Earnings Call: Q2 2025

Aug 27, 2025

Summary

Consolidated Q2 profit rose 195% YoY to CLP 74.5 billion as markets rebounded and financial subsidiaries recovered. Healthcare revenue and EBITDA grew, while elevated credit provisions and Vida Cámara claims costs remained pressures.

Hello, everyone, and thank you for joining ILC's second quarter 2025 results conference call. I'm with Juan Pablo Undurraga, CFO of ILC, and Francisca Arroyo, investor relations. Before we begin, I will invite everyone to download from our website a presentation prepared especially for this call. This document provides an overview of key events and achievements for the period, as well as the financial performance and context of each of our businesses. Today's call will be divided in five blocks. First, we'll review the economic and industry context for the period, followed by ILC's consolidated results for second quarter 2025. Next, we will analyze our subsidiaries' financial performance and key highlights for the period. After that, we will provide an update on our financial position, and finally, we will conclude with a Q&A section. Now, I will hand the call over to Juan Pablo Undurraga, CFO of ILC, who will review the period context, ILC's 2025 milestones, and our consolidated results for the year. Thanks, Juan Pablo. On slide 5, presents the macroeconomic context for the second quarter of 2025 compared to the second quarter of 2024. During the first quarter of 2025, we observed increased volatility in global equity market. However, in the second quarter of 2025, both global and local equity markets delivered strong performances, marking a recovery from the weakness seen in the previous period. The S&P 500 advanced 10.6%, while the IPSA gained 7.8%. Pension Fund C, which we use as a proxy for the return on legal reserves, posted a 4.7 return, reversing the negative result of the prior quarter. As you can see in the graph below, inflation remained flat during the quarter compared to a 0.7 increase in the same period last year, while UF registered a 1% increase. Regarding the monetary policy rate, the central bank continued its easing cycle, maintaining the policy rate at 5% for most of the quarter, before lowering it to 4.75% in August. On slide 7, you can see that regarding our 2025 milestones, significant events have occurred during the second quarter of the year. At Banco Internacional, we continue to strengthen our position in retail financing and capital markets. In April, the bank achieved 100% ownership of Autofin, consolidating its leadership in auto financing. In the same month, it successfully issued its first AT1 bond, broadening its capital structure. In June, Banco Internacional carried out two capital increases, further reinforcing its capital base. More recently, in July, the bank signed a commercial alliance with MAPFRE, aimed at expanding its distribution capabilities in the insurance business. In healthcare, in June, RedSalud signed a binding agreement to acquire the Nuevo Sanatorio Alemán, a leading healthcare institution in Concepción. The transaction, which is subject to regulatory approvals and a due diligence process, is aligned with our strategy to expand the network's regional and strengthen its offering of high-complexity services. Finally, in the insurance sector, Confuturo was awarded 50% of Contract 11 of the Disability and Survivorship Insurance Tender, reinforcing its strong position in the annuities and life insurance markets. ILC stock has continued to deliver strong returns, significantly outperforming the IPSA both in 2024 and year-to-date 2025. This positive trend extended into the second quarter, and as of August 22nd, our shares delivered a 63% return year-to-date compared to a 32% gain for the IPSA over the same period. A key milestone supporting this performance was our re-entry into the IPSA index on March 24th, which boosted both the visibility and liquidity of our stock. This strong momentum reflects market recognition of ILC's growth strategy, the consistent execution of our subsidiaries, and our commitment to long-term value creation. As we have stated in previous presentations, ILC's strategy is based on five pillars. These pillars form the foundation of our approach, driving both organic and inorganic growth opportunities. Our focus remains on achieving profitability in our operations, maintaining flexibility in the businesses we engage with, and ensuring a strong financial position. We work with ESG values and metrics across all our activities. This strategic framework directly supports our overarching purpose to be leaders in creating social and economic value that improves people's quality of life. Slide 10 highlights the strong performance ILC delivered in the first half of 2025, driven by greater stability in financial markets and solid execution across its businesses. ILC closed the second quarter with a profit of CLP 74.5 billion, compared to CLP 25.2 billion in the same period of 2024, representing a 195% increase. As a result, recurring profit of the first half of 2025 reached CLP 114.1 billion during the period. This record performance reflects the diversification of our portfolio, the recovery of financial subsidiaries following last quarter's market volatility, and the consistent growth of our businesses. With these results, ILC