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Earnings Call Transcript

[Gustavo Maturana V., executive]

Hello, everyone, and thank you for joining ILC's Second Quarter 2024 Results Conference Call. With me is Rosario Letelier, Chief Corporate Development Officer of ILC.

Before starting, I would like to invite everyone to download from our, a website presentation prepared especially for this conference call. The purpose of this document is to go through the main events and achievements for the period as well as to explain the context and financial figures of each of our businesses.

This call will be divided in 5 blocks. First, we will review the context of the period. In order to continue with ILC's consolidated results for the second quarter of 2024. Then we are going to analyze our subsidiaries' financial results and the main highlights for the quarter. Afterwards, we will do an update regarding our financial position in order to close the call with a Q&A section.

First, I will start in Slide #5, which chose macroeconomic context for the period, which is especially important for the results of the quarter. In 2Q '24, financial markets exhibited weaker performance compared to the same period last year. The IPSA index which recorded a return of 8.7% in 2Q '23, fell by 3.5% in 2Q '24, while the S&P 500, which had achieved 8.3% return last year, dropped by 2.1% this quarter.

Similarly, the Pension Fund C, which is a proxy for [indiscernible] results, which had shown growth of 1.6% in 2Q '23, experienced a decline of 2.1% this quarter. On the employment front, the formal employment rate also saw a slight deterioration dropping from 72.8% in 2Q '23 to 71.8% in 2Q '24.

Inflation remained under control, but increased slightly with a quarterly CPI of 0.7% in 2Q '24, compared to 0.3% year -- the last year. Lastly, the monetary policy rate decreased moving from 11.25% in 2Q '23 to 5.75% in 2Q '24, reflecting the Central Bank's response to more stable inflation levels.

Then Slide #6 highlights the key regulatory advances in the health care industry, especially addressing the reforms in the Isapre sector. The short law of Isapre was promulgated in response to the Supreme Court in November '22 ruling on the application of the single Factor Tables, which eliminated gender-based discrimination in health plans.

As of September 1, 2024, health plan prices will be adjusted according to the single Factor Tables with a mandatory minimum contribution of 7%. The law also introduced a requirement for Isapre to present payment and adjustment plan with monthly refunds that do not accrue interest and are adjusted according to CPI will not be considered for the purpose of warranties or financial indicators.

An extraordinary premium also cap at 10% of the contribution agreed upon in July 2023 is also incorporated into the plan. While the adjustments are aimed to ensuring financial sustainability in the health care system, the approval of the payment plan and extraordinary premium per beneficiary remains pending as the superintendency has requested amendments to the plan presented by Consalud. Additionally to this, the introduction of supplementary health insurance for Fonasa affiliates in groups B, C, and D through the Complementary Coverage Modality is part of the next steps in advancing the regulatory framework.

Other advances in regulatory change -- regulatory changes is on the -- regarding the pension reform in Colombia, which was approved by the Congress on June 14, 2024, following the proposal by President, Gustavo Petro.

This reform introduced 4-pillar system, that includes: solidarity, semi-contributory, contributory, and voluntary savings. One of the key aspects of the reform is the integration of public and private regimes. Contributors earning between 1 and 2.3 minimum wages will direct their contribution to the public average premium system with any excess being directed to the private individual savings with solidarity system managed as today by the AFP.

The reform also allows affiliates with at least 750 weeks for women and 900 weeks for men by July 1, 2025 to continue contributing to the existing system with flexibility to those within 10 years of retirement to switch between Colpensiones and AFP.

Additionally, the contribution rate will remain at 16% of taxable income with potential adjustment up to -- up to 3% for those earnings over 4 minimum wages with the additional funds directed to the Pension Solidarity Fund. Also, the reform adjusted administration fees for AFPs, capping them at 80 basis points for contribution exceeding 2.3 minimum wages while 70 basis points will be deducted from the assets of the former portfolios.

