To ask questions, click on the Q&A icon at the bottom of the screen and type in your name, company, and language to get online. I will now hand over to CEO Jorge Pinheiro, who will begin the presentation. Jorge, please go ahead.
Hello, good morning everyone. Thank you very much for participating.
[Foreign language] are gathered here. I, Luccas Adib, our CFO, Guilherme, Renato, Gleiciane, Ana Luiza, our IR team, and Cândido Neto to share some details of our results with you. We are concluding a historic period for our company in this cycle that ends on December 31, '24. Almost two years ago, we invited the market and our investors to present a bold plan that involved commercial, technological, corporate initiatives and, mainly, the integration of all acquired entities. Our teams acted with discipline, strength, good sense, and we were able to complete the execution of the entire plan that was well detailed at that time. This closing of the cycle enabled us to start '25 at a very favorable moment for us.
[Foreign language] Senhores participantes, peço que aguardem por gentileza enquanto verificamos.
[Foreign language] O áudio está muito ruim, a gente vai testar aqui para ver se melhora. Testando para ver se o áudio melhora.
[Foreign language] Sim, melhor sim.
[Foreign language] Opa, então vou voltar aqui no início desse parágrafo. Desculpe-me pela questão técnica. Mas eu vim dizendo que estamos.
As I said, we are ending a historic period of our company in the cycle that ends on December 31, '24. Almost two years ago, we invited the market and our investors to present a bold plan that involved initiatives in the operational, commercial, technological, and corporate areas, and above all, the integration of all the acquired entities. I can say that our teams acted with discipline, strength, and common sense, and we were able to finalize the execution of the entire plan, which was well detailed on that date. This closing of the cycle allowed us to start '25 at a very favorable time for us, with integrated and unified operations, with secure and solid controls. At the moment, we are moving our teams, resources, and efforts towards a new agenda with our beneficiaries always at the core of our actions.
We will work on digitalizing our operations, expanding and qualifying our own network, and expanding our activities. Our company has enormous executive capacity, and now, freed from the intense agenda that has consumed us over the last two years, we will be ready for a new cycle, a new journey. Turning now to '24, before we get into the financial highlights, I'd like to give you an overview of the year. It was a period with many challenges and many achievements. At the beginning of the year, the region of Rio Grande do Sul went through a very difficult time with the floods. We set up a crisis committee with daily meetings, and our service network was fully operational. Our teams worked on an extraordinary basis, and we were able to cope and provide care to the affected population, whether they were Hapvida consumers or not.
At the beginning of the year, we went through the biggest dengue epidemic in Brazil history, and during this period, the company invested heavily in opening specialized units and increased the number of medical professionals and beds, fulfilling our mission. The volume of emergency outpatient care and tests related to dengue and other viruses was well above our historical volume for the period. Even so, we managed to control claims. This is the strength of our business model, which is verticalized and integrated. In the second half of the year, the issue of excessive judicialization gained relevance and significant focus of the whole health sector, both public and private. We have created several work fronts for this issue, which will be detailed below. On the achievement side, there were several in '24.
We invested around BRL 300 million in system development, preparing them for the final stages of our integration journey with Notre Dame Intermédica. The final turnaround took place in December '24, and we now have a 100% systemically integrated company with significant gains in customer journey control and full visibility of all our care quality indicators, which are essential to our management. Our observation and control center already monitors all of the more than 100 care quality indicators in real time, monitoring absolutely all of our company units, reaffirming what we have already mentioned in previous quarters, all stages of integrating care units and the operator were conducted diligently, ensuring that the customer's perception of quality of care remained unchanged and thus had no impact on churn.
We also took advantage of this time of full integration of operational and corporate systems to review a series of internal control processes and policies. Several teams worked on this review process to ensure security and control over information since now, with a single standardized system, management can identify distortions more quickly and act more swiftly to correct them, bringing much more security, reliability, and predictability to '25. We invested around BRL 500 million in infrastructure to expand and improve our own network. More than 112,000 sq m were renovated, expanded, or retrofitted. Throughout the year, we inaugurated one hospital to emergency rooms, 32 medical clinics, and three diagnostic and imaging units, totaling 38 medical and hospital units throughout the country. Speaking of our own network, the expansion of our healthcare infrastructure remains a priority for the next two years.
Our verticalization strategy remains strong and should intensify after this intense period of integration. We will continue our process of expanding and upgrading various hospital units throughout Brazil. Last December, we announced our plans to invest around BRL 2 billion in infrastructure, and we are already starting to see this plan materialize. In Manaus, we inaugurated in December the Nilton Lins Hospital, one of the largest in the city. In Fortaleza, in January '25, we inaugurated the Santa Maria Hospital, a super modern and complete hospital. This week, we will reinaugurate Jardim Anália Hospital in the Anália Franco neighborhood here in the capital of São Paulo. The expansion of the Layr Maia Hospital in Belém, Pará, is scheduled for completion in April, and Ariano Suassuna, our reference hospital in Recife, Pernambuco, is very close to its inauguration, scheduled for May.