achieved an ROAE of 18.7% over the last 12 months. Over time, ILC has maintained double-digit profitability, showcasing steady growth and resilience. On slide 11, we present an executive summary of the main drivers behind ILC's consolidated profit of CLP 74.5 billion in the second quarter of 2025, which compares to CLP 25.2 billion in the second quarter of 2024. The difference between both periods represents a 195% increase year on year, largely supported by the rebound in global financial markets. On the right part of the slide, you can see ILC's profit breakdown. On this table, subsidiaries with greater exposure to financial assets such as Confuturo and Habitat recorded better results. Confuturo contributed CLP 25.6 billion, while Habitat added CLP 18.9 billion during the period. In the healthcare segment, Consalud reported a profit of CLP 9.7 billion after the adjustment of the Isapres Short Law. Now I turn the presentation to Gustavo, who will review the results of our subsidiaries. Thank you, Juan Pablo. Now that we have reviewed ILC's consolidated performance, we will take a closer look at the performance of each of our main subsidiaries. In this section, we will go division by division to better understand the key drivers behind each business, the challenges faced in the quarter, and the strategic progress achieved in line with our long-term plan. Let us begin with Banco Internacional. As of June 2025, Banco Internacional's loan portfolio grew by 16% year-over-year, positioning the bank with the fourth highest growth in the industry, which expanded by just 4%. The commercial loan portfolio grew 30%. Meanwhile, consumer loans increased by 50% during the expansion of Autofin's portfolio and the bank's digital consumer lending platform. As a result, Banco Internacional's market share increased in commercial loans from 2.65% to 2.94%, consumer loans from 0.92% to 1.3%, and mortgage loans remained stable, reaching 0.15%. In terms of client growth, the bank continued to expand its footprint. Commercial clients increased by 17%, reaching 8,500 companies. Retail clients increased by 2%, totaling more than 97,000 clients, including Banco Internacional and Autofin. With this, the bank reached 106,000 total clients. Looking ahead, Banco Internacional remains focused on expanding its presence in the large corporate segment, the consolidation of retail banking platform, and diversifying both its product offering and funding sources. In this line, as shown in slide number 15, Banco Internacional has continued to consolidate its funding structure, reflecting a clear shift towards greater diversification and long-term stability. As of June 2025, the bank's funding base shows an increase. The reliance on bonds and retail time deposits, which now represent 39% and 22% of total funding. At the same time, the share of bank funding declined from 12% to 9%, reducing the dependence on short-term sources. During the quarter, in April, as Pablo mentioned before, Banco Internacional completed the issuance of the first AT1 bond in the Chilean industry for up to UF 1 million, with maturity and a 5.6 annual coupon. It is also important to remember that in July of the previous year, the bank placed its first public bond in the Swiss market for 120 million Swiss francs for diversifying its international funding sources. In addition to capital increases carried out in 2025, totaling CLP 28.5 billion, it further strengthened the bank's capital base. Something important to highlight is that most of the last year's loan growth was financed through stable funding sources, underscoring the consistency of the bank's funding model. Looking ahead, the bank sees three main opportunities, scaling retail financing by improving clients' acquisition and retention, expanding the corporate funding base, developing digital financial products aligned with an efficient onboarding process. The next slide, as shown in slide number 16, Banco Internacional's gross operating result grew 12.6% quarter-over-quarter, reaching CLP 53.6 billion. This increase was supported mainly by higher loan volumes, provision releases, and the contribution from Autofin, partially offset by lower spreads and treasury income in the commercial loans. Operating expenses rose to CLP 30.1 billion, mainly due to Autofin, which continues to expand its operations. As a result, the efficiency ratio improved by 622 basis points year-on-year, reaching 56.1%. As shown in slide number 17, total risk expenses increased to CLP 12.1 billion in the second quarter of 2025, compared to CLP 4.1 billion in 2Q24. This increase of CLP 8 billion was mainly due to higher provision in commercial banking, mainly explained by a small group of clients. In terms of assets quality indicators, NPL ratio decreased to 2.8% as of June 2025, compared to 3% in June 2021. The risk index remained stable at 2% versus 2.1% in June 2024. Collateral coverage stood at 68%. Banco Internacional remains fully compliant with Basel III requirements with a solvency ratio of 16.8% as of June 2025, compared to the industry average of 16.7%. Slide number 18. The chart shows Banco Internacional's profit and ROE evolution. In the second quarter of 2025, the bank reported a net income of CLP 9.8 billion, compared to CLP 11.9 billion in the same quarter of the previous year, reflecting