Regarding the events that are occurring during the year, first and one of the main important milestone that we are facing this year is that on August 14, 2024, ILC signed an agreement with Baninter to increase its stake in Banco Internacional incurring an additional 10.9% of the bank's shares raising its total ownership to 78.1%.

Next, on July 2, 2024. Banco Internacional completes its first bond issuance on the Swiss market. These unsecured bonds maturing on July 23, 2027, has a coupon rate of 2.8% and will be used to fund the bank's lending activities and diversifying its funding sources.

For Confuturo, they successfully secured a portion of the D&S portfolio in Tender 11 for the period between July 2024 and June 2025, Confuturo acquired 6 fraction for men and 2 fraction for women, expanding its portfolio.

Moreover, on April 23, 2024, Confuturo carried out a capital increase approved by its shareholders' meeting, the capital increase of up to CLP 74.5 billion was approved with -- I mean, CLP 18.9 billion subscript and paid by June 17, 2024.

Finally, it is important to mention that Vivir Seguros secured 1 of the 7 fraction of the SISCO portfolio in Tender #7 with an acquisition rate of 1.73%.

Regarding our commitment to the elderly, ILC has made significant development in supporting and empowering seniors through various initiatives aligned with our strategy. Confuturo has been ranked as the most senior-friendly company, leading with its Portal de Formación initiative, which offers free online courses tailored to seniors, providing exception tools and support for their daily life.

AFP Habitat secured second place incurring the participation of the senior talent among employees and driving impactful initiatives such as Piensa en Grandes.

Additionally, Red Salud received a recognition from SelloMayor for its seniors-focused call center initiative, which promotes the well-being of people over 60 years through concrete actions in accessibility, inclusion, respectful treatment and prevention.

Slide #11, reference the 5 pillars of our strategy. We have considerably faced this -- I mean, -- these pillars are the congregation of our approach, driving both organic and inorganic growth opportunities. Our focus remains on achieving profitability in our operations, maintaining flexibility in the business we engaged with and ensuring a strong financial position. Importantly, we continue to prioritize ESG values and metrics in all our activities. This strategic framework directly supports our purpose, which is to be leaders in creating social and economic value that enhance people's quality of lives.

Slide #12 illustrate the consistent returns the company has achieved over time, aligning with our strategy. The company has maintained a double-digit profitability in recent years, reflecting a steady growth and resilience. As previously mentioned, the company is now entering a new phase where growth is expected to stem primarily from its financial businesses.

A trend already that we are showing in the results of the second quarter 2024. For the second quarter of 2024, ILC achieved a profit of -- I mean, a loss of -- a profit of CLP 25.2 billion before adjustments resulting from the application of the Short Law os Isapres compared to CLP 54.3 billion recorded in 2Q '23, this decrease in profit was mainly explained by weaker performance in financial market and losses in Consalud, that we will explain later.

Net of the effect of the application of the Short Law os Isapres ILC has recorded a loss for the second quarter of 2024 amounted to CLP 6.2 billion. And the variation is primarily attributed to the loss of CLP 31.4 billion associated with the accounting liability under IFRS standards at Consalud, arising from the total payment plan determined according to the mechanics established by the Short Law of Isapres promulgated on May 24, 2024.

Slide #13 highlights ILC composition for second quarter of 2024. The company recorded a profit of CLP 25.2 billion before the adjustment, primarily driven by the contribution of Banco Internacional, Confuturo, AFP Habitat, Red Salud and Vivir Seguros.

Regarding Banco Internacional, the organic growth in its commercial and consumer portfolios, along with the consolidation of 51% of Autofin resulted in profit of CLP 8 billion. Higher operating expenses were partially offset by the increased net indexation and financial income.

Confuturo revenues from higher annuity and voluntary pension savings insurance as well as investment performance in fixed income, real estate and investment funds resulted in a profit of CLP 10.1 billion.