Our two new hospitals in São Paulo and Rio de Janeiro are well underway at the design stage. Our efforts to continuously improve quality of care remain a priority. When we look at our quality of care indicators, satisfaction rates by operator have been improving consistently. Investments in quality have been perceived by our customers, reflected in a downward trajectory in complaints, which means that our overall complaints index, the consolidated IGR for all of the group's operators, performed better than the sector throughout '24. We had a small increase in complaints in January '25, reflecting the last stage of NDI Saúde Systems turnaround, but this was to be expected for such a large integration. Thanks to the swift action of the integration team, the index has been convergent towards healthier levels since February.
I would like to take this opportunity to thank the commitment of this army of employees and service providers who have been working on the assisted operation process. You are warriors. At the beginning of the 4th quarter, the company's risk rating was upgraded to stable, confirming HAPVIDA's solidity. Shortly afterwards, we announced another capital market-raising operation, our eighth debenture issue, raising BRL 2 billion. This also obtained the highest investment-grade rating, AAA. It's important to mention that our gradual and organic deleveraging process continues with our indicator close to one-time net debt over EBITDA, a very healthy and comfortable level. Not only that, the company ended the year with a strong cash position of around BRL 9 billion, which is important for navigating volatile periods such as the current one.
Delving a little deeper into our financial results on slide two of the presentation, the 4th quarter is marked by a historical claim rate at lower levels due to less volume of utilization when compared to other quarters. In the 4th quarter of '24, the cash loss ratio reached 67.9%, and the audio, once again.
Adentrando pouco mais nos nossos resultados financeiros, no slide que.
Now, talking a little bit about our financial results on slide two of the presentation, the 4th quarter is marked by a historical claim rate at lower levels due to less volume of utilization when compared to other quarters. In the 4th quarter of '24, the cash loss ratio reached 67.9%, the best in the company's history combined. This is a significant improvement of 1.4 percentage points compared to the 4th quarter of '23, and a reduction of 2.5 percentage points compared to the 3rd quarter of '24. For the year, the index was 69.2%, very close to our aspirational levels.
Our own network has already become more representative in the composition of the total cost, not only because of the investment process in our own network that I mentioned, but also as a result of the process oxygenating the beneficiary portfolio, which in new sales receives more and more clients who opt for more vertical plans. An extraordinary factor that occurred in this quarter was the adherence to the agreement for the partial settlement of amounts related to reimbursement to SUS, the Unified Health System, and fines imposed by the National Supplementary Health Agency, ANS, on the company's health operators. In this negotiation, the company obtained a benefit of BRL 470 million. We have a positive outlook for '25. We remain firm in this new cycle with appropriate adjustments and a responsible and sustainable underwriting policy.
Our adjusted EBITDA was just over BRL 1 billion in the three months, an increase of almost 20% compared to the same three months of the previous year. Our adjusted net profit almost doubled in the same comparison. When we look at the closed years, '24 versus '23, our EBITDA grew by almost BRL 1 billion in one year. At the same time, as we had non-recurring effects, which will be detailed later on, we also had pressure on legal contingency expenses, putting pressure on G&A. We will detail the digitalization issue later as well. I can guarantee that the combination of technology allows us to be confident that we are following the right track. We have observed sequential improvements, which combined with contract readjustments will absorb totally these impacts by the end of '25, as we had already disseminated.
Regarding the adjusted net profit, it's grown even more, just over 170%. We are very proud of the results. With the integration process completed, claims under control, leverage at comfortable levels, good cash generation, successive improvements in our customer satisfaction indices, a resumption of organic growth in the number of beneficiaries, we start '25 with some priority agendas. The first one is the expansion and upgrading of our own network, as mentioned earlier. Secondly, we will be very focused on technology, now no longer on implementing systems, but on technological disruption by means of intense use of artificial intelligence. We have set up specific governance to monitor all the results of the AIs that are being worked on internally. We have dozens of projects, many of them being developed internally, as well as others being developed in national and international partnerships for each of the specialties.
Our current focus is on initiatives in the medical care areas, and there are also several projects in the back office. All of them have a high expected impact on improving the services provided, as well as reducing costs and expenses. Finally, we believe that '25 will be a year for capturing synergies, given that we are reviewing all of our performance indicators, now 100% integrated and standardized. Our focus is always on the customers. Our efforts are always aimed at placing our beneficiaries at the heart of the ecosystem to increase satisfaction levels. Our quality indicators now position us at the top of the ranking among the country's major operators. We are at a new moment after all the achievements and changes of recent years, and especially when we look ahead.