higher risk-related expenses in commercial banking, as we have mentioned, but mainly explained by a small group of clients. Autofin continued to play a significant role, accounting for 30% of Banco Internacional's quarterly earnings. All in all, the bank posted a return on average equity of 12.1% in 2Q25. Despite these short-term pressures, Banco Internacional continued to demonstrate a solid long-term growth, supported by improved loan volumes, diversification of funding, and the ongoing integration of Autofin in its balance. Now, shifting to the annuity market, as shown in slide number 20. In the second quarter of 2025, we continued to see a strong demand for annuities. During the quarter, the annuity rate stood at 3.14%. Compared to a programmed withdrawal rate of 3.54%. The spread continues to favor annuities as an attractive retirement option. As a result, 68% of retirees choose annuities, while 32% opt for programmed withdrawal. Total industry premium reached UF 35 million, increasing 24.3% quarter-over-quarter. Confuturo's premium amounted UF 4.2 million, slightly below the previous quarter, with a market share at 12%. Confuturo remains one of the leading players in this industry, supported by the demand and regulatory changes. The 2025 pension reform, which reduced the eligibility requirement for annuities from UF 3 to UF 2, continues to broaden access and reinforce the relevance of this retirement alternative. Next slide highlights Confuturo focus on strengthening its direct channel and maintaining strict cost efficiency. In the second quarter, 47% of life annuity premiums came from the direct channel, consolidated its role as the company's main distribution platform and remaining well above the industry average. On the cost side, the chart on the right, the G&A expenses reached CLP 9.1 billion, increasing 3.7% compared to the same quarter previous year, mainly due to higher personnel and IT related costs. Despite this increase, the G&A over assets under management stood at 37 basis points, lower compared to prior quarters, below the industry average of 100 basis points. On the next slide number 22, we show the investment result of Confuturo's portfolio in the second quarter of 2025. Investment result of Confuturo's portfolio in this quarter totaled CLP 110.2 billion, representing a 24% increase quarter-over-quarter. This performance was mainly explained by higher return in fixed income, with local instruments contributing CLP 6.8 billion and foreign instruments contributing CLP 3.5 billion, both supported by impairment reversal. In addition, local equities contributed CLP 4.4 billion and investment funds added CLP 6.9 billion during the quarter. These positive effects were partially offset by a weaker result from the real estate portfolio this quarter, which decreased by CLP 745 million. Slide number 23, we see Confuturo's profit evolution. In the second quarter of 2025, Confuturo reported a net income of CLP 28.9 billion, compared to CLP 14.1 billion recorded last year, representing a 105% increase. This better result was mainly driven by higher investment income, supported by improved performance of local equity and fixed income results. As of June 2025, Confuturo achieved an ROE of 13.6%. The company is staying focused on its long-term investment strategy, especially by growing its portfolio of alternative assets, including private equity and real estate, in order to improve future returns and diversification. If we move to slide number 24, regarding AFP Habitat. In the second quarter of 2025, revenues reached CLP 54.7 billion, a 4% increase compared to second quarter of 2024. This growth was mainly supported by higher fee income from mandatory contributions, driven by a 6.8% increase in the average taxable income per contributor. As of June 2025, Habitat contributors had an average taxable income 19% higher than the industry average, reinforcing the company's strong position in the mid to high income segment. This was partially offset by a 0.9% decrease in the number of contributors year-over-year. Non-operating income showed a recovery with encaje, the legal reserve return, totaling CLP 24.9 billion, compared to a loss of CLP 11.6 billion in 2Q 2024. This result was mainly driven by the strong performance of funds with higher exposure to equities, as the A, B, and C funds, supported by the rebound in local and international equity markets during the second quarter of 2025, after a first quarter impacted by the U.S. tariff announcement. In the next slide, we see the performance of our international operations in Peru and Colombia. These companies reported higher revenues in the second quarter of 2025, supported by growth in commission income. In Peru, revenues increased 8.8% year-over-year, reaching CLP 11.5 billion. Legal reserve return improved, totaling CLP 2 billion compared to CLP 0.7 billion in 2Q 2024, reflecting a strong global market performance. At Colfondos, very similar, in Colombia, revenues grew 7% quarter-over-quarter, reaching CLP 22.8 billion. Legal reserve return also showed a strong recovery, reaching CLP 6.5 billion, up from CLP 4.3 billion in 2Q 2024. Overall, higher legal reserve returns in both countries were mainly driven by the rebound in financial markets, particularly in equity heavy funds, reversing the weaker