Amil Participações S.A. Financial Statements accompanied by Independent Auditor s Report.

Transcription

1 Financial Statements accompanied by Independent Auditor s Report. As of December 31, 2011

2 AMIL PARTICIPAÇÕES S.A. Publicly-held Company Corporate Taxpayer s ID (CNPJ/MF): / Company Registry (NIRE): Management Report Dear Shareholders, In accordance with the legal and statutory provisions, the Management of Amil Participações S.A. ( Company ) hereby submits the Company s Management Report and the individual and consolidated financial statements, together with the independent auditors report, for the fiscal year ended December 31, 2011, for your approval. Economic Scenario 2011 was a year of instability in the global economy. The U.S. economy began to show signs of recovery, albeit still modest, while the EU was jeopardized by fiscal discrepancies among its members, large public deficits, financial contagion and soaring unemployment. As result, many countries were in recession and market confidence was at exceptionally low levels in the old continent. On the other hand, despite not being immune to the effects of recession, the emerging economies managed to make considerable progress through expansionist policies, relatively stable exports and ample foreign reserves. In particular, it is worth drawing attention to China, whose GDP grew by 9.2% to US$ 7.46 trillion, putting it in second place in the global economic rankings, behind only of the United States. 2/98

3 In the case of Brazil, growth is closely related to household purchasing power, which has been recording relative growth, income distribution programs, hefty tax incentives, reductions in the basic interest rate, the expansion of credit and strict inflationary control. Not surprisingly, therefore, given the credit restrictions and the increase in interest rates in the opening months of the year in an attempt to force convergence with the official inflationary target, the country s economy slowed considerably in comparison with 2010 and annual GDP growth was 2.7%. Despite healthy exports (particularly in the food segment), which grew by 27% to US$ 256 billion, industrial production was exceptionally modest, inching up by just 0.27% over Nevertheless, direct foreign investments reached the record level of US$ 75.9 billion, underlining the country s growing global visibility. In addition, according to the Brazilian Institute of Geography and Statistics (IBGE), unemployment in December 2011 was only 4.7% (5.98% annualized), one of its lowest ever rates. As for the nominal exchange rate, after spending most of the year hovering around R$/US$ 1.65, the Real depreciated against the U.S. dollar in the second half, falling to around R$/US$ 1.79, which was positive for exporters. The IPCA consumer price index, which is the main inflationary index and serves as the basis for the inflationary target established by the Finance Ministry, recorded 6.5%, equivalent to the ceiling projected by the Central Bank. In addition, aiming to boost domestic demand, the monetary authority reduced the Selic base rate to 11% in late 2011, higher than the 2010 figure (10.75%). The net public sector debt closed the year at R$ 1.5 trillion, equivalent to 36.5% of GDP, 2.7 p.p. down on December 2010, thanks to the primary surplus, GDP growth and the increase in foreign reserves. 3/98

4 In 2011 Amil was even more present in the lives of a significant portion of Brazil s population. The Company closed the year with a client base of thousand companies and 5.8 million members, who benefited from 44.1 million exams, thousand hospital admissions, 14 thousand land and air rescues and more than 26 million calls to our call center. Besides that, our operating figures were also very positive. Our revenues totaled R$ 9.3 billion and adjusted EBITDA stood at R$ million, approximately 30% higher than in 2010, both of which historical record figures for us. Despite the challenges, the Company also had several opportunities, having acquired Hospital Samaritano, Hospital Pasteur and Lincx, further improving its positioning in their respective areas of influence and client bases. In terms of organic growth, one of the Company s main fronts is the dental plans segment. Amil Dental is currently the second largest dental plan operator in Brazil, with annual membership and revenue growth of 28% and 35%, respectively. Despite representing a small percentage of Amilpar s total revenue (approximately 2.5%), the segment is exceptionally attractive thanks to its higher profitability. We remain confident in Amil and Brazil s performance in New challenges and opportunities lie ahead and we are fully prepared to take them on. Source: Brazil s Central Bank, IBGE and IPEA Data. Comments on the supplementary healthcare industry The number of new health plan beneficiaries in Brazil continued to outpace population growth, reaching 47 million in September 2011, together with 16 million dental plan beneficiaries, representing growth of 15.1% over Another characteristic of this market is the dominance of collective adhesion to 4/98

5 health plans currently around 76.9% of total health plan beneficiaries are members of corporate plans, equivalent to 36 million people. As an additional factor, the national healthcare agency (ANS) has been monitoring and regulating the sector with more severity, thereby increasing the credibility of the responsible operators who respect the rules. According to the ANS, in September 2011 around 24.6% of Brazil s population were covered by medical plans. However, the actual ratio may be lower, given that beneficiaries included in the available statistics are sometimes counted more than once, as in the case of individuals with more than one plan. In addition, this figure is exceptionally low in comparison with the developed countries, where more than 70% of the population is covered. Therefore, there is still a sizeable growth opportunity for Amilpar, due to the limited penetration rate and the process of consolidation to which Brazil s supplementary health industry is passing through. SOURCE: Brazil s health regulatory agency (ANS) Description of the company s businesses Amil Participações S.A. is the largest healthcare company in Brazil, according to the ANS, with more than 5.8 million members in the states of São Paulo, Rio de Janeiro, Paraná, Minas Gerais, Pernambuco, Bahia, Rio Grande do Norte and the Distrito Federal. Amil began its activities in 1978 and offers a wide range of healthcare plans for small, medium and large companies, as well as for individuals from all income groups, providing its members with access to carefully selected hospitals, clinics, laboratories and doctors. 5/98

6 Corporate Governance Amilpar has only common shares, which are listed in the Novo Mercado trading segment of the Securities, Commodities and Futures Exchange (BM&FBOVESPA). The Novo Mercado contains only those shares issued by companies that have voluntarily committed to adopt corporate governance and information disclosure practices that go beyond what is required by the applicable legislation. Capital Markets Amilpar s shares, traded under the ticker AMIL3, ended 2011 at R$ 16.43, 7.69% down on the year before, while the Bovespa index fell by 18.11% in the same period. In 2011, the Company s shares were traded in all BM&FBOVESPA trading sessions, recording daily average volume of R$ 10.9 million, 41% more than in Amilpar s market capitalization on December 29, 2011 was R$ 5.9 billion. Relations with the Independent Auditors In compliance with CVM Instruction 381/03, we hereby declare that in 2011 the Company contracted from its independent auditors, Ernst & Young Terco, or persons related to it, external audit services (totaling R$ 928 thousand) and tax advisory services (R$ 2,839 thousand). The policy adopted complies with the best principles of governance which preserve the auditors independence in accordance with internationally accepted principles, which are as follows: the auditors may not audit their own work, exercise any managerial function in their clients company, or promote their clients interests. It is important to mention that the relationship with Ernst & Young Terco reflects the fact that Ernst & Young, which provided advisory services to Amilpar, acquired Terco, the Company s 6/98

7 external auditors when said acquisition took place. In view of the mandatory change of auditor imposed by the Brazilian Securities and Exchange Commission (CVM), this situation will be altered in Adherence to the Arbitration Chamber The Company, its Shareholders, Executive Officers and Board Members undertake to submit to arbitration, any and all disputes or controversies that may arise between them, related to or originating from the use, validation, effectiveness, interpretation, violation and their effects of provisions in the New Market Listing Agreement, the New Market Listing Regulations, the Company s Bylaws, the shareholders agreement filed at the Company s headquarters, and Brazilian Corporate Law, the rules issued by the National Monetary Council, the Brazilian Central Bank or the Brazilian Securities and Exchange Commission (CVM), the regulations of the BM&FBOVESPA and all other regulations governing the functioning of the securities market in general other applicable rules to the operation of market, as well as Arbitration Clauses and the Arbitration Regulations of the Market Arbitration Chamber, conducted in compliance with the latter. Approval of the Financial Statements In accordance with CVM Instruction 480/09, the Company s statutory executive board hereby declares that it has discussed, reviewed and agreed with the findings of the independent auditors report and the financial statements for the fiscal year ended December 31, 2011, which were approved for disclosure by the Board of Directors Meeting of March 12, /98

8 Final considerations Additional comments on Amilpar's operating performance can be found on the Company's website: Acknowledgements Amilpar would like to thank all its employees for their hard work and its clients and suppliers for their support, as well as government bodies and regulatory authorities and all those who, in some way, contributed to the Company s performance in /98