That's why we saw the need to adopt a new corporate brand to ensure even more recognition, standardization, and performance of our business. A new brand, but our essence will always be maintained. We remain focused and disciplined, always guided by and confident in our business model with a very long-term vision. The results we are now delivering come from people. That's why I'm grateful for the commitment and dedication of this team of almost 70,000 employees and of our teams of doctors and other service providers who number almost 170,000 people. I'm also grateful for the contribution of our partners, brokers, and suppliers, and for the trust and very present performance of the board of directors and our shareholders. Above all, I'd like to thank our clients, the fundamental reason for our efforts. We reaffirm our commitment to serving Brazilians, taking care of their health with quality and affordability. Luccas, I now turn over to you.
Obrigado, Jorge. Thank you, Jorge. Hello, everyone, and thank you for your participation. It's a great pleasure to be with you for another HAPVIDA's results call. I would like to comment on the restatement of the financial statements, which came out in a material fact last night. In the context of the integration and turnaround of systems accentuated in the last three months of '24, an environment that provides us with a natural improvement of our internal controls based on the standardization of legacy systems and the center ERP, we have comprehensively and pervasively reviewed our processes, teams, governance, and methodologies. In addition, we had the issue of judicialization, which ended up taking us and the sector by surprise, which motivated us to improve and strengthen our processes.
We'll talk more about this later, but after these two events, we've looked more deeply into a series of issues, and the results of this work is what we're presenting here. I highlight and repeat, all the adjustments we identified were proactive. In other words, identified and diagnosed by us and taken to an independent auditor. PwC carried out numerous additional tests and reviews on our financial statements and our controls, identifying the root causes that explain these adjustments and came to the same conclusions as us. In short, we've done and are doing our homework here, including strengthening our controls to prevent further adjustments from becoming necessary in the future. Our conclusions are based on the fact that these adjustments involved improving processes and the control environment, nothing more.
In this regard, we've made the following accounting adjustments and corrections, which are duly reflected in the '24 financial statements that you have had access to, in line with CPC 23, through the restatement of comparative balances as at December 31, '23, and the inclusion of balances prior to '22. The company's shareholders' equity on slide three, we present these adjustments, which are immaterial in terms of balances, reflecting positive adjustments of 1% of equity under IFRS 17, the company's current official GAAP, and negative adjustments of 0.4% of equity under IFRS 4. Now, let's go through the adjustments. In the first one, we wrote off a tax liability calculated as a temporary difference on goodwill, which was allocated to the business combination carried out in 2016 by NDI, and then some liabilities, including tax results that may affect this.
The first group of adjustments amounted to a positive BRL 310 million in equity. In the second bar on the screen, we write off assets and liabilities that are not expected to be realized in the future. We are talking about a write-off of indemnity assets in the context of an arbitration amounting to more than BRL 100 million. Individually, this was the most representative adjustment of all and leaves us in a completely comfortable and 100% provisioned position in the event that we are unsuccessful in this arbitration. We have also written off liabilities related to the share grant plan, return to equity, and an increase in the tax contingency included in the balance sheet of the companies for 2021. These adjustments amounted to less than BRL 224 million, including the BRL 100 million I mentioned from the arbitration process.
In the third group, we have the regularization of balances of judicial blocks and deposits that had already been released by the judicial authorities in previous years, but were still on our balance sheet. Here we have a link with the subject of judicialization, which I will detail later. It amounted to less than BRL 168 million between 2016 and '23. The fourth items, I'm sorry, concerns the correction and standardization of the monetary updating policy for assets and liabilities. The adjustments in this group amounted to less than BRL 100 million. Finally, there are two adjustments that impact the financial statement only under IFRS 17. The first is the recognition of deferred revenue from search and consolidated contacts in '22. Here we had a positive impact of BRL 676 million.
The last item, a correction similar to that of the second group, assets and liabilities not expected to be realized, totaling over BRL 29 million. In turning the page on the subject, we have the internal controls agenda, and I will share our results with you. Moving on to the next slide, slide number four, you can see that revenue totaled BRL 7.5 billion in the 4th quarter of '24 and BRL 29 billion in '24, growth of 7.8% and 5.8% above the 4th quarter of '23 and '23, respectively, benefiting from the growth of the health and dental plan business lines, the result of our successful policy of readjustments and financial balance of contracts. This strategy more than compensated for the reduction in revenue from medical and hospital services and the discontinuation of other businesses in line with other activities.