Regarding AFP Habitat Chile, AFP Habitat Chile saw a revenues grew in line with the increase in the average taxable income of its contributors, aligned with our strategy. But however, the weaker performance of the financial markets led to lower legal research returns with a profit of CLP 7.5 billion.

AAISA result was mainly explained by higher revenues and returns on legal reserve, partially offset by higher operating expenses.

In the health sector, Red Salud, improved its results, thanks to the better mix of inpatient services, increased income from dental services and enhanced operational efficiency, contributing CLP 6.2 billion to the overall profit.

Consalud, however, recorded a loss of CLP 13.8 billion, primarily due to the lower revenues from the reduction of the GES tariff and fewer beneficiaries, though it was partially offset by lower inpatient.

Vida Cámara contributed CLP 4.1 billion to the growth, mainly attributed to the growth in the number of beneficiaries and improved health insurance performance.

Lastly, Vivir Seguros, as we mentioned before, was awarded a portion of the SISCO #7, which contributed to a profit of CLP 5.7 billion. Overall, ILC achieved a total profit of CLP 25.2 billion for 2Q '24 before the adjustment of the Short Law of Isapres the main contribution came from its financial subsidiaries despite the challenge that we mentioned before in the health insurance sector, particularly in Consalud.

Then, if we move to the main operational figures of each of our subsidiaries. Moving to Slide #16. So June 2024, Banco Internacional commercial loans grew by 10.4%, outpacing the industry, 2.1% growth. Commercial loans surged by 720.5% significantly exceeded the industry growth driven the expansion of the loans and strategic acquisition. Meanwhile, the mortgage loans increased by 32.6% above the industry, 6.6% growth rate.

I would like here to highlight that Banco Internacional is entering a new state this year after a successful turnaround phase focused on SMEs, risk management and efficiency, we are now moving into a new phase with 3 main pillars. First, deepening our products, particularly from large companies and corporations. Second, development of retail banking, and finally, the diversification of our products and funding, leveraging the growth of our retail base.

Seeing on Slide #17, Banco Internacional has made progress in developing products within its retail banking division. The number of retail customers has grown by 109% since June 2023, reaching 27,000 (sic) [ 27,808 ] customers by June 2024. In addition to this growth, the integration of 36,000 new customers through the acquisition of Autofin in August 2023 for expanding the customer base.

Banco Internacional is actively growing its retail products portfolio through targeted initiatives and strategic audience. In the consumer loan segment, which continues to offer the best rates in the market, the bank has expanded through digital cross-selling to both clients and non-clients.

Importantly, the bank has formed a strategic partnership with Mercadolibre and Portal Inmobiliario, broadening its access to new markets and customers. For credit cards, the bank has introduced digital credit cards and made significant life cycle improvements. Additionally, it's recently partnered with DirecTV has added value by operating co-branded cards, enhancing customer loyalty.

In terms of deposit segment, Banco Internacional has successfully collaborated with Tenpo to create new cross-selling opportunity is between checking accounts and time deposits, strongly customer retention. Additionally, taking account and term deposits are being cross-sold with an emphasis on customer loyalty. Also, it's important to mention the introduction of the out-of-field digital checking account has enhanced the bank's offering.

Now going to the financial figures. As we can see on Slide #18, Banco Internacional's operating results improved during 2Q '24 driven by growth in commercial loans and consumer loans. The net interest and adjustment margin increased by 15.7%, reaching CLP 32.8 billion compared to CLP 28.4 billion in 2Q '23.

Additionally, the treasury result grew by 54.9%, rising from CLP 6.3 billion to CLP 9.7 billion. The gross operating result rose by 24.6%, reaching CLP 48 billion with Autofin contributing 22% of this total, reflecting the ongoing impact of the integration of Autofin on the bank financial performance.

On the other hand, operating expenses increased by 68.1%, but this is mainly due to the good will derivation of CLP 2.7 billion and also the consolidation of Autofin, which account for almost 20% of these expenses. As a result, the efficiency ratio increased to 62.4%.