9 Independent auditor s report on financial statements To the Management and shareholders of Amil Participações S.A. Rio de Janeiro - RJ We have audited the individual and consolidated financial statements of Amil Participações ( Company ), which are identified as Controlling Company and, respectively, and include the balance sheet on December 31, 2011 and the statements of income, statements of comprehensive income, statements of changes in shareholders equity and statements of cash flows for the year then ended, as well as a summary of the main accounting practices and other notes to the financial statements. Management s responsibility regarding the financial statements The Company s Management is responsible for the preparation and fair presentation of these financial statements in accordance with the accounting practices adopted in Brazil and of the consolidated financial statements in conformity with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and in conformity with the accounting practices adopted in Brazil, and for internal accounting controls deemed as necessary to permit the preparation of these financial statements free from material misstatement, whether due to fraud or error. Independent auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit, which was conducted in conformity with Brazilian and international auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing selected procedures to obtain audit evidence about the amounts and disclosures presented in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity s preparation and fair presentation of the Company s financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company s internal controls. An audit also includes evaluating the adequacy of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 9/98

10 Opinion on the individual financial statements In our opinion, the financial statements referred to above present fairly, in all material respects, the equity and financial positions of Amil Participações S.A. as of December 31, 2011, the performance of its operations and its cash flows for the year then ended, in conformity with the accounting practices adopted in Brazil. Opinion on the consolidated financial statements In our opinion, the financial statements referred to above present fairly, in all material respects, the equity and financial positions of Amil Participações S.A. as of December 31, 2011, the consolidated performance of its operations and its cash flows for the year then ended, in conformity with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB) and the accounting policies adopted in Brazil. Emphasis of Matter As described in Note 2, the Company s financial statements were prepared in conformity with the accounting practices adopted in Brazil. In the case of Amil Participações S.A., these practices differ from IFRS applicable to the separate financial statements only with regard to the assessment of investments in subsidiaries by the equity method, while for the purposes of IFRS these are assessed at cost or fair value. Our opinion does not have reservations due to this matter. Other matters Statements of value added We have also audited the individual and consolidated statements of value added for the year ended December 31, 2011, prepared under Company s management responsibility,required by the Brazilian Corporate Law for publicly-held companies, and as supplementary information to the International Financial Reporting Standards (IFRS) that do not require the presentation of the statements of value added. These statements were submitted to the same audit procedures previously described and, in our opinion, they are presented fairly in all material respects, in relation to the financial statements taken as a whole. Rio de Janeiro, March 12, 2012 ERNST & YOUNG TERCO Auditores Independentes S.S. CRC - 2SP /O-6-F-RJ Eduardo José Ramón Leverone Accountant CRC - 1RJ /O-6 10/98

11 Balance Sheet as of (In thousands of Reais, unless otherwise stated) A S S E T S Controlling Company Note 12/31/ /31/ /31/ /31/2010 Current Assets Cash and cash equivalents 4 5,897 2, , ,803 Cash investments , ,041 Health premium receivables , ,240 Accounts receivable related to other activities ,843 64,574 Inventories ,383 46,179 Dividends and interest on capital stock receivable 9 5,555 25, Tax credits 10 21,504 14, ,128 67,954 Other credits ,721 80,579 Total current assets 33,036 42,563 1,938,479 1,605,370 Non-current assets Long-term assets Escrow deposits 12 3,184 2,916 71,165 67,983 Recoverable taxes and contributions Deferred tax credits 13 42,365 24,897 92, ,940 Advance for future capital increase - 39, Other credits ,473 10,617 45,549 67, , ,514 Investments 15 2,859,745 2,367,632 38,435 38,313 Property and equipment ,460,306 1,151,692 Intangible assets ,784,672 1,440,272 2,859,755 2,367,643 3,283,413 2,630,277 Total non-current assets 2,905,304 2,434,892 3,453,882 2,866,791 Total assets 2,938,340 2,477,455 5,392,361 4,472,161 The accompanying notes are an integral part of the financial statements 11/98

12 Balance Sheet as of (In thousands of Reais, unless otherwise stated) L I A B I L I T I E S A N D S H A R E H O L D E R S ' E Q U I T Y Controlling Company Note 12/31/ /31/ /31/ /31/2010 Current liabilities Technical provisions , ,495 Anticipated payments from clients , ,018 Loans and financing ,877 38,594 Debentures , , , ,667 Suppliers and accounts payable 21 1, , ,199 Salaries, accrued vacation and physician fees payable , ,081 Taxes and contributions payable ,605 91,891 Taxes and contributions payable - installments ,341 26,756 Dividends and interest on capital stock 41,666 30,221 41,863 30,478 Total current liabilities 234, ,002 2,128,198 1,675,179 Non-current liabilities Technical provisions ,521 1,238 Loans and financing ,470 59,118 Debentures 20 1,194, ,928 1,194, ,928 Provision for contingencies , ,526 Deferred income and social contribution taxes ,565 29,137 Taxes and contributions payable ,146 Taxes and contributions payable - installments , ,621 Other debts ,062 85,174 1,195, ,235 1,742,596 1,420,888 Shareholders' equity 25 Capital stock 1,156,593 1,156,593 1,156,593 1,156,593 Capital reserve 32,750 16,010 32,750 16,010 Profit reserve 335, , , ,371 Treasury stocks (30,627) (29,832) (30,627) (29,832) Other comprehensive income 6,385 11,226 6,385 11,226 Additional dividends proposed 8,418 9,850 8,418 9,850 1,508,992 1,374,218 1,508,992 1,374,218 Minority interest ,575 1,876 Total liabilities and shareholders' equity 2,938,340 2,477,455 5,392,361 4,472, The accompanying notes are an integral part of the financial statements 12/98

13 Income statements for the years ended (In thousands of Reais, unless otherwise stated) Controlling Company Note 12/31/ /31/ /31/ /31/2010 Net revenue from services ,008,826 7,635,444 Cost of services (6,664,526) (5,692,653) Gross Income ,344,300 1,942,791 Operating expenses and income General and administrative expenses 28 (26,636) (12,521) (1,491,860) (1,243,105) Selling expenses (450,180) (379,737) Other operating income (expenses), net (61,369) (63,612) Equity income , , Income before financial result 295, , , ,337 Financial expenses 31 (139,764) (87,738) (250,551) (184,826) Financial revenues 31 1,883 12, , ,274 Income before taxes on net income 157, , , ,785 Income and social contribution taxes 13 17,467 21,290 (106,064) (84,158) Net income for the year 175, , , ,627 Income attributable to shareholders: Controlling 175, , , ,945 Minority - - 3,654 4, , , , ,627 Basic earnings Diluted earnings The accompanying notes are an integral part of the financial statements 13/98

14 Statements of comprehensive income for the years ended (In thousands of Reais, unless otherwise stated) Controlling Company 12/31/ /31/ /31/ /31/2010 Net income for the year 175, , , ,627 Market value adjustment of hedge operations - - (263) 210 Income (expenses) from change in interest in subsidiaries capital - - (4,578) 11,016 Comprehensive income for the year 175, , , ,853 Income attributable to shareholders: Controlling 175, , , ,171 Minority - - 3,654 4, , , , ,853 The accompanying notes are an integral part of the financial statements 14/98

15 Statements of cash flows for the years ended (In thousands of Reais, unless otherwise stated) Controlling Company Restated Restated 12/31/ /31/ /31/ /31/2010 Cash flow from operating activities Net income for the year 175, , , ,627 Adjustments to reconcile net income to the cash and cash equivalents generated from (used in) operating activities: Adjustments from previous years Stock option plan 16,304 8,168 16,304 8,168 Depreciation and amortization , ,229 Allowance for doubtful accounts ,553 56,866 Remission provision (473) Provision for incurred but not reported claims ,186 32,530 Equity income (322,152) (193,766) - - Provision for contingencies - - (7,836) (48,575) Fair value of investment properties - - (3,962) - Recorded interest/ cost 139,228 87, ,848 98,049 Minority interest - - 3,654 4,682 Other (17,467) (21,290) 69,376 49,530 (8,977) 7, , ,633 Variation in assets and liabilities Decrease (increase) in current assets 6,806 (27,555) (263,633) (179,844) Decrease (increase) in non-current assets 39,168 (39,446) (250,196) 255,526 Increase (decrease) in current liabilities 1,592 28, , ,622 Increase (decrease) in non-current liabilities (9,694) (303,416) Net cash generated from (used in) operating activities 38,589 (30,150) 481, ,521 Cash flow from investing activities Additions to Property and Equipment - - (239,969) (202,750) Additions to intangible - - (14,537) (15,575) Additions to investments, net of acquired companies' cash - - (274,434) (689,891) Capital increase in subsidiaries (349,941) (734,103) - - Dividends and interest on capital stock received 181, Net cash used in investing activities (168,285) (734,103) (528,941) (908,216) Cash flow from financing activities Loans, financing and debentures funded 298,753 1,342, ,085 1,409,731 Loans, financing and debentures paid (125,585) (663,067) (188,340) (718,626) Sale of own shares 6,108 14,535 6,107 14,535 Purchase of own shares (6,903) (17,208) (6,903) (17,208) Income (expenses) with treasury shares 436 2, ,088 Dividends and interest on capital stock paid (39,993) (26,556) (41,637) (26,556) Net cash generated from financing activities 132, , , ,964 Increase (decrease) in cash and cash equivalents 3,120 (111,491) 79, ,269 Balance of cash and cash equivalents End of year 5,897 2, , ,803 Beginning of year 2, , , ,534 Increase (decrease) in cash and cash equivalents 3,120 (111,491) 79, ,269 The accompanying notes are an integral part of the financial statements 15/98