We have a positive outlook for '25 due to an expectation of average readjustments at lower levels than in '24, increasingly approaching the company's historical levels of readjustments in the pre-pandemic period. In slide five, we see a net growth of 20,000 lives in health insurance beneficiaries in the 4th quarter. In addition, unlike our vision at the beginning of '24, we ended the year with positive net growth. We lost less and gained more lives than we expected, and we believe that '25 will follow the same track. The results are evidenced in the control of the cancellations and new additions. Remember that the 1st quarter is usually a seasonally more challenging quarter, in addition to the natural effects of the turn of systems, but this does not affect our outlook for the year.
In '23, we made significant and necessary changes to correct the levels of claim in our operations, including initiatives to optimize our portfolio and adjust the products we offer. Today, we can divide the regions where we operate into three large groups. The first group of more mature operations, such as the North, Northeast, and Central West regions. They continue to grow sustainably and consistently with strong margins. The second group of acquisitions made by HAPVIDA, which needed to be corrected in recent years, have already stopped losing lives on a net basis, with some already returning to growth. This is the case of Rio de Janeiro and Brasília. Finally, we have the Southeast and South of Brazil, including states such as Rio Grande do Sul, Paraná, Minas Gerais, and São Paulo, mostly NDI operations.
These were the last regions to be adjusted with fiercer competitive environments, and which have suffered from a higher volume of cancellations in recent years. These markets have been performing better quarter after quarter. On the bottom of the page, we can see the evolution of the average ticket up 10.2% between the 4th quarter of '23 and '24. In this graph, we had an increase of 8.4% in the net price, which takes into account the effects of increased verticalization and co-participation in existing contracts. In the second block, MIX, which represents the net difference between the average tickets of incoming contracts, gross sales, and outgoing contracts cancellations, contributed with an increase of 1.8 percentage points, mainly as a result of revisions to the sales tables and the portfolio mix. MIX is no longer detracting from discomposition for the 2nd quarter running.
On the next slide, slide six, we present a cash loss ratio of 76.9% for the quarter, a significant improvement of 140 basis points. The 4th quarter cash loss ratio reflects the segment's utilization levels for four quarters, with reduced demand for services in December due to the end of holidays. On the other hand, throughout the year, the company reinforced its own structure to reduce service times and increase the satisfaction level of its beneficiaries. Investments in quality of care took place all over the country, but especially in São Paulo and Rio de Janeiro after the system changes, with adjustments needed to bring these locations into line with the same models and indicators of the mature regions. In addition, a specific task force was implemented throughout '24, focused on decreasing deadlines for elective surgeries in the metropolitan region of São Paulo.
We're delivering more health to our beneficiaries, and the effects are evident. The NPS and the IGR per operator in turn, we are delivering all of this, putting our beneficiaries at the core of the ecosystem and dropping 270 basis points compared to last year, a robust, consistent, and sustainable improvement in cost efficiency. I'm going to open two parentheses here, going through two specific sessions before going on to the Q&A, because there are two events that we have moved these lines a lot. The first is very exciting news, which is a historic agreement with the federal government that pacifies a substantial part of our SUS reimbursement and ANS fines balance, which are explained in yesterday's material factor. The second is a more in-depth update on digitalization.
On slide seven, regarding the first issue on December 31, we reached good terms to adhere to an agreement for the partial settlement of amounts released to reimbursement to SUS and fines owed to ANS. The conditions proposed by the agreement between us and brokered by the Federal Attorney General's office made it possible to considerably reduce the amounts under discussion. In this historic negotiation, liabilities recorded in the active debt amounting to more than BRL 2.9 billion were resolved for BRL 1.7 billion, with a net impact on our results of BRL 470 million broken down into BRL 145 million in EBITDA and BRL 325 million in the financial result.
On the positive side, BRL 866 million net reversal discount of SUS collections up to December '24 on a liability of BRL 2.5 billion divided into BRL 541 million of SUS provisions cost and BRL 325 million of reversals of fine and interest in the financial results. On the other, we had a majority of BRL 250 million from the net recognition of contingent liabilities and BRL 128 million in income from the surplus balance of the judicial deposit by the government, without the possibility of using it in other processes or entities of the HAPVIDA group. After all the reversals of SUS, an imperative of the rule that anchored the agreement, we still have BRL 187 million cash installment expected to be disbursed in the first half of '25. It has been provisioned.
That's why anyone who accessed the individual operator's data in the ANS B.I. yesterday saw a very strong reversal in PESL- SUS. It wasn't a typo, and it makes perfect sense since we resolved a large part of the liability linked to this provision. We will continue to discuss the issue of SUS since we believe we have a good right regarding the IVR, which increases the amount of reimbursement to SUS by 50%. We will start paying our fines in a more expedited manner with expressive discounts. Our work to reduce the impact of fines on our bottom line has been bearing fruit, and this is reflected in our reduction of more than 40% in NIPs over the course of '24. We will continue steady, fastly on this journey of reducing NIPs for '25 and beyond.