In summary, the higher gross operating result was mainly driven by the increased income from commercial and consumer loans, along with lower deposit expense. However, the rise in operating expenses, primarily due to the consolidation of Autofin and the impact of this goodwill impairment contributed to increase in the efficiency ratio.

On Slide #19, we can observe the risk expenses have increased, partially explained by the consolidation of Autofin. Total risk expenses rose to CLP 4.1 billion in 2Q '24, up to CLP 3.2 billion in 2Q '23. This CLP 1.6 billion increase was mainly due to higher provision for consumer loan portfolio impacted by the integration of Autofin.

The NPLs ratio also shows a change with Banco Internacional overall NPLs rising from 2.5% in June 2023 to 3% in June 2024, while the industry average remains 2.3%. The consumer loan segment saw an increase from 0.9% to 1.3%, that it remains the third best NPL ratio related to consumer loans in the industry.

Risk index saw a slightly increased from 1.8% to 2.1%, with provision to total loans remaining consistent. In the terms of collateral coverage, we -- this was a slight decrease from 77.4% in June 2023 to 72.9% in June 2024. Additionally, the bank continues to fully -- to fully comply the Basel III standards with a solvency ratio of 15.3% as of June 2024, maintaining a strong capital position in line with regulatory requirements.

Slide #20 shows the evolution of Banco Internacional profits and ROAE over time. While the bank has shown sustained growth in profitability for 2Q '24, there was a decrease in profit -- a decrease in profit compared to the same quarter last year.

Banco Internacional profit for 2Q '24 decreased by CLP 2.2 billion from CLP 14 million to close to close to CLP 12 billion. This was primarily due to higher operating expenses, which were partially offset by increased net adjustment income and improved result from financial operations.

Despite the short-term decrease, Banco Internacional continues to maintain a strong long-term profit growth with profit reaching CLP 55.5 billion and an ROAE of 17% over the last 12 months ending in June 2024.

Now if we move to Slide #22, shifting to the annuity market. We're seeing that recovery in the annuity industry for the last 2 years, the annuity rate as of June 2024 has increased to 3.36%, while the programmed withdrawal stands at 4.41%.

This difference has influenced pensioners decision with 55% (sic) [ 57% ] opting for annuities, 43% for programmed withdrawals. Comparing this to the previous periods, the annuity market continues to show resilience. Although the annuity preference is higher than the last years. The long-term trend shows a stabilization in this preference.

In terms of premium volume, total pension industry premium reached CLP 28.2 million in terms of UF in 2024, with CLP 28.2 billion -- I mean, CLP 23.1 million UF allocated to programmed withdrawal, we're forcing the recovery of the annuity market.

Moving into Slide #23, we see that Confuturo annuity premiums have remained stable quarter-over-quarter. The operated sales rate for 2Q '24 reached 3.38%, slightly higher than 3.26% regarding the same period of the last year. Confuturo achieved a market share of 15.2% in annuity sales, maintaining its strong position in the market compared to 15% in 2Q '23.

Total net premium income for 2Q '24 decreased, reaching CLP 194.5 billion, which is 28.1% lower than 2Q '23, where the decline was primarily attributed to the reduction in the D&S premiums following the end of the 2022-2023 contracts. Despite this, the decline was partially offset by increases in individual life insurance and annuity premiums.

In the next slide, we can see Confuturo's investment portfolio performance for this quarter. The investment result grew by 11% quarter-over-quarter, where we exclude life insurance with savings result, reaching CLP 111 billion. This increase was primarily driven by better returns from local and foreign fixed income of investments as well as improved results from real estate investments.

The fixed income, both local and foreign contributed possibility to -- I mean to the overall results with local fixed income adding CLP 3.1 billion, and foreign fixed income contributing CLP 2.1 million. The real estate sector also performed well, contributing CLP 2.6 billion. While the local equities showed a negative contribution, as we see at the beginning of the presentation, mainly due to the lower performance of financial markets. But the overall investment performance remained strong due to gains in other areas.