16 Statements of changes in shareholders' equity for the years ended (In thousands of Reais, unless otherwise stated) Capital stock Capital reserve Legal reserve Profit reserve Expansion reserve Other comprehensive income Additional proposed dividends Retained earnings Total, Controlling Company Minority interest Total, Balances on December 31, ,155,702 4,863 19,155 77, ,257, ,428 1,745,929 Capital increase 5, ,122-5,122 Capital decrease (4,231) (4,231) - (4,231) Minority interest (486,552) (486,552) Stock option plan - 8, ,168-8,168 Stock option exercise - 2,088 - (2,673) (585) - (585) Goodwill on share subscription Other comprehensive income , ,557-10,557 Net income for the year , , ,945 Allocation of income: Legal reserve - - 6, (6,347) Dividends ,850 (40,000) (30,150) - (30,150) Expansion reserve , (80,598) Balances on December 31, ,156,593 16,010 25, ,037 11,226 9,850-1,374,218 1,876 1,376,094 Capital increase Capital decrease Minority interest ,699 10,699 Granted stock options recognized - 16, ,304-16,304 Stock option exercise (796) (360) - (360) Dividends (9,850) - (9,850) - (9,850) Other comprehensive income (4,841) - - (4,841) - (4,841) Net income for the year , , ,109 Allocation of income: Legal reserve - - 8, (8,755) Dividends ,418 (50,006) (41,588) - (41,588) Expansion reserve , (116,347) Balances on December 31, ,156,593 32,750 34, ,588 6,385 8,418-1,508,992 12,575 1,521,567 The accompanying notes are an integral part of the financial statements 16/98

17 Statements of value added for the years ended (In thousands of Reais, unless otherwise stated) Controlling Company 12/31/ /31/ /31/ /31/2010 REVENUES Sale of services and other operating income - - 9,376,284 7,889,329 Allowance for doubtful accounts - - (84,553) (56,866) - - 9,291,731 7,832,463 ITEMS PURCHASED FROM THIRD PARTIES Cost of services - - (5,923,843) (5,080,139) Materials, energy, third-party services and others (17,684) (11,756) (1,287,387) (1,043,153) (17,684) (11,756) (7,211,230) (6,123,292) GROSS VALUE ADDED (17,684) (11,756) 2,080,501 1,709,171 Depreciation and amortization (1) (1) (128,127) (112,229) NET VALUE ADDED GENERATED BY THE COMPANY (17,685) (11,757) 1,952,374 1,596,942 VALUE ADDED RECEIVED IN TRANSFER Equity income 322, , Financial income 1,883 12, , ,274 Other TOTAL VALUE ADDED TO BE DISTRIBUTED 306, ,157 2,146,861 1,741,216 DISTRIBUTION OF THE VALUE ADDED Personnel and charges (excluding INSS) , ,926 Direct compensation , ,579 Benefíts , ,367 FGTS ,954 61,980 Taxes, fees and contributions (9,256) (21,065) 679, ,879 Federal (9,256) (21,065) 575, ,381 State ,223 Municipal ,099 71,275 Remuneration for third-party capital 139,764 87, , ,784 Interests 139,764 87, , ,826 Rentals ,052 87,958 Remuneration for capital stock 175, , , ,627 Interest on capital stock Dividends 50,006 40,000 50,006 40,000 Retained earnings 125,103 86, ,103 86,945 Minority interest in retained earnings - - 3,654 4, , ,157 2,146,861 1,741,216 The accompanying notes are an integral part of the financial statements 17/98

18 1. Operations The main activities of Amil Participações S.A. ( the Company or Amil Participações ), with headquarters at the Avenida das Américas, 4200, bloco 3, suite 601, City of Rio de Janeiro, State of Rio de Janeiro, and its subsidiaries are: (i) coverage of costs related to medical, hospital and dental care for its associates, (ii) providing medical hospital and dental care services; and (iii) investing in other companies. Amil Participações is a corporation domiciled in Brazil and its shares are traded at BM&FBOVESPA under the ticker AMIL3. New acquisitions, incorporation, spin-offs and formation of companies Medial Saúde Acquired by Amil Assistência in December 2009, under the corporate name of Medial Saúde S.A. During 2010, its registration as a publicly held corporation has been cancelled and its corporate name was changed to Amil Saúde S.A. In December 2010, this company went through a partial spin-off and the spun-off portion (health plan segment) was transferred to its controlling company, Amil Assistência. Since this was a merger that involved companies pertaining to the same economic group, this merger was based on book values, thus, with no effects on the consolidated financial statements of Amil Participações. From then on, its corporate purpose only covered the medical hospital services and the interest in other companies. In November 2011, was approved a transformation in the company, from privately held corporation to a limited company without liquidation, dissolution or change in its capital, remaining in force all the rights and social obligations. Esho - Empresa de Serviços Hospitalares S.A. In February, 2010, Amil Assistência acquired 99.99% of this company, whose purpose is the provision of medical hospital services and the interest in other companies, exercising its stock option right as provided in the agreement, executed on October 18, In June 2010, with the merger of the spun-off portion of Cemed Care, the company s capital stock increased by R$ 18,744, therefore, Amil Assistência holds 97.55% of its capital stock and Amico Saúde the remaining 2.45%. This merger was based on book values, with no effects on the consolidated financial statements of Amil Participações. In December 2010, with the incorporation of Hospital Pró-Cardíaco S.A and Casa de Saúde Santa Lucia S.A. by Esho, the company's capital was increased. As a result, Amil Assistência increased its stake to 97.78% and Amico Saúde decreased to 1.07%. Later, in April 2011, Esho incorporated Organização Médica Clinihauer Ltda. and Casa de Saúde e Maternidade São José S.A. After these incorporations, Amil Assistência s interest in the company's capital increased to 98.91% and Amico Saúde s was decreased to 0.52%. In June 2011, Esho incorporated UN 18/98

19 Diagnósticos Ltda. On September 30, 2011 Esho's capital is 99.31% owned by Amil Assistência and 0.33% by Amico Saúde. In October 2011 Esho incorporated Hospital Samaritano and Hospital Pasteur. In November 2011, indirect subsidiary Esho acquired from its minority shareholders absorbed after incorporation of Hospital Pró-Cardíaco, 19,132 shares at the price of R$ 100. These shares were recorded as Treasury Shares. On December 31, 2011 Esho's capital is 97.04% owned by Amil Assistência, 0.25% by Amico. These incorporations were based on book values, with no impact on consolidated financial statements of Amil Participações. Hospital Pró-Cardíaco S.A. ( Pró-Cardíaco ) In May 2010, Esho acquired 89.40% of this company s capital and in June 2010 increased its stake by 0.11%. In December 2010, with the approval of the Protocol and Justification of Merger, Hospital Pró-Cardíaco was merged into Esho, based on accounting balances verified on the date of merger. Cemed Care In June 2010, the Protocol and Justification of Partial Spin-off of Cemed Care was approved, with the transfer of its spun-off portion to Esho in the total amount of R$ 18,744. Therefore, the stakes of Cemed Care in investees Hospital and Clínicas SK Steckelberg Ltda (14,505,063 quotas) and São José (8,346,710 quotas) were transferred to Esho. Hospital e Clínicas SK Steckelberg Ltda. ( HCB ) In June 2010, due to the partial spin-off of Cemed Care, HCB s ownership structure changed and Esho and Amico Saúde became its holders. Still in June 2010, Amico Saúde assigned and transferred its quotas to Esho, withdrawing from the partnership. On this same date, the merger of HCB into Esho was approved. Esho already held 100% of this company s quotas. This operation was based on the accounting balances. ASL - Assistência à Saúde Ltda. This company s corporate purpose is to sell medical hospital plans. In July 2010, Amil Assistência took over its controlling interest, acquiring 99.99% of its capital stock. CEAME - Centro Especializado de Atendimento à Mulher S/S Ltda. This company s corporate purpose is to provide medical and laboratory services. In July 2010, Amil Assistência acquired 99.99% of its capital, and Cemed Care is its partner with 0.01%. 19/98