We already have the best among the major operators, but we want to keep improving here. It is also important to mention that ANS and AGU still have internal and operational procedures pending for the final conclusion of the agreement, but these do not have the capacity to modify the conditions that governed the presentation of the memberships in any material way. Slide eight. In December '24, we completed a review of the entire base of judicial deposits and revisited the need for civil provisions. After all the necessary adjustments, the coverage ratio, in other words, provisions divided by blockages, stood at 104% in the 4th quarter of '24. Looking at the pro forma periods now adjusted for both deposits and provisions, we see that the coverage ratio has remained above 100% over the last two years.
We identified a number of cases in which these deposits had already been released to beneficiaries over time. Checking these amounts, which had historically been done manually and individually, case by case, led to this mismatch. We were able to identify the date on which each deposit was released to beneficiaries. We were also able to identify and associate any leftovers from related provisions and write off these balances. Thus, we had an opportunity to recalculate the actual amounts of each disbursement combined with the movement of the corresponding provision balance and determine what the respective balance of the asset and liability accounts should have been in '23 and '24, which is what you see on this slide. I highlight that we've also corrected practices in relation to the monetary restatement of assets and liabilities impacting the accounts cumulatively in the quarter.
In the rescheduled pro forma, we also made the appropriate adjustments to each of the accounts in the period. Thus, in the pro forma, we have a view of the adjusted effect quarter over quarter of how the balance of assets, liabilities, and their transits in the results should have been seen over time. We also rescheduled a pro forma for total contingency expenses as a percentage of revenue at the bottom of the slide. When we look at the 4th quarter of '24, pro forma expenses totaled 3.3% of net revenue, a drop against the 3rd quarter, and a level closer to the expectation of the additional impact of the lawsuit that we shared with you at the end of the 3rd quarter last year. In slide nine, we show you the analysis of deposits and civil provisions pro forma for the second half of '24.
In the first graph above, looking at the deposits, comparing the movement in the 4th quarter of '24 with the 3rd quarter of '24, we see a stability of new deposits net of recoveries of around BRL 200 million, disposals and expenses of BRL 94 million from the 4th quarter '24 itself against BRL 147 million in the 3rd quarter of '24. In the graph below, looking at provisions, we see new provisions of BRL 93 million in the 4th quarter of '24 compared to BRL 151 million in the 3rd quarter of '24, payments of BRL 47 million compared to BRL 56 million in the 3rd quarter, monetary restatement of BRL 12 million. We have stronger control and governance than in the past. We've hired consultants and data scientists, automated processes, and embedded the right technology to build the dashboard of indicators needed to manage this issue more safely.
Today, we have a daily view of every block that arrives and every deposit that leaves. Jorge and I monitor these balances on a daily basis. The working groups we created and discussed with you in the last quarter are gaining traction, and we are increasingly convinced that they will deliver results. In a few weeks, time will release our results for the 4th quarter when we hope to bring you more details. We're struggling, and this means significant advancement. Now, let's turn to SG&A. Slide 10. On cash and selling administrative expenses, we can see that the percentage of administrative expenses in relation to the revenue reached 17.2% impacted by the two issues I just mentioned, of which 5.3% arose from the settlement of contingency liabilities for ANS fines and 1.5% from write-offs of civil judicial deposits for the first nine months of '24. In other words, non-recurring.
Excluding these events, the percentage of administrative expenses over net revenue would have been 10.4%, 0.7 percentage points higher than in the 4th quarter of '23, but 1% lower than in the 3rd quarter of '24, reflecting the impact of judicialization, notably in the last two quarters and the system integration efforts, whose expenses had a seasonal concentration in the 4th quarter with a turnaround in December. I reinforce our confidence that not only will we have room for savings after the assisted operation of the integration is completed, but that we have spent a lot of time in the company's long-term planning, looking at automation initiatives, digitalization, the use of AI, training for back office team, etc. '25 will be the year of HAPVIDA's digital transformation. 2026 will be the year of applied preventive medicine with a lot of embedded technology.
There are so many projects and initiatives that unfortunately do not fit here, but we are going to start populating our communications with tangible elements about this over the next few quarters. Jorge has already given a spoiler about some of these initiatives, and we have also made a bridge to make it easier to understand the breakdown of what impacted contingency expenses. We have one-off events of prior quarters and half of the year. Selling expenses on the right upper corner reached 7.4% in the 4th quarter of '25, 50 basis points higher than in the 3rd quarter of '24 due to the concentration of advertising campaigns. Commissions and PDD expenses have remained fairly stable. In slide 11, our adjusted EBITDA was BRL 1.63 billion in the quarter.