performance seen in the first quarter. This slide, here we show the evolution of profit before taxes and encaje for both AFP Habitat and Aisa. The results were mainly supported by higher legal reserve returns, reflecting, as we mentioned, the strong performance of funds with greater exposure to equities. Excluding this effect, the second quarter of 2025, AFP Habitat reported a profit of CLP 38.6 billion, up 4.9% compared to the previous quarter. The improvement was mainly driven by higher commission revenue supported by increased taxable income. In the case of Aisa, there's a 52.5% increase compared to the last year. The result was mainly explained by higher revenue and the addition of a new company, Andina Vida. Overall, Habitat and Aisa performance in the quarter reflect the positive impact of improved financial market condition and the sustained growth of taxable income across the contributors of both companies. I will turn the call over Francisca Arroyo, as she will review the performance of our health sector. Thank you, Gustavo. Moving now to health segment, we will review the performance of RedSalud and Vida Cámara during the second quarter of 2025. In slide 29, it shows RedSalud activity indicators. In the second quarter of 2025, RedSalud revenues reached CLP 207.3 billion, an 11.2% increase compared to the same period in 2024. Growth was broad-based, with inpatient, outpatient, and dental services rising 13.1%, 10.1%, and 10.8%, respectively. In inpatient care, revenue growth was mainly driven by higher income from surgical procedures, intensive care units, and hospitalizations. The number of surgeries increased 3.8% quarter-over-quarter, while occupancy across the network rose to 76.3%, compared to 73.6% in the second quarter of 2024, reflecting a more complex case mix. Outpatient revenues grew 10.1%, supported by the higher activity in laboratory services, images, and procedures, as well as the continued expansion of clinics and medical centers. Dental care revenues increased 10.8%, boosted by higher demand and promotional campaigns. RedSalud's solid growth is supported by rising demand and a more complex inpatient mix, and increasing activity in outpatient and dental services. Moving to slide 30, RedSalud EBITDA margin reached 12.9%, slightly below the 13.1% recorded in the second quarter of 2024. The breakdown shows that the margin was affected mainly by the personnel and SG&A costs, which reduced my margin by 0.9%, reflecting the increase in staffing associated with the development of new specialties. At the operational level, the higher complexity in patient services and continued growth in outpatient advanced activities supported revenue expansion, while investments in medical staff and specialties explains the slight margin contraction. Now to Slide 31. RedSalud continued to diversify its revenue sources, reinforcing its resilience across different payer segments. As of the second quarter of 2025, FONASA accounted for 46% of revenues, while ISAPRE represented 30% of out-of-pocket and public payers, and other payers, 24%. This reflects the sustained prevalence of the public insurer, which reached a 49% share of the last 12-month basis, aligned with RedSalud's strategic objective of expanding access. This is also worth noting that ISAPRE show a modest recovery this quarter, following the implementation of the Short Law, which has provided greater financial stability to the system. Overall, RedSalud's diversified revenue mix reduced exposure to regulatory changes while supporting sustainable long-term growth. On Slide 32, we can see that RedSalud EBITDA grew across all segments of the network. Consolidated EBITDA increased 9.5% year-over-year, reaching CLP 27.2 billion in the second quarter of 2025, with a margin of 12.9% compared to the 13.1% in the second quarter of 2024. By business unit, EBITDA increased by CLP 1.4 billion at outpatient dental centers, reaching a margin of 17.6%. Metropolitan region hospital also grew, adding CLP 0.9 billion with a margin of 13.8%, while regional hospitals show a similar trend, with an increase of CLP 0.9 billion and a margin of 13.8%. This growth-based growth across centers reflects RedSalud's balanced network expansion and operational improvements, reinforcing its ability to capture demand in both outpatient and inpatient services. On Slide 33, we can see that RedSalud's average monthly contribution remains stable at 5.7 UF per affiliate in the second quarter of 2025, consolidating the recovery observed since early last year after the GES price adjustment. This stabilization reflects the combined effect of regulatory measures, including the implementation of the extraordinary premium in late 2024 and the Short Law adjustment. Together, these have helped restore contributions to levels consistent with historical averages. In this context, the loss ratio stood at 85.7% in the second quarter of 2025, slightly down from 88.1% in the first quarter, continuing the improvement trend and pointing toward a more balanced outlook for the ISAPRE industry. Slide 34 illustrates the evolution of RedSalud's beneficiaries as a market share. We can see that the decline in RedSalud's beneficiaries slowed down during the late second part of 2024 and the first half of 2025. After the 19.8% decrease observed between December 2022 and