fourth quarter of 2022 and 71.9% in the third quarter of last year.
Adjusted EBITDA exceeded market consensus by 6%, with Hapvida delivering R$950 million – also the best number since the merger; the market projected R$898 million.
CEO Jorge Pinheiro told Brazil Journal that this “is not an isolated tri. If you look at the sequence, the company has been improving its profitability level three by three, at the same time that we continue to invest in expanding the network.”
According to Jorge, the result shows that “we have not yet reached the historic pre-pandemic margins, but we are on the right path.”
Before Covid, Hapvida ran with an EBITDA margin of around 15%. In the fourth quarter, the margin was 13.7%, compared to 9.2% in the same period of the previous year.
The CEO also highlighted the company’s leverage, which fell to 1.38x EBITDA in the fourth quarter, compared to 1.58x in the immediately previous quarter.
A year ago, leverage was 2.45x. To deal with this, the company raised R$2.3 billion between a capital increase and a sale leaseback operation.
The improvement in accident rates at Hapvida – the highlight of today’s results – is the result of a series of measures that the company adopted over the last year.
The health operator made adjustments that reached 15% in some quarters, but also worked on the integration of recently acquired assets — with the implementation of systems and standardization of operations — and on the unification of some areas nationally, such as claims and hospitals.
Still, the CEO said he sees more room for the accident rate to fall throughout the year.
“We are still completing the last phase of the GNDI integration, in São Paulo, which began in March, and we have some readjustments to make this year, albeit at smaller levels,” he said.
Hapvida also had strong cash generation in the fourth quarter, with a conversion of EBITDA to cash — excluding thirteenth salaries — of 63%, in line with the historical average. The CEO said that this cash generation has helped with organic deleveraging.
On the negative side, the operator continued to record net losses of lives, with a reduction of 61 thousand beneficiaries in the fourth quarter and 380 thousand in the year. The company has 8.7 million health and 7 million dental policyholders.
Jorge said that this dynamic of net loss of life should continue in the first and second quarters, as the company continues to review its portfolio.
From the third quarter onwards, however, he thinks the company should grow again.
“We have a very strong and dynamic gross sales generation, which gives us confidence that when the portfolio review is over we will return to growth,” said the CEO.
In recent quarters, Hapvida has prioritized sales in regions where it has its own strong network or plans to invest in one. “We have 2,500 of our own beds idle. We are directing commercial efforts towards these regions.”
Hapvida’s shares are up 33% in the last 12 months. The company is worth R$28 billion on B3.
The balance sheet is still being reported under IFRS-4 accounting rules. Like all other insurers, Hapvida intended to publish this quarter under IFRS-17 – the new rule for reporting insurance contracts – but the work will only be completed in the coming weeks.
CFO Luccas Adib said the delay is due to the complexity of consolidating data from the 50 acquisitions the company has made in the last five years (many using legacy systems); because Hapvida is not a pure insurance company, the type of company for which the rule was created; and the fact that most of Hapvida’s claims are on its own network, which creates additional complexity.
“We are working from 7 to midnight, Monday to Monday. We killed Carnival and we will continue without a break until the work is completed.”
Pedro Arbex