EBITDA for the year was BRL 3.8 billion, an increase of almost 35% compared to '23 due to all the effects that we've seen this far. It's naturally a more pressured result as it reflects the impact of the lawsuits on the result of '24. It's a strong result, which reflects the resilience of our operation and demonstrates that we are on the right track. I also note that our adjusted net income under IFRS 4 went from BRL 680 million in '23 to BRL 1.8 million in '24, up 170% year over year. As with G&A, here we too did the pro forma exercise, excluding the effect of the ANS fines agreement and resource reversal and redistributing the expenditure of BRL 113 million to its proper competences. On slide 12, cash flow.
In '24, we had an increase in net cash of BRL 1.4 billion, of which BRL 1.5 billion was generated as free cash flow and BRL 0.4 billion from financial activities, which was partially consumed by the negative result of BRL 0.5 billion in M&A. In the free cash flow, BRL 163 million from the resource agreement and ANS fines, which have a positive effect on EBITDA, but no cash effect. BRL 255 million resource judicial deposit necessary for the company to carry out its judicial defense without the incidence of late payment fines and BRL 123 million in net taxes to be recovered and collected due to the mismatch between calculation and disbursement. BRL 115 million in trade receivables, and we also had BRL 251 million in income tax and Social Security company contributions. To help you understand, we've provided this graph below to help you reconcile cash tax with current tax.
Throughout the year, the company makes monthly payments under the real annual profit system as well as withholding taxes. The company reverts a part of the current tax and is credited with BRL 202 million disbursed in advance throughout the year, which will be offset during '25. Throughout '25, to cushion the cash rate, we expect to make monthly JCPs to mitigate the impact of the charge on tax compensation, which should reduce the volatility of the effect rate in a high-Selic scenario. CapEx for the year was BRL 835 million. This figure includes the company's disbursement of BRL 158 million for the purchase of property for one of our new hospitals in São Paulo. As we have signed BTS memorandums of understanding for this hospital, we should be reimbursed this amount throughout the year. We generated operating cash of BRL 2.6 billion, or 68.6%. We want to continue improving.
In slide 13, M&A activities consumed around BRL 550 million in '24, BRL 270 million from the release of the retained portion of the acquisition of Grupo São Francisco, BRL 180 million corresponding to the agreement with the seller of Notre Dame Intermédica, an operation that took place in 2014, and BRL 109 million in amortization of retained portions of other acquisitions. As to financial activities, we had a generation of BRL 366 million, BRL 78 million in financial income yielding 9.5% on the company's average cash, slightly below the CDI rate for the period, mainly due to the mark-to-market of some assets in our funds, and BRL 222 million from share buybacks. We ended the year with a net debt of 1.06 times the EBITDA, a reduction since the end of '23, and a slight increase on the previous quarter due to the share buyback and other factors mentioned above.
Além da redução da dívida líquida, também melhoramos nosso perfil de endividamento. In addition to the net debt, we also improved our debt profile, going from a weighted cost of CDI plus 1.56% at the end of '23 to CDI plus 1.36% at the end of '24, moving from a duration of 3.4 years to 3.3 years in '24. We're still evaluating opportunities to buy back our bonds. We've generated more cash. We have leveraged the company and resumed a stronger pace with adequate methodologies. We have grown the number of lives in a very challenging year. We concluded the consolidation and also an important agreement involving resource and ANS fines. In short, many victories. Once again, thank you for your patience. It wasn't a trivial result for the company. We had specific explanations and topics to deal with, and I hope that these details have been useful to you.
We now open the floor for the Q&A session. Thank you very much.
We're now going to start the Q&A session for investors and analysts. When you are announced, a prompt to activate your microphone will appear on the screen, and then you must activate your microphone to ask questions. We kindly ask that you ask a maximum of two questions per analyst and that you ask them all at once. T he first question is from Vinícius Frachia, Analyst Itaú.
Good morning, everyone, and thank you for taking my question. I would like to start with slide number nine. We can see on the graph above that expenses and deposits in the 4th quarter were less than in the 3rd quarter. It was 177, and now it was 94.
How much of this reduction has to do with seasonality or any external facts, and what should be the company after the agreements? This question here is the BRL 200 million that came in the 3rd quarter and what came in the 4th quarter. When you look at what in fact was taken into account, is it lower? Because we have this time mismatch, which makes it difficult to conciliate things. But these BRL 200 million, will they become an expense in '25? Another question about slide eight. You mentioned the pro forma contingencies of 3.3% of the revenue. With all of the blocks you have for '25, along with the internalization of some of the processes that would no longer be in contingencies, the final impact on the margin regarding judicialization for '25, would it be 3.3% of the revenue already taking it into account? Thank you very much.
