At Hapvida, action collapses with loss of life and high loss ratio

Executive compensation package, with an impact of BRL 130 million on Ebitda, is yet another source of discomfort for investors

In the first quarterly balance sheet after the incorporation of NotreDame Intermédica, Hapvida could not have been more displeased. The company’s shares registered the biggest drop on the Ibovespa this morning, with a fall of more than 18%.

In the early afternoon, HAPV3 was trading at R$6.42, with a vertical operator valued at R$45 billion. In just one trading session, the operator lost R$ 10 billion in market cap. In the year, Hapvida’s shares have already shrunk 37%.

On the sell-side, analysts drew attention to the high loss ratio and the loss of organic lives. “Expectations were already low for the quarter, but we believe that the numbers will surprise negatively”, wrote analysts Leandro Bastos and Renan Prata, from Citi.

In the quarter, Hapvida lost almost 15 points of Ebitda margin. The company also lost 64 thousand organic lives, equivalent to 0.7% of the base. The loss ratio reached 76.9% in the consolidated, an increase of 11.3 points in the annual comparison. The company closed the quarter with a loss of R$ 180 million.

“In the short term, limited organic growth and the still high levels of claims prevent a recovery in share prices”, pointed out Maurício Cepeda and Pedro Caravina, from Credit Suisse.

For a long-term manager, Hapvida’s shares also suffer for a technical reason. “The company was the biggest position for almost everyone. It was all bogged down and out of fringe buyers,” he said. In the market, it was already expected that the result of Hapvida would be bad, but the release of the data made the mood even more bitter. “What caught my attention the most is that there was nothing good about it”.

In governance, the remuneration package in shares of up to R$170 million for the board, approved at the meeting in April, is another nuisance. “Management compensation is huge. It was already known, but it bothers us with such a result” said a manager.

In the first quarter, Hapvida reported an Ebitda of just R$284 million. The executives’ long-term incentive plan and the stock-based compensation package had a significant impact on Ebitda, of R$129.6 million.

Source: Value Pipeline