On Slide #25, we can see that Confuturo's results in 2Q '24 were mainly impacted by lower nonoperating income. Although the company benefited from a higher annuity premium income and improved investment portfolio returns. These gains were partially offset by a decrease in nonoperating profit.

Confuturo profit posted a profit of CLP 14.1 billion in 2Q '24 compared to CLP 19.5 billion in 2Q '23. This was primarily due to CLP 6.1 billion loss from inflation indexed unit results compared to a positive result in 2Q '23. Additionally, the exchange rate results dropped from CLP 2.5 billion in 2Q '23 to CLP 0.2 billion in 2Q '24.

Overall, Confuturo's ROE for the last 12 months ending on June 2024 was 30.6%, down from 12.4% in 2023, reflecting the impact of these nonoperating -- lower nonoperating.

Then if we move to AFP Habitat. AFP Habitat as shown in Slide #27. Revenues increased by -- increased by 4.9% into -- in the second quarter of 2024 compared to the same period last year, reaching CLP 62.1 billion. This growth was mainly driven by commission related to mandatory savings supported by the 7% nominal increase in the average taxable income of AFP Habitat contributors compared to 2Q '23.

The average taxable income for AFP Habitat contributors in June 2024 was 21.1% higher than the industry average. This was partially offset by the 4% year-over-year decrease in the number of -- number of contributors. While revenues showed positive growth, the legal reserve returns dropped by almost CLP 12 billion, reflecting a weaker performance from funds with higher exposure to the equity markets. Funds A, B, and C.

As shown in Slide #28, AFP Habitat remained stable profits over time with profit reaching CLP 140 billion for the last 12 months ending in June 2024. However, looking at the second quarter of 2024, profit decreased by 39% compared to same period of last year, dropping from CLP 30.9 billion in the second quarter of 2023 to CLP 18.7 billion this quarter. This decline, as we just mentioned, was partially -- I mean, it was primarily driven by the lower returns on legal reserves due to the performance of financial markets.

Then if we move to Slide #29, we can see AFP Habitat Peru and Colfondos performance, starting with AFP Habitat Peru, revenues grew by 38.5% quarter-over-quarter, reaching CLP 10.6 billion. This increase was driven by higher fees supported by a larger AUM and an improvement in average tax holding. Additionally, legal reserves return more than doubled, increasing by 115% to CLP 0.7 billion, reflecting better performance in Funds 0, 2 and 3.

Regarding Colfondos, revenue grew by 38.9%, reaching CLP 21.3 billion in 2Q '24, this growth was primarily due to higher revenues from mandatory pension fees, which show 22% increase. This was driven by also -- this was also driven by a lower D&S fees and higher average salary base. Additionally, legal reserve returns improved by 22.2%, reaching CLP 4.3 billion.

As we can see on Slide #30. AAISA continues to consolidate its regional model with profits reaching CLP 34.9 billion for the last 12 months ending in June 2024. In 2Q '24, AAISA posted a profit of CLP 11.2 million, which is 17.8% increase compared to 2Q '23. The profit growth was mainly driven by higher fees revenues and returns on legal reserves, partially offset by higher operating expenses, which increased during the period.

On Slide #32, we observed a more complex mix in Red Salud, where -- especially in, inpatient segment, also with increased activity in dental services contributing to higher revenues. Starting with outpatient and dental activity, there was a 13.3% increase in dental consultation, rising from CLP 77.5 million in 2Q '23 to CLP 87.8 million in 2Q '24. Exams also saw a slightly increase of 1.4%, while medical consultation remained stable.

For the inpatient activity, the number of surgeries increased by 2.4%, also additionally, occupancy rates show an improvement, increasing almost 900 basis points from -- I mean, 67.1% in the second quarter of 2023 to 75.9% in 2Q '24.