Vinícius, thank you very much for your questions. I will start answering then turn over to Luccas. In the 4th quarter, we can already see some good news. When you invited us to talk about this, we showed you that the work groups were already providing results. The first ones were about the blocks that had already been made. Once we identify a block, even if we do it right, but evaluating that the procedure would have a lower cost when performed at our own network, because we already have fixed expenses. When done in our own network, the cost would be much lower than when we pay for an accredited network. This group started working very actively around October and November and gained impact in this period.
In case the company can have all of these blocks referring patients to its own network, we will be able and will be able. We already have these gains reflected in the 4th quarter in expenses with less expenses. When we have a block and we issue the form, this has to do with costs which are reflected on the costs for the 4th quarter. The expenses that we avoided were already reflected on the 4th quarter.
Vinícius, very good question, and thank you for the opportunity to explain this topic. When we look at the 4th quarter, when we make the pro forma adjustments I talked about, we are 1.5% above the average. When we compare to what we'd seen in '24, why are we still in doubt?
Because in the 3rd quarter, we'd already told you that we had a provision for the 3rd quarter and 4th quarter, but we can see that when I make the pro forma adjustments, we have 37 in contingency and now it is 249. The 3rd quarter was a little bit worse. The 4th quarter, a little bit better. We do not expect this to be maintained like this for contingency over net revenue. Today, when you look at the 4th quarter, this is what the 1.5% means. Okay, so it's clear. As we can see, all of the measures of the work group, along with the internalization of the agreement, which may render new deposits to accelerate. The new deposits, at the end of the day, we will have this figure going down from this 3.3%. I just want to clarify this. Yes, perfect.
For this perspective, this is what we have to do. We had a first group started in November. We wanted to guarantee the expenses for the blockade, and then we did not want that amount to be released to the counterpart. We captured some of this in the 4th quarter, and then we had another group where we tried to hold this blockade, and the contribution of new blocks is flat because we did not have a lot of action, but we will see it for the first and 2nd quarters of '25. In the 4th quarter, we already had the impact of the activities carried out by the work group. If we are successful throughout the year, both in terms of expenses and the control of new blocks, this margin is likely to go down, but we have to wait and see. It is very clear.
Thank you, Dr.
Jorge and Luccas.
Our next question is for Maurício. Maurício, please proceed.
Good morning, Dr. Jorge and Luccas. Thank you for the opportunities. Regarding the judicialization, I would like to remind you that this is a lot stronger and regulated in terms of claims control. What is it, or how is it going to work this year? I see that you are very optimistic that the year is going to be good. I wanted to better understand what you see in this competitive environment, what are the key success factors for this year, and all of the key factors leading to business success this year. Also, going back to judicialization, now that you have evolved a lot with legal support, will it be possible for you to provide more frequent monitoring of what's going on to the market?
The nature of these litigations is more related to patient care. Could you classify it as claim? How would you align these claims with ANS GAAP?
Cepeda, thank you very much for your questions. We are very enthusiastic for '25. '24 was a very intense period looking at the company internally. In the second half, we reviewed portfolios. We had a process that involved a lot of our teams, including the business team and after sales, and we have a team which is visiting clients. Another one was reviewing processes with us, making system implementation tests with information entered in the database. As we concluded this task and released our teams, I would say that over 30% of our time was dedicated to this judicialization process, given its size.
Now that they are released, they will be able to help us have a better performance, including the new products that were launched. At the end of April, it will be running throughout Brazil with more accessible results. We also had reviews in half of our base and HMO, also the PPO cap. We are developing a series of new platforms and technologies for online sales. We are increasing the volume of online sales, and in combination with that, with more capabilities in our cost structure and good control of claims, we will be more competitive. This indicates that we're going to have a profitable year, except for the 3rd quarter, because we know that it's never a very strong one. We are very positive looking at the 2nd quarter on, and this is what our sales pipeline indicates. Corporate is doing well.
Cancellations are at the lowest historical levels at the company retail. If it works as we expect, we will have a very successful year.
Cepeda, thank you for your question. I will start with the most difficult one because it's always better to start with the most difficult one. The communication strategy and a more frequent one, I think it's important for us to have an idea of how incipient the discussion is, not only for the section, but also for the company, and the impact of what we're doing internally will be captured during a certain period of time. Jorge talked about November, which is very recent. We were able to note that we needed to have intelligence, not only from a legal point of view, but also statistic data for us to be capable of negotiating.
The actions we've taken throughout the 4th quarter can be seen now in the 1st quarter of '25. As we evolve and as we are more confident about this, we can discuss a better communication strategy. We understand that this is one of the main lines followed by the market, and it's right. As we can show you that it's been controlled, it's been addressed properly, and looking ahead, it is stable, we will not have to be talking about these issues. I think that this is something that, according to logic, should end in the near future. We are spending a lot of energy to deal with this. Once we conclude these activities, it will no longer be necessary, and then we will be able to evaluate other types of communication. I'm talking to you aloud.