20 ETHO - Empresa de Tecnologia Hospitalar Ltda. This company s corporate purpose is to analyze and develop softwares, sell and provide software installation, maintenance and configuration services. Amil Assistência holds 50.01% of its capital. Casa de Saúde Santa Lúcia S.A. ( Santa Lúcia ) Acquired in October 2008 by Amil Assistência, which subsequently granted and transferred its interest in this company to its subsidiary Esho. In December 2010, Santa Lúcia was merged into Esho. Both operations were based on book values. Sistema Ipiranga de Assistência Médica Ltda. ( Ampla ) This company s purpose was to manage and sell heath care plans, as well as to provide medical hospital services. In April 2008, Amico Saúde acquired 62.84% of this company, then owning its controlling interest and Hospital Ipiranga as its partner, which owned 37.16% interest in this company. In November 2010, the merger of subsidiary Ampla was approved into its controlling company Amico Saúde; this operation was also based on accounting balances. Hospital e Maternidade Ipiranga de Mogi das Cruzes S.A. ( Hospital Ipiranga ) Acquired by Amico Saúde in 2008, this company was merged into its controlling company in November 2010, based on accounting balances. Excelsior Med S.A. ( Excelsior ) This company s purpose is the development, management and hiring of healthcare plans of medical, hospital, outpatient and dental assistance provided by third parties, individual or corporate. In February 2011, Amil Assistência took over its controlling interest, with the acquisition of 100% of its capital. Clínica Médico Cirúrgica Botafogo S.A. ( Hospital Samaritano ) In February 2011, Esho acquired 83.93% of this company, whose purpose is to provide medical services, to maintain hospital establishments, maternity wards, emergency rooms and to practice medical activities. In October 2011, with the approval of the Protocol and Justification of Merger, Hospital Samaritano was merged into ESHO, based on accounting balances verified on the date of merger. 20/98

21 Organização Médica Clinihauer Ltda ( Clinihauer ) Acquired in August 2007 by Amil Assistência, which subsequently granted and transferred its interest in this company to its subsidiary Esho. In April 2011, the Protocol and Justification of Merger of Clinihauer in Esho was approved. Casa de Saúde São José Ltda ( São José ) This company s purpose was the provision of medical hospital services. In April 2011, the Protocol and Justification of Merger of São José in Esho was approved. Méier Medical Center Ltda ( Hospital Pasteur ) Esho acquired, in April 2011, 99.99% of the company whose purpose is the provision of health services in general, of any kind, size or category, including hospital and diagnostic services, medical procedures and other. In October 2011, with the approval of the Protocol and Justification of Merger, Hospital Pasteur was merged into ESHO, based on accounting balances verified on the date of merger. UN Diagnósticos Ltda ( UN ) This company s purpose was the provision of professional services to conduct clinical exams and diagnostics in general, and quality control of own and accredited laboratory exams. In June 2011, the Protocol and Justification of Merger of UN by Esho was approved. Lincx Sistemas de Saúde Ltda ( Lincx ) This company s purpose is the operation of private healthcare plans (individual, family and corporate) by ensuring coverage of medical, outpatient, dental or hospital costs, exclusively by accreditation of third parties, technical and legally qualified. In July 2011 ANS Agência Nacional de Saúde Suplementar (Brazilian Heathcare Agency) approved this acquisition and then Amil Assistência took its control, with an interest of 99.99% of the company. In November 2011, with the approval of the Protocol and Justification of Merger, Lincx was merged into Amil Assistência, based on accounting balances verified on the date of merger. Logserv Serviços de Logística Ltda. ( Logserv ) In July 2011, through a quota purchase agreement, Esho acquired 99.99% of the company, whose purpose is in-transit storage of office, graphic and consumption supplies, inventory control, labeling, logistics, purchases management and intermediation. 21/98

22 Corporate restructuring The Boards of Directors of Amil Participações and Medial Saúde, in meetings held on April 12, 2010, approved to submit to their shareholders a corporate restructuring proposal involving Amil Participações and its subsidiaries Amil Assistência and Medial Saúde. In June 2010, with the completion of the restructuring, Medial Saúde became an integral subsidiary of Amil Assistência, which became an integral subsidiary of Amil Participações. According to the corporate restructuring proposal, the minority shareholder of Medial Saúde could exercise the right to withdraw or exchange its shares for Amil Assistência shares and then for Amil Participações shares, in accordance with valuation report prepared by a specialized and independent company. The period for Medial Saúde shareholders to exercise their right to withdraw after the incorporation, by Amil Assistência, of 100% of Medial Saúde shares ended on June 2, The reimbursement due to the exercise of right to withdraw amounted to R$ 24,271, corresponding to R$ per share and was paid on June 9, On June 30, 2010, Amil Assistência entered into a Share Purchase Agreement to pay the same amount. Shareholders who, after the merger of Medial Saúde shares, remained with a fraction of share issued by Amil Assistência after the operation, received shares from Amil Participações in replacement of Amil Assistência shares. In 1Q10, the Company redeemed R$ 557,223 of its investment funds to settle the purchase of 45.7% of Medial Saúde and raised R$ 450,000 with the issuance of two debentures to set again its funds available (see Note 18). 2. Accounting policies 2.1 Declaration of conformity and preparation basis The financial statements of the Company and its subsidiaries for the years ended are expressed in thousands of Reais, unless otherwise stated, and include: The individual financial statements of Amil Participações were prepared in accordance with the accounting practices adopted in Brazil, based on the provisions contained in the Brazilian Corporate Law - Law 6,404/76 - amended by Laws 11,638/07 and 11,941/09, on the rules issued by the Brazilian Securities and Exchange Commission ( CVM ), and on Pronouncements, Guidelines and Interpretations issued by the Brazilian Accounting Standards Board ( CPC ). 22/98

23 These individual quarterly information, in accordance with the Brazilian laws, state the valuation of investments in subsidiaries by the equity method. Therefore, these statements are not considered as in compliance with the International Financial Reporting Standards ( IFRS ), which require the valuation of these investments in separate financial statements of the controlling company by their fair value or cost. The consolidated financial statements prepared according to the accounting practices adopted in Brazil, which comprise the CVM rules and technical pronouncements issued by CPC, which comply with the International Financial Reporting Standards ( IFRS ), issued by the International Accounting Standards Board ( IASB ), and interpretations issued by the International Financial Reporting Interpretations Committee ( IFRIC ). The Company s Board of Directors approved the individual and consolidated financial statements on March 12, 2012, considering the subsequent events occurred up to that date. 2.2 Main accounting practices Consolidation basis The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards ( IFRS ), accounting practices adopted in Brazil and rules set forth by CVM, and included the Company and its direct and indirect subsidiaries as explained in Notes 1 and The subsidiaries are fully consolidated from the date on which the Company obtains control and continue to be consolidated until the date that control no longer exists. A change in the interest in a subsidiary that does not result in loss of control is recorded as a transaction between shareholders, in the shareholders' equity. The accounting practices were materially applied to all consolidated companies and are the same accounting practices as the ones used in previous periods. Investments in direct and indirect subsidiaries are eliminated in the consolidated financial statements, as well as all records deriving from intercompany transactions Investments and business combinations The interest in subsidiaries is valued by the equity method. Investment properties are recorded by fair value method. The variation verified in the initial adoption was recorded in shareholders equity (other comprehensive 23/98