December 2023, the pace of decline moderated, with beneficiaries falling by 5.5% during 2024 and by 3.2% in the first half of 2025. Despite this reduction in total affiliates, RedSalud has managed to maintain a stable market share, standing at around 19% in June 2025. Moving to Slide 35, we can see that Vida Cámara continues to expand its operations during the second quarter of 2025. The number of beneficiaries reached 650,000, up 16.4% year-over-year, with growth across both group and individual health insurance. Group insurance beneficiaries increased by 14.3%, while individual insurance surged by 61.6%, supported by the policies associated with preferred provider agreed with RedSalud. This growth translates into higher premium collections in both health and life insurance. However, the comparison is affected by a high base for the prior year, which had benefited from provision releases in 2021. Claim costs increased by 24% in the quarter, mainly driven by higher outpatient coverage in group health insurance. As a result, the loss ratio rose to 86.1% in the second quarter of 2025, compared to 73.5% in the second quarter of 2024. Now I will turn the call over to Gustavo again, and he will review ILC's debt indicators and the bullet points of this conference call. Thank you, Francisca. Now, if we move to slide number 37, which shows ILC's well-managed debt maturity profile and liquidity position. As of June 2025, net financial debt totaled CLP 386.4 billion, with a net financial debt to equity ratio of 0.33 times, showing further deleveraging compared to March, where the company reached 0.35 times. Liquidity stood at CLP 189.3 billion, composed mainly of cash and equivalents and an investment portfolio of liquid assets. This liquidity structure provides flexibility in order to cover upcoming maturities. ILC continues to optimize its funding structure, balancing carry costs, maintaining conservative leverage, and mitigating foreign exchange exposure, supporting both financial resilience and long-term growth. Now, in order to end the presentation, to sum up in slide number 39, I would like to highlight the key advances towards our strategic goals. Between 2023 and 2027, we are focused on accelerating the growth in the financial business. At Banco Internacional, we continue expanding our client base, reaching 106,000 clients as of June 2025 and delivering 15.5% loan growth, far above the industry of 4%. Milestones this quarter include increasing our stake in Autofin to 100%, issuing the first AT1 bond in Chile, and forging new strategic alliances. Regarding Confuturo maintains a strong position in the annuity market, supported by higher spread, efficiency, value creation, achieving a 12% of market share in the annuity business. AFEAVida remains focused on the mid- to high-income segment, benefiting this quarter from stronger financial market performance. Then, as Francisca just reviewed, in the healthcare business, RedSalud reinforced its leadership in private coverage, strengthening high-complexity services. EBITDA reached CLP 27.2 billion with a 12.9% margin, while Vida Cámara's supplementary health insurance grew 16% year-over-year, reaching 650,000 beneficiaries. On the regulatory front, the implementation of the Isapres Short Law has contributed to stabilizing the health insurance system with positive effects at Consalud. Finally, at the ILC level, we remain fully committed to our purpose of creating value. We achieved a first-half profit of CLP 114 billion, supported by stronger financial markets and operational progress across all our businesses. In addition, ILC's stock continues to perform strongly, outperforming the IPSA by more than 30% year to date. This concludes today's presentation. We will now open the floor for questions. Daniel Ballenas from Moneda Patria have a question. I will let him to talk and ask the question. I mean, his question. Hi, Gustavo. Could you hear me? Yes. Hi, ILC team. How are you doing? Thanks for the call and for taking my question. It's mostly regarding the increase in provisions we saw this quarter. When we look at NPLs, it seems quite well-behaved, going from 3.1% last quarter to 2.8%, so actually an improvement. Trying to understand the reasons behind. You mentioned during the call the one group of small commercial clients, but I don't know, this is not reflected in the NPLs ratio. Trying to understand better that. Thank you. Thank you, Daniel, for your question. The bank, I would say, maintain a prudent provision policy and a conservative approach to credit origination, focusing on clients with strong payment behavior. It is important to note that the higher risk expenses recorded this quarter were primarily linked to a few specific cases, as you also mentioned, and do not reflect the alteration of the loan portfolio. Overall, the portfolio quality remains sound and within the bank's historical norms. Remember, if you have any question, you can also write it down in the Q&A section of this call or in the investor relations department. We are very open to address any question you have. No further question? Okay, thanks. It was a very clear call. That's everything for today. As I mentioned, if you have further questions, feel free to contact our IR team. Thank you all for attending this conference call, and see you next quarter.