As a result of these operational improvements, revenues grew across all segments. Outpatient and dental centers saw a 4.3% increase in revenue. Hospital in the metropolitan region posted a 9.9% increase in revenue. And Regional Hospital recorded the strongest growth with almost 13% increase in revenue.

Slide #33, presents Red Salud's EBITDA breakdown. For 2Q '24, EBITDA increased by CLP 3.2 billion, reaching a total of CLP 24.8 billion. This growth was primarily driven by a better mix of services in the patient and increased dental services activity. On-site improved efficiency in personnel expenses, medical fees and impairments.

Breaking down the EBITDA, hospitals in the metropolitan region contributed the most with CLP 4.8 billion (sic) [ CLP 1.8 billion ] increase, outpatient and dental center added CLP 1.8 billion (sic) [ CLP 0.9 billion], and regional hospitals contributed CLP 0.3 billion to the overall EBITDA growth.

In addition, the EBITDA margin improved from 12.4% in 2Q '23 to 13.1% in 2Q '24. And this was driven by better operational efficiency and lower impairments of account receivable, largely due to improved payment have especially from the private insurer.

As shown in Slide #34, Red Salud continues to diversify its revenue sources. The revenue breakdown by insurer shows growing share from the public insurer FONASA, which has gained increased increasing relevance by 2Q '24 FONASA represented 49% of Red Salud's total revenue, up from 48% in 2Q '23. This shift reflects Red Salud's strategy to diversify its income sources and reduce its dependence on the private insurance Isapres, which accounted for 33% of revenue in 2Q '24.

If we move to Slide #35, we can see Red Salud's EBITDA evolution. Red Salud's EBITDA continues to show sustain high level reflecting a strong performance in both inpatient and outpatient services. For 2Q '24, EBITDA reached CLP 24.8 billion, representing a 14.7% increase compared to 2Q '23.

The EBITDA margin also improved, rising from 12.4% in the second quarter of 2023 to 13.1% in 2Q '24. As we already mentioned Red Salud continues to face high demand for inpatient and outpatient services. During this quarter, especially results were driven by a more complex inpatient mix, higher activity in dental services, along a lower impairments, along with improvement in operational efficiency.

Now if we move to Consalud, the health insurance sector. Revenues were affected by adjusted in GES premium and a decline in beneficiaries. The reduction in GES premium led to a 2.9% quarter-over-quarter decrease in the average contribution per beneficiary, offset by a 7.6% increase in the base rate increase.

Additionally, the number of industry beneficiary decreased by 7.8% quarter-over-quarter, while Consalud experienced 9.7% decline. Consalud's revenue dropped by 16.2% quarter-over-quarter, reaching CLP 159 billion in the second quarter of 2024.

Moving to Slide #37, we observed the Consalud cost decreased by 2.3% quarter-over-quarter, mainly due to a 3.6% reduction in the total inpatient costs, which was partially offset by higher outpatient and medical leaves costs. The number of medical leaves related to COVID-19 and mental health disease decreased, but the average cost for mental health services have increased.

Then if we move to Slide #38. The slide focused on the financial impact of the regulatory changes on Consalud, highlighting the loss resulting from the accounting liability under IFRS standards. Consalud recorded an accounting loss of CLP 31.4 billion, net of deferred taxes which arise from the total payment plan mandated by the Short Law of Isapres promulgated on May 24, 2024.

This law introduced several regulatory changes aimed at achieving the financial balance in the financial sustainability in the health care system and complying with the Supreme Court ruling of November 2022. Key aspects of the law include a mandatory minimum contribution of 7% of the gross salary, price adjustments using the unique Factor Tables or [Foreign Language] and the introduction of an extraordinary premium to cover the costs of obligation to affiliates.