24 income) on December 31, Subsequent variations in the fair value of these investment properties are being recorded in the income statement. The Company adopts the acquisition method in business combinations, when it acquires control. In these operations, the identifiable assets acquired and contingent liabilities assumed in a business combination are firstly measured by fair values on the acquisition date. The Company recognizes the minority interest in the acquired company by the proportional amount of minority interest in the fair value of the acquired company s net assets. The excessive payment transferred and the fair value on the acquisition date of any previous equity interest in the acquired company in relation to the fair value of interest from the group of identifiable net assets acquired is recorded as goodwill. When the payment transferred is lower than the fair value of net assets of the subsidiary acquired, the difference is directly recognized in the statement of income for the year. The goodwill recorded as intangible asset is not subject to amortization. The goodwill is attributed to each cash generating unit and the annual impairment test is conducted at least in the fourth quarter. Once identified that the goodwill recorded is impaired, the corresponding portion of goodwill is definitively written off in the profit and loss statement. 24/98

25 financial statements include the following direct and indirect subsidiaries: Total Interest (%) Acquisition/ restructuring 12/31/ /31/2010 Direct subsidiaries Health plans operators Amil Assistência Médica Internacional S.A. jun/ % % Amico Saúde Ltda. jun/ % 99.99% Indirect subsidiaries Health plans operators Amil Planos Amil Planos por Administração Ltda. jun/ % 99.99% ASL Assistência à Saúde Ltda. aug/ % 99.99% Excelsior Med S.A. sep/ % % Medical Hospital Assistance Aeromil Aeromil Táxi Aéreo Ltda. jun/ % % Cemed Care Empresa de Atendimento Clínico Geral Ltda. jun/ % % TotalCor Orion Participações e Administração Ltda. aug/ % % Medial Saúde Amil Saúde Ltda. dec/ % % HAT - Hospital Alvorada Taguatinga Ltda. dec/ % % Esho Empresa de Serviços Hospitalares S.A feb/ % 98.85% CEAME Centro Especializado de Atendimento à Mulher S/S Ltda. aug/ % % Excellion - Excellion Serviços Biomédicos S.A. dec/ % 96.00% Other investments Hangar - Hangar 116 Participações e Investimentos Ltda. jun/ % 99.98% Bosque Bosque Medical Center S.A. jun/ % % Promarket Promarket Propaganda e Marketing Ltda. jun/ % % IMED Imed Star Serviços Médicos e Odontológicos Ltda. oct/ % % ETHO Empresa de Tecnologia Hospitalar Ltda. aug/ % 50.01% Logserv - Logserv Serviços de Logística Ltda. jul/ % - 25/98

26 2.3 Recognition of revenue and cost related to the provision of services Revenues from services include premiums arising from operations with health plans and medical hospital assistance to the Company s members and beneficiaries from other operators. These revenues are recognized to the extent it is probable that economic benefits will be generated and if it can be reliably measured, revenue is measured based on the fair value of payment received, excluding discounts, rebates and taxes or charges on sales. Income from payments are recorded by the amount corresponding to the daily apportionment pro rata die - of the individual coverage period of each contract, counted as of the first coverage date. Revenues from medical hospital assistance to third parties are appropriate by the accrual basis. Medical costs include claims, medical and dental services provided by accredited network of the plans sold by controlled operators and the costs related to the services provided in the Company s own network. Claims are recorded based on the amount of the invoices presented by the accredited network. As part of such invoices is not presented within its accrual period, the events occurred and not reported are recorded upon provisioning. Costs with own network are recorded in the results when incurred. 2.4 Functional currency and presentation currency of the quarterly information The Company s functional currency is the Real, the same currency of preparation and presentation of the quarterly information. 2.5 Cash and cash equivalents It includes cash, positive balances in checking accounts, financial short-term investments and with insignificant risk of changing their market value. The financial investments included in the cash equivalents are classified under financial assets measured at fair value through profit and loss statement held for trading (see Note 4). 2.6 Health premiums receivable They are recorded and held in the balance sheet at the nominal value of the representative securities of such credits, as a balancing item in the income account of payments of health insurance operations. The allowance for losses on credits of accounts receivable is recorded for the amounts receivable from beneficiaries whose securities are more than 90 days past due for legal entities and, more than 60 days past due for individuals. The Company s management periodically reviews the criteria for recording such provision in order to fit it into the development of non-performance by its customers. 26/98

27 2.7 Accounts receivable from other activities These are registered and held in the balance sheet by the nominal value of securities representing credits by services not related to health plans, against the account revenue with other activities. The allowance for losses on credits of other activities is recorded for amounts past due for over 180 days. The Company s management periodically reviews the recording criteria to fit it into the development of delinquency of these operations. 2.8 Inventories Inventories are recorded by the average acquisition cost and stated in the balance sheet by the lower amount between cost and realization. Inventories represent medical hospital, nutrition supplies and medicines used by own network in healthcare services, as well as property related to real estate activity developed by the indirect subsidiary Bosque Medical Center. 2.9 Fixed assets They are recorded at acquisition, formation or construction cost. The Company chose not to evaluate its fixed assets by fair value as deemed cost. Considering the characteristics and controls over its fixed assets, the Company believes that the cost method is the best for evaluating the fixed assets. Depreciation is calculated according to the straight-line method based on the assets estimated useful life, at the rates mentioned in Note 16. The remaining economic and useful life of its fixed assets is annually reviewed, with effects prospectively recorded Commercial leasing Financial lease agreements are recognized in the fixed assets and in the loan and financing liabilities at the present value of the compulsory minimum installments of the agreement or fair value of assets, whichever is the lowest, increased, when applicable, by the initial direct costs incurred in the transaction. The assets depreciation is calculated according to the straight-line method at the rates mentioned in Note Intangible assets Intangible assets acquired separately are measured in the initial recognition at acquisition cost and later deducted from the accumulated amortization and impairment losses, when applicable. Intangible assets generated internally are recognized in the income for the period. The intangible assets with defined useful life span are amortized 27/98

28 in accordance with their estimated economic- useful life and when indications of impairment are identified, the intangible assets are submitted to impairment tests, as well as assets with undefined useful life span. The period and the amortization method for an intangible asset with indefinite useful life are reviewed at least at the end of each year. Changes in the estimated useful life or the expected consumption of future economic benefits of these assets are registered by changes in the amortization period or method, as appropriate, and treated as changes in accounting estimates. Goodwill generated in the acquisitions was amortized under the straight-line method up to December 31, 2008, when it was determined by Law 11,623/07 that they would only be subject to annual test of adjustment to their probable recoverable value (see Note 17) Asset impairment tests The management annually revises the net book value of its assets with the purpose of assessing events that may identify impairment; a provision for impairment is recorded, when necessary, for the net accounting amount to the recoverable amount. The recoverable amount of an asset or a particular cash-generating unit is defined as the higher between value in use and net sales value. In the estimate of the value in use of the asset, the estimated future cash flows are discounted to present value, using a discount rate before tax that reflects the Company s weighted average cost of capital. The net sales value is determined, whenever possible, based on a firm guarantee sale agreement on a commutative basis transaction, between knowledgeable and willing parties, adjusted for expenses attributable to the asset sale, or when there is no firm guarantee sale agreement, based on market price of an active market or the latest price of transaction with similar assets Other assets and liabilities (current and non-current) Assets are recognized in the balance sheets when it is probable that their future economic benefits will be generated in behalf of the Company and their cost or value may be measured with assurance. Liabilities are recognized when the Company has a legal or recorded obligation as result of an event in the past, for which it is probable that an economic resource be required in order to settle it. They are increased, when applicable, by the corresponding charges and monetary and exchange variations incurred. The provisions are recorded with basis on the best estimates of the risk involved. The assets and liabilities are classified as current when their realization or liquidation will probably occur in the following twelve months. Otherwise, they are stated as noncurrent assets and liabilities. 28/98

29 2.14 Technical provisions They are calculated based on the methodology established by the RN ANS 160/07 or special methodology, based on the actuarial technical note, except for the provision of events to be settled, which is calculated based on the billings from health assistance service providers effectively received by the health plans operators as established by RN ANS 209/09. Additionally, the Company performs liability adequacy test in order to verify if the technical provisions recorded are sufficient to meet contractual obligations (see Note 18) Advances from clients Basically, billings issued and received in advance to its coverage period. This liability is represented by the obligation of providing services and if otherwise it does not happen, by the return of the money received Loans and financing They are recorded by their principal amount, plus proportional financial charges up to the balance sheet date. Foreign currency-denominated loans were translated into Reais at the exchange rate as of balance sheet dates. The gains earned and losses incurred due to these agreements are recognized as financial income and expenses, respectively Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) The income tax and social contributions expenses are recognized in the income statement of the year, except for transactions directly recognized in comprehensive income, for which the tax is also recognized in comprehensive income. The provision for income tax is individually calculated by group entity based on tax rates and tax rules in force at the location of the entity. The recognition of deferred tax is based on temporary differences between book value and the value for tax basis of assets and liabilities, on registered tax losses and negative basis of calculation of social contribution on net income, so far their achievements were considered likely against future taxable income. The deferred income taxes assets and liabilities are offset when there is a right legally practicable to offset tax assets against tax liabilities and when the deferred income tax assets and liabilities are related to income taxes issued by the same taxation authority on the same entity taxable. 29/98