I haven't discussed it with my boss, but this is the concept that makes sense. Regarding ANS, how can we communicate this better, and what is the discussion like? Historically, the company never included the discussion that included amount spent with coverage. We commented this with you, and it's now part of our DNA. As of January 1, '25, we reallocate this part of judicialization expenses, which will move to cost. Because it's clear expense related to the coverage of the company, it will be included in cost, and this will be considered as a claim, be it in our own network or in the accredited network. We are well prepared so that we can work with this, and we will send it to ANS and also take into account our corporate readjustments. This will be part of the company expenses, which will help us for the future years.
These are amounts that will be included in costs as of '25. I hope it was clear.
Yes, it was very clear. Thank you very much, Jorge and Luccas.
Our next question is from Leandro Bastos, Citi Analyst. Please, Leandro, proceed.
Good morning, Dr. Jorge and Luccas. Thank you very much. I have two questions. The first one regarding the deposits linking to the comment made that in '25, you've already seen a more dynamic understanding of these new deposits. I wanted to understand whether there is any seasonality component that we should pay attention to, or whether perhaps this is a better reference for us to consider '25. Also, could you comment a little about the new deposits in the second half of '24? There were over BRL 700 million of net deposits. Could you give us an idea for '25 so that we can reconciliate?
Also on this topic, I would like to ask about the integration of NDI. You commented that you are stabilizing the system. I wanted to understand how this is going and when you expect to end it so that we can work in a more integrated manner as a whole. Thank you very much.
Thank you for your questions, Leandro. Regarding seasonality, if you think that they are going to benefit the period, the nature of these demands or help the vacation time by the judiciary system not affect us? What eventually reduces it are procedures that have a less important volume in this type of demand. We have, for example, if we have an emergency procedure when the patient has not gone through its time to be able to use it, these issues are solved faster. Regarding the integration, we're doing well.
This is the largest and most successful integration of all we've had. In the past years, we have been trying to develop new functionalities in the system to meet the demand. We expect that by the end of March, the vast majority of the activities will be concluded, and we will have residual issues to tackle in the 2nd quarter, but they will not have a significant impact. We are really very close to overcoming this phase and move ahead. I cannot tell you with words how this enables us to look ahead. The quality of the information we have here will allow us to be more efficient on the day-to-day. Luccas will answer your second question, Leandro.
Hello, Leandro. I will talk to you about the composition of new net deposits. In the 2nd quarter, we had additional BRL 152 million, which resulted from this methodology.
In the 2nd quarter, in the 1st quarter, it was around BRL 111 million, and it escalated throughout the year.
That's very clear. Thank you very much.
Our next question is from Fabio Isaias da Silva , Southside Analyst. Fabio, please proceed.
Hello, good morning, everyone. Thank you for the opportunity to ask questions. I have two. The first one is regarding the deposits. You mentioned that in the 4th quarter, you converged to a 100% ratio for deposits and provision. I wanted to better understand how we should consider this dynamic from now on and if it will remain at this level.
My question, because you seem very enthusiastic with integration, and it indeed seems to be very important for the company, but I wanted to know if you're still running with assisted operations or if this will end by the end of March, or if you have any costs for the system and the gains in efficiency with this operation, how and how much will it be?
Thank you, Fabio, for the excellent questions. I will start with the integration. We no longer have legacy systems. They're all running in our systems: invoicing, patient care, health center, call center. Everything is already running in the new system. We are still working on assisted operations, but only for a very few weeks. I now turn over to Luccas.
Thank you for your question, Fabio. We had a technical problem with the microphone.
When we were in the 3rd quarter and we recounted that 96, and then we analyzed it, our vision was that looking to our historical series. We can hear. The sound is not excellent, but we can hear. In our vision, looking ahead, I would like to remind you that we should evaluate it with our lawyers, be them our internal lawyers or hired lawyers. This is done to analyze the evolution curve of the results. If we have any adjustments that are required, what I can tell you is that we've made a series of tests. The provisions comply with what we've seen and our risk perception and our provisions of liabilities. The idea is that we will not go under 100%.
Excellent. Thank you very much.
The Q&A session is now over.
With this, the event for the 4th quarter of '24 for Hapvida is now over. The IR area remains available to eventual questions. Temos mais uma pergunta. I'm sorry, I've received new instructions from the company, and we will have one more question. I'm sorry. The Q&A session of Hapvida for the 4th quarter is now over. The IR team remains available for eventual questions. I thank you all for your participation.