In addition, the law mandates are monthly accrual of the total refund amount, which we -- which will be returning surpluses without accruing interest and adjusted according to the CPI. It is important to note that under the superintendency of Health Methodology, the fund amount is not content for guarantees or financial requirements.

Unlike the IFRS accounting their refund amount is recorded monthly on an accrued basis. As a result of these factors, [ Isapre ] Salud posted a quarterly loss of CLP 45.2 billion compared to a profit of CLP 6.5 billion in the same period the previous year. Excluding the accounting effect of this liability, Consalud's loss amounted to CLP 13.8 billion, primarily due to lower revenues from a reduction in the GES premium in January 2024, partially offset by a decrease in the inpatient coverage costs.

Slide #39 shows Vida Camara's performance for 2Q '24. The contribution margin for health and life insurance increased by CLP 4.7 billion compared to 2Q '23 driven by a lower loss ratio. In terms of stock growth, premium income rose by 48% due to an increase in beneficiaries and lower account receivable deterioration mainly as a result of changing the model accounted. Consequently, the number of Vida Camara beneficiaries reached 544,000 as of the end of June 2024, reflecting a 20% increase year-over-year.

Then if we move to Chapter #4, financial position of ILC concerning ILC's debt elevated structure. This slide shows that the company achieved a net financial debt-to-equity ratio of 0.3x. ILC maintains close to CLP 194 billion in liquid assets to meet future obligation, and actively manage its cash through investments aimed at reducing financial carry and mitigating foreign currency pressure. Over the past quarters, the company has also reduced its gross debt by remaining part of its local operating obligation, along with paying regular amortization bonds and bank debt repayments.

If we move to the next slide, this slide shows the evolution of ILC's stock price until August 30. This year, the stock price outperformed the IPSA index year-to-date. The stock price increased by 18.6% with a dividend yield of 7.1%, which is one of the highest in the Chilean market based if we consider the closing price of 2023. In comparison, the IPSA index rose by 3.9% year-to-date -- I mean, 4.2% year-to-date.

Then if we move to Slide #44. ILC's second quarter -- I mean to wrap-up, ILC 2Q '24 results were driven by the performance of the financial subsidiaries impacted by the lower performance of the financial markets on losses in Consalud. Starting with Banco Internacional, we saw a significant contribution from the growth in both commercial and consumer loans portfolio. This expansion was a major factor in the bank's strong results for the quarter.

Moving on to Confuturo and annuity market continues to show a strong momentum. This, combined with higher investment returns due to the better performance in local operating investment funds boosted the operational results of Confuturo.

For AFP Habitat, the improvement in the operational -- I mean, the revenues was offset by increase in the financial markets, contributing a decrease in the net profit. In the health sector, because as we mentioned before, Consalud experienced some challenges with losses mainly driven by lower revenues from the adjustment in GES premium and the Short Law of Isapres impact.

On the other hand, in Red Salud. Red Salud -- the other side of the coin, reported a stronger EBITDA supported by a more complex inpatient mix and increased activity in dental services. We helped to improve its overall performance.

Finally, it's important to mention that ILC continues to maintain a strong financial position. The company's strategic pillars where Banco Internacional, Confuturo, AFP Habitat and Red Salud being the main drivers behind its result for the quarter.

This concludes the presentation. We will now open the floor up for questions. [Operator Instructions].

[Gustavo Maturana V., executive]

There's a first question from [ Francesca Raleigh ], we're asked about the impact of the Short Law of Isapre, which is CLP 31.4 billion. She asked if it's the only effect and also in which line of the financial statement of Consalud is reflected this loss. And also is this -- there's any financial impact we will see in the next quarter for Consalud.

I don't know if Rosario, you want to have this question.

[Rosario Letelier L., executive]

Yes. Regarding the first part of the question, this is reflected in other gains and losses. You can see it in our press release and also in the financial statements and all the notes to financial statements and also has an impact on deferred taxes. All in all, it's CLP 31.4 billion.