30 2.18 Derivative financial instruments a) Financial assets The Company classifies financial assets according to the purpose for which they were acquired and determines the classification at initial recognition in the following category: Measured at fair value through income - are recorded in this category purchased financial assets held for trading, with the purpose of selling in the short term b) Financial liabilities Financial liabilities are classified as "Other financial liabilities" (including loans and financing) and are initially measured at fair value, net of transaction costs and, subsequently, measured at amortized cost using the method of effective interest rate, and interest expenses are recognized based on income. The method of effective interest rate is a method that calculates the amortized cost of a liability and allocates interest expenses over the relevant period. The effective interest rate is one that discounts exactly the estimated future cash payments through the expected life of the financial liability or, where applicable, for a shorter period. c) Hedge operations They are only recognized as from the date in which the Company and/or its subsidiaries become party of its contractual provisions. When recognized, they are initially recorded at their fair value increased by costs of transaction that are directly imputed to their acquisition or issue. Their subsequent measurement occurs on balance sheet date in accordance with the rules established for each type of classification of financial assets and liabilities (see Note 33) Earnings per share Basic earnings per share are calculated based on the net income attributed to controlling shareholders and on the average number of outstanding shares in the years. Diluted earnings per share considers the same calculation as for basic earnings, however, the number of outstanding shares is adjusted by the dilution potential of outstanding stock options. 30/98

31 2.20 Contingent assets and liabilities and legal obligations Contingent assets Are recognized only when there is collateral security or favorable judicial decisions deemed final and unappealable. The contingent assets with probable success are only disclosed in explanatory notes; Contingent liabilities Are provisioned when the losses are evaluated as probable and the amounts involved are measurable with sufficient assurance. The contingent liabilities evaluated as possible losses are only disclosed in explanatory notes and the contingent liabilities evaluated as unlikely losses are not provisioned nor disclosed; Legal liabilities Are recorded as long-term liabilities, regardless of the evaluation of the possibility of success of the claims in which the Company and/or its subsidiaries called into question the unconstitutionality of taxes Present value adjustments of monetary assets and liabilities The long-term monetary assets and liabilities are monetarily restated and, therefore, are adjusted to present value. Based on the analyzes performed and the best estimate of management, the Company concluded that the present value adjustment of monetary current assets and liabilities is irrelevant in relation to the financial statements taken as a whole, and thus did not record any adjustment Stock Option Plan The share-based payment, qualified as an equity instrument is set forth by the fair value of granted options, established at the granting date of each program, through the options pricing model Black Scholes, and it is recognized as expenses against shareholders equity during the grace period of right to option, comprised between the granting date and the date at which the exercise right is acquired. 31/98

32 2.23 Statement of value added ( DVA ) This statement of value added aims at evidencing the wealth created by the Company and its subsidiaries and its distribution during a given year and is reported as required by the Brazilian Corporate Law, as part of its individual financial statements and as additional information to the consolidated financial statements, since this is not an estimated nor mandatory statement, according to international financial reporting standards IFRS Pronouncements not yet in force on December 31, 2011 Pronouncements, interpretations and changes in existing rules that are not yet in force and were not adopted by the Company in advance. We list below the rules issued that had not yet come into force until the date of the disclosure of the Company's financial statements. IAS 1: Presentation of Financial Statements Presentation of items from Other Comprehensive Income IAS 12: Income tax - Recovery of Underlying Assets IAS 19: Benefits to employees (Amendment) IAS 27: and Individual Financial Statements (reviewed in 2011) IAS 28: Investment accounting in Associates and Joint Ventures IFRS 7: Financial Instruments: Disclosures Increase in Disclosures Related to Write-offs IFRS 9: Financial Instruments: Classification and Measurement IFRS 10: Financial Statements IFRS 11: Joint agreements IFRS 13: Fair Value Measurement Considering the current operations of the Company and its subsidiaries, Management does not expect that these new rules, interpretations and changes have a material effect on the financial statements from its adoption. 32/98

33 Brazilian Accounting Standards Board ( CPC ) has not yet issued their pronouncements and changes related to new and revised IFRSs listed above. Due to the commitment of the CPC and the Brazilian Securities and Exchange Commission ("CVM") to keep updated the set of rules issued based on the updates made by the International Accounting Standards Board - IASB, it is expected that these pronouncements and changes to be edited by the CPC and approved by CVM until the date of its mandatory publication. 3. Judgments, estimates and significant accounting assumptions The preparation of the financial statements of the Company and its subsidiaries requires the Management to judge, estimate and adopt assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, as well as the disclosure of contingent liabilities, on the reference date of the quarterly information. However, the uncertainty related to these assumptions and estimates may lead to results that would require a significant adjustment to the book value of asset or liability in future periods. 3.1 Deferred Corporate Income Tax and Social Contribution on Net Income The Company and its subsidiaries recognize the deferred assets and liabilities based on differences between the book value presented in the financial statements and tax basis of assets and liabilities using tax rates in force. The Company regularly reviews the deferred tax assets in terms of possibility of recovery, considering the generator historical profit and projected future taxable income, according to a technical feasibility study. 3.2 Fair value of investment properties The Company and its subsidiaries present their investment properties at fair value, with changes in fair value recognized in the income statement. The Company hired a specialized independent company to determine the fair value at December 31, For investment properties, the specialized company used technique of assessment at market value. The main assumptions used to determine the fair value of investment property are detailed in note /98

34 3.3 Reduction in recoverable value of goodwill (impairment) To determine whether the goodwill has a reduction in its recoverable amount, is necessary to estimate the value in use of cash-generating units to which goodwill has been allocated. The calculation of the value in use requires management to estimate the future cash flows expected from the cash-generating units and an appropriate discount rate, for present value to be calculated. 3.4 Useful life of fixed assets and intangible assets of definite useful life As described in notes 2.9 and 2.11, the Company and its subsidiaries review the estimated useful lives of fixed assets and intangible assets of definite useful life annually. During the current year, the management kept the useful life of fixed assets and changed the estimate of the remaining useful life of its healthcare members portfolios (intangible asset), due to the membership loss history of these portfolios. 3.5 Evaluation of contingent liabilities The Company and its subsidiaries recognize a provision for tax, civil, regulatory and labor liabilities, as described in note 24. These provisions are recorded only when the possibility of loss is considered probable by the Company s legal department and its legal counselors. The record of contingencies occurs when the amount of loss can be reasonably estimated. By their nature, contingencies will be resolved when one or more future events occur or fail to occur. Typically, the occurrence of such events does not depend on the performance of the Company, which hinders the realization of precise estimates about the date that such events will be verified. Assessing such liabilities, particularly in the uncertain legal environment in Brazil, as well as in other jurisdictions involves the exercise of significant estimates and judgments of management regarding the results of future events 3.6 Transactions with share-based payments The Company and its subsidiaries measure the cost of transactions settled with shares with employees based on fair value of the equity instruments at the date of the grant. The estimate of the fair value of share-based payments requires determining the most appropriate valuation model for the granting of equity instruments, which depends on the terms and conditions of the grant. That also requires the determination of more 34/98

35 appropriate data for the valuation model, including the expected life of the option, volatility and dividend yield, and corresponding assumptions. The assumptions and models used to estimate the fair value of the share-based payments are disclosed in note Provision for incurred but not reported events (IBNR) The controlled healthcare operators record, monthly, provision for incurred but not reported events (IBNR) to make the payments of the events which have not been recorded in the books. The amount of this provision is estimated according to own actuarial calculation or by the method established by ANS. 3.8 Valuation of assets acquired and contingent liabilities assumed in business combinations The Company allocates the cost of the acquired entity to assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Any difference between the cost of the acquired company and the fair value of assets acquired and liabilities assumed is recorded as goodwill. The Company exercises significant judgment in the process of identifying tangible and intangible assets and liabilities and valuation of such assets and liabilities and determination of its remaining useful life. The valuation of these assets and liabilities is based on assumptions and criteria that in some cases, include estimates of future cash flows discounted at the appropriate rates and may result in different estimated values of assets acquired and liabilities assumed. The Company believes there are not indicative of a material change in estimates and assumptions used to complete the allocation of the purchase price and estimate the fair value of assets acquired and liabilities assumed. 4. Cash and cash equivalents Controlling Company 12/31/ /31/ /31/ /31/2011 Cash and banks (i) , ,645 Exclusive Investment fund (ii) Fixed income investment funds quotes 4,996 2, , ,090 Other Investment funds (iii) ,523 78,892 CDB (iv) ,954 24,176 Total 5,897 2, , ,803 (i) Funds to cover payment of healthcare services due on the first ten-day period of each month; 35/98

36 (ii) Financial investments in exclusive investment fund are made according to investment policy defined by company s management. These investments are short-term ones, subject to changes in interest rates in the financial market, to the credit risk of its issuers, and are indexed to the Interbank Deposit Certificate variation ( CDI ). The Company may be called into question due to the fund s operating rates (management, custody and audit). For presentation purposes, the exclusive investment fund is consolidated. (iii) Financial investments in other investment funds are short-term ones and are indexed to the Interbank Deposit Certificate variation ("CDI"). The market value of the these financial investments quotas was determined based on the values of quotas disclosed by the fund managers; (iv) Financial investments in CDB (Bank Deposit Certificate), are issued by renowned banks, have daily liquidity and its remuneration is indexed to the Deposit Certificate variation ( CDI ). These investments may, at any time be redeemed without prejudice to its income. 5. Financial investments 12/31/ /31/2010 Linked financial investments Fixed income investment funds quotes 226, ,918 Managed portfolio Fixed income investment funds quotes 408, ,612 Subtotal 635, ,530 Non-linked financial investments Exclusive investment fund Debentures 3,568 4,973 Term deposits 19,760 - Investment funds in receivables quotes 6,251 - Fixed income investment funds quotes 4,482 3,538 Subtotal 34,061 8,511 Total 669, ,041 Linked financial investments guarantee technical provisions and contingencies related to SUS reimbursement of group operators (see Note 18). The operation of these funds is in compliance with rules established by ANS. 36/98

37 6. Healthcare receivables The balance of the healthcare receivable accounts refers to amounts to be paid by the health insurance members of the subsidiaries, as follows: Breakdown by type of plan 12/31/ /31/2010 Medical and hospital plans Corporate plans 377, ,220 Individual plans 332, ,643 Subtotal 710, ,863 Dental plans Corporate plans 12,486 8,573 Individual plans 3,435 3,138 Subtotal 15,921 11,711 Advanced billing (i) (522,187) (399,079) Total 203, ,495 Allowance for losses on credits (78,071) (44,255) Total, net 125, ,240 (i) Invoices related to healthcare operations of medical and hospital plans are issued and recorded for services delivered in periods ranging from three to six months. However, so as to have its consolidated revenues stated on an accrual basis, the Company s amounts referring to subsequent months are recorded in the write-down account named advanced billing., Breakdown by aging list 12/31/ /31/2010 Falling due 9,987 11,974 Past due For 30 days or less 88,382 65,593 From 31 to 60 days 35,102 27,092 From 61 to 90 days 16,697 15,783 From 91 to 120 days 11,752 7,426 For more than 121 days 41,995 16,627 Subtotal 193, ,521 Total 203, ,495 37/98

38 Breakdown of allowance for losses 12/31/ /31/2010 Balances at the beginning of the period (44,255) (59,868) Recordings (490,456) (269,227) Reversals 446, ,257 Write-offs 13,100 68,289 Acquisition of companies (2,740) (8,706) Balances at the end of the period (78,071) (44,255) 7. Accounts receivable from other activities The balance of this group refers to amounts receivable from customers due to services not related to healthcare plans, basically hospital assistance to people who are not insured by the healthcare plans traded by the Company s subsidiaries, whose breakdown is shown bellow: Breakdown by type of customer 12/31/ /31/2010 Corporate 121,113 81,315 Individual 11,516 6,517 Total 132,629 87,832 Allowance for losses on credits (32,786) (23,258) Total, net 99,843 64,574 Breakdown by aging list 12/31/ /31/2010 Falling due 52,006 31,453 Past due For 30 days or less 26,946 8,586 From 31 to 60 days 10,841 5,811 From 61 to 90 days 3,533 4,318 From 91 to 120 days 2,067 9,482 From 121 to 150 days 1,968 2,052 From 151 to 180 days 2,482 2,872 For more than 180 days 32,786 23,258 Subtotal 80,623 56,379 Total 132,629 87,832 38/98

39 Breakdown of allowance for losses 12/31/ /31/2010 Balances at the beginning of the period (23,258) (8,555) Recordings (41,479) (17,375) Reversals 16,781 4,479 Write-offs 18,115 3,962 Acquisition of companies (2,945) (5,769) Balances at the end of the period (32,786) (23,258) 8. Inventories 12/31/ /31/2010 Medical hospital supplies 11,199 9,304 Medicine 10,042 5,966 Graphic material 3,730 3,404 Properties under construction (i) - 24,004 Other 7,412 3,501 Total 32,383 46,179 (i) Costs incurred in the construction of real estate intended for sale. On December 13, 2011, with the certidão de habite-se (dwellcertificate) issued for the property, we recognized the end of the risk of transfer of the asset. It was recognized as a cost in the year the amount of R$ 33,454 and transferred to the fixed asset the amount of R$ 9, Dividends and interest on capital stock receivable In December 2011, the subsidiary Amil Assistência provisioned dividends in the amount of R$ 1,216 related to allocation of net income for 2011 and the subsidiary Amico Saúde approved the distribution of interest on capital stock, in the gross amount of R$ 5,106 (R$ 4,339 net of withholding income tax), calculated on the balance sheet as of November 30, In February 2012, the interest on capital stock was fully received. 39/98

40 10. Tax credits Controlling Company 12/31/ /31/ /31/ /31/2010 IRPJ and CSLL 21,504 14,637 95,550 54,234 PIS and COFINS - - 9,087 6,180 Other ,465 8,514 Total 21,504 14, ,102 68,928 Short-term 21,504 14, ,128 67,954 Long-term Total 21,504 14, ,102 68, Other credits 12/31/ /31/2010 Advance to suppliers (i) 16,386 38,296 Credits with employees 11,025 10,955 Swap 7,978 6,773 Certificates of judgment debt of the government (ii) 6,936 9,624 Advanced expenses 6,811 5,457 Credits on the sale of properties 1,859 9,265 Other 9,199 10,826 Total 60,194 91,196 Short-term 54,721 80,579 Long-term 5,473 10,617 Total 60,194 91,196 (i) (ii) Subsidiaries make advances for the accredited hospital and laboratory chains for the coverage of costs of healthcare to insured members, settled in the subsequent months, against the presentation of documents supporting the costs incurred. Subsidiary Esho executed an escrow deposit to guarantee the acquisition of certificates of judgment debt of the government from third parties. Should the State Revenue do not ratify these credits upon the settlement of this subsidiary ICMS debits, funds pledged as security will be refunded to its cash. 40/98

41 12. Escrow deposits Controlling Company 12/31/ /31/ /31/ /31/2010 Tax PIS (Social Integration Program) ,010 10,064 COFINS (Tax for Social Security Financing) - - 4,730 3,647 ISS (Service Tax) SAT (Occupational Accident Insurance) (i) ,687 Other ,750 5,109 Subtotal ,237 35,254 Labor (ii) 2,708 2,430 28,857 17,777 Civil ,071 14,952 Total 3,184 2,916 71,165 67,983 (i) Refers to the questioning in court of the risk level rate applied on the staff. Amico Saúde deposited in court the remaining amount set forth by the INSS. In November 2011, due to judicial determination, these deposits were converted into definitive payment for INSS and the lawsuit was filed. The loss expectation of this lawsuit was considered probable and, consequently, these deposits were fully provisioned (see note 22). (ii) Refers to questioning in several claims relating to salary parity, overtime, additional payment for hazardous conditions, subsidiary liability, and other. Those escrow deposits related to disputes whose probability of loss is considered probable are properly provisioned, as presented in note Income tax (IRPJ) and social contribution (CSLL) 13.1 Income Tax and Social Contribution recognized in the income Income tax and social contribution recognized in the income statement are as follows: 41/98