In the next quarters, I mean, the first thing to keep in mind is that this is an estimation under IFRS standards, considering that the final amount has to be approved by the Superintendency of Health. This is the best estimate we have as of today. And we do not expect any significant changes in the upcoming financial savings. And this covers all of the amount. And as I said before, under IFRS standards and reflects the present value of the amount. And you can see all the details in the risk notes in the financial savings.

[Gustavo Maturana V., executive]

Thank you, Rosario. There's another question from Andre, who ask, is very similar to the question on [ Francesca ], he asked for the future of Consalud business. And also, if there is -- there's some additional capital that we must put in this subsidiary.

[Rosario Letelier L., executive]

I will take this and please jump in if you feel there's a need to. The first thing to note is that, as Gustavo mentioned in the presentation, the Short Law of Isapre aims to bring stability to a whole health care system. As you know, there is pending the approval of the plan that each of the Isapres presented to the Superintendency, which is important milestone for the future of each 1 of the insurance companies.

I mean what we understand that the Short Law was a key milestone to bring the stability to comply with the Supreme Court ruling. As Gustavo mentioned, the Short Law brings different aspects into the table regarding the mandatory minimum contribution, price adjustment using the unique Factor Table, which is important to comply with the Supreme Court ruling, also introducing an extraordinary premium, which is a very important aspect of the Short Law because this brings an additional premium for the insurance companies to be able to cover all the cost and obligation that the Isapres has with their affiliates, including their refund amount.

All of the above mentioned, we think that aims for the sustainability of the system.

Regarding capital increases, it's very important, something that Gustavo mentioned that under the Superintendency of Health financial statements, which are the financial statements that are used for all financial ratios and all guarantees required by the authority, this refund is occurred on a monthly basis as opposed to IFRS standards, which requires accounting or the best estimate the company has on the present value of the -- all of the amounts involved in the refund.

So considering this, and to be very clear, the Short Law states that these refunds and all of the impacts that the refund has do not -- does not require guarantees and would not have an impact on financial ratios.

So considering that, we do not foresee any capital requirements in Consalud for the upcoming or forward-looking sales.

[Gustavo Maturana V., executive]

Thank you, Rosario. There is another question about the health care businesses before I address the other question from Andre [indiscernible]. But there's a question about the -- asking about if there is a chance to exceed the health care business given its diminish strategic importance of operating challenges?

[Rosario Letelier L., executive]

As we have put forward in our strategy, health is part of the asset that ILC has and is part of the forward strategy that the company has nowadays. So -- and considering the combination that ILC has participation in health care providers and health care insurance, there is some hedge when you see this all-in-all.

[Gustavo Maturana V., executive]

Also I want to add if I mis-said -- but when we said the growth will be come mainly from the financial sector, we don't say that we will not have growth from the health sector. We expect growth, especially in the providers, Red Salud and it's one of our subsidiaries that is important for us.

The other question about Andre was talk about the transaction that we released in August that we expect to reach 100% of the stake in Banco Internacional, there's an option of that in May 2027. He asked about the valuation, how is the valuation of the remaining stake?

[Rosario Letelier L., executive]

I can give you some color on that. General terms of this agreement states that the first step is to coming to an agreement between both parties in order to determine the valuation of the stake in both [indiscernible]. And in case an agreement is not reached, the next step is to have independent valuation, one of each party. And if these valuations be faring more than 10%, then there's a third valuation that has to select between 1 of the 2 of the previous valuations that each party has. It's important to state that this mechanism has also been part of previous agreements, and ILC and [indiscernible] have reached agreement on the valuation of the involving the stakes that we have acquired in the past time.

[Gustavo Maturana V., executive]

Okay. I think this all the questions. So if we don't have further questions, this concludes the call for today. Thank you, Rosario for joining us this quarter. And everyone, have a nice weekend and holidays next week.

[Rosario Letelier L., executive]

Okay. Thank you very much for attending the call. Bye.