42 Controlling Company 12/31/ /31/ /31/ /31/2010 Current income tax and social contribution: Current income tax and social contribution expenses - - (37,432) (34,679) Deferred income tax and social contribution: Related to constitution and reversion of temporary differences - - (53,983) (76,959) Tax loss and negative tax basis 17,467 21,290 (14,649) 27,480 Income tax and social contribution expenses presented in the income statement 17,467 21,290 (106,064) (84,158) The reconciliation of the IRPJ and the CSLL calculated at nominal and effective rates is presented as follows: 12/31/ /31/2010 Income before IRPJ and CSLL 284, ,785 Nominal tax rate 34% 34% Income tax and social contribution by nominal rate (96,841) (73,367) Adjustments to determine the effective rate Permanent differences Transition Tax Regime - RTT 12,086 1,547 Write-off of deferred tax credits (i) (29,643) (26,807) Other permanent differences (19,491) (20,588) Other (ii) 27,825 35,057 Income tax and social contribution on income (106,064) (84,158) Effective tax rate 37.24% 39.00% (i) Reversal of deferred Income Tax and Social Contribution by the expectation of future not realization and constitution of deferred Income Tax and Social Contribution on the goodwill amortization (ii) Basically goodwill amortization which, for accounting purposes, is fully provisioned. 42/98

43 13.2 Income tax and social contribution recognized directly in shareholders equity On December 31, 2010, was recognized directly in shareholders equity the amount of R$ 5,741 related to deferred income tax and social contribution taxes on the fair value of investment properties Deferred income tax and social contribution Are recorded to demonstrate future tax effects attributable to temporary differences between the tax bases of assets, liabilities, and its book value. Controlling Company 12/31/ /31/ /31/ /31/2010 Tax loss and negative CSLL tax basis 42,365 24, , ,720 Provision for contingencies ,733 48,387 Allowance for losses on credits ,755 17,731 Provision for events to be settled ,488 Other provisions ,158 24,160 Fair value valuation of investment properties - - (8,792) (5,741) Goodwill allocation in indirect subsidiaries (16,679) (18,309) Tax amortization of goodwill in incorporated companies (i) (121,345) (63,082) Other deferred tax liabilities - - (25,609) (18,551) Deferred tax asset (liabilitie), net 42,365 24,897 56, ,803 Demonstrated in the balance sheet as follows: (ii) Deferred tax asset 42,365 24,897 92, ,940 Deferred tax liabilitie - - (36,565) (29,137) Net deferred tax asset 42,365 24,897 56, ,803 (i) (ii) Goodwill generated in the acquisition of investments no longer booked amortized as of January 1, However, they were still amortized for tax purposes based on the Transition Tax Regime - RTT (Law 11,941/09). The income tax and social contribution net assets and liabilities are presented according to the net position of each company of the consolidated holding. The Management prepares feasibility studies of future realization of the deferred tax asset at the end of each year. This study is updated annually, considering the ability to generate taxable income and main aspects of the Company s business. In accordance with these projections, the deferred IRPJ and the CSLL are expected to be realized as follows: 43/98

44 Controlling Company , , , , , ,383 10, ,387 10, ,423 9, ,494 11, ,545 13,886 Total 42, ,717 Taxable income projections of future years were calculated based on the sector s growth track record, market estimates for GDP growth, inflation index and the management outlook for administrative costs and expenses over the next years. The Company s management considers that assumptions used and, consequently, the expectation of realization of deferred taxes reflects the goals to be achieved. Changes in political, tax, economic and regulatory scenarios may affect this framework. 14 Business combination Acquisitions in 2010 Esho In February 2010, in line with the rules established by the hospital management and purchase agreement executed in October 2007 with related parties, the subsidiary Amil Assistência acquired 99.99% and Amico 0.01% of Esho for R$ 60,082. The payment was agreed in 48 equal and successive monthly installments, adjusted by CDI (Overnight Brazilian Interbank Deposit Rate), with the first installment being paid in February The goodwill of R$ 1,190 includes the value of future economic benefits from synergies from the acquisition. 44/98

45 Acquisition of additional interest In October 2011, indirect subsidiary Esho incorporated Hospital Samaritano. Resulting from this merger, Esho proceeded with the replacement of shares of minority shareholders of Hospital Samaritano for shares from its own issue. Since this transaction, Esho has non-controlling shareholders. In November, 2011 indirect subsidiary Esho acquired from its minority shareholders absorbed after incorporation of Hospital Pró-Cardíaco, 19,132 shares at the price of R$ 100. These actions were recorded in treasury shares. ASL In August 2010, as part of the strategy of growth and expansion to the Northeast region of the Country, subsidiary Amil Assistência entered into an agreement for the acquisition of 99.99% of the capital of the health plan operator ASL for the amount of R$ 8,663, calculating goodwill of R$ 14,336 (R$ 2,926 of which were allocated as Brands and R$ 301 as clients portfolio). The payment was agreed as follows: R$ 4,298 as down payment, paid in July 2010; R$ 2,865 will be paid in 02 equal and successive installments, adjusted by IPCA; and R$ 1,500 as an additional installment. Hospital Pró-Cardíaco In May 2010, indirect subsidiary Esho entered into an agreement for the acquisition of of 92.47% of the capital of Hospital Pró-Cardíaco for the amount of R$ 101,694, calculating a goodwill of R$ (R$ 9,142 of which were allocated as Buildings and R$ 27,202 as Brands). The payment was agreed as follows: R$ 17,883, as down payment, in April 2010; R$ 37,413, in May 2010, upon the signature of the agreement; R$ 23,199, 12 months after the execution of the agreement, adjusted by CDI; and R$ 23,199, 24 months after the execution of the agreement, adjusted by CDI. The value of non-controlling interest in the acquired companies in 2010 of R$ 1,159 was represented by the proportional value of the share in net assets on the date of business combination and shown as a component of equity. 45/98

46 The fair values of identifiable assets and liabilities and goodwill of the acquired companies, registered at the respective dates of acquisition are as follows: Fair value recognized in the acquisition Esho ASL Hospital Pró-Cardíaco Current Assets 15,891 17,327 28,419 Non-current assets 8,913 1,241 10,134 Investment 12,590-1,718 Property and equipment 78, ,036 Buildings 2,311-21,675 Previous accounting value 2,311-12,533 Value allocated - - 9,142 Other 76, ,361 Intangible assets 482 3,227 27,752 Brands - value allocated - 2,926 27,202 Membership portfolio - value allocated Other Total Assets 116,332 22, ,059 Current liabilities 22,812 18,151 48,792 Non-current liabilities 34,628 6,322 15,530 Total liabilities 57,440 24,473 64,322 Shareholders equity 58,892 (2,446) 51,737 Non-controlling interest - - (1,159) Goodwill in the acquisition 1,190 11,109 51,116 Total amount of acquisition 60,082 8, ,694 46/98

47 Acquisitions in 2011 Amilpar, with the support of specialized companies, is working in the allocation of the purchase price of the acquisitions made in 2011, according to accounting standards set by CPC 15 - Business Combinations. Based on preliminary analysis, the Company opted to temporarily classify the difference between the amount paid and the book value of these acquisitions as buildings, brands, clients portfolio and goodwill for expected future profitability. Excelsior In February 2011, the subsidiary Amil Assistência entered into an agreement for the acquisition of 100% of capital of the health plan operator Excelsior for the amount of R$ 50,130. The transference of control was approved by ANS only in September Of the total goodwill calculated in the transaction, in the amount of R$ 52,976, the Company temporarily classified R$ 17,661 as buildings, R$ 9,497 as brands and R$ 8,991 as clients portfolio. The payment was agreed as follows: R$ 1,980, as down payment, paid in September 2010; R$ 14,445 paid in February 2011; and R$ 33,705 to be paid in 8 quarterly installments, adjusted by CDI. Hospital Samaritano In February 2011, indirect subsidiary Esho entered into an agreement for the acquisition of 83.94% of the capital of Hospital Samaritano for the amount of R$ 160,772, recording a goodwill of R$ 125,693 (R$ 30,982 of which were temporarily allocated as buildings and R$ 29,096 as brands). The acquisition amount shall be paid as follows: R$ 15,965 paid in February 2011; Installment 1: R$ 26,061 paid in March 2011; Installment 2: R$ 38,360 adjusted by the CDI, paid in July 2011; and Installments 3 to 6: R$ 80,386 to be paid in four equal and biannual installments, adjusted by the CDI, payable from January In October 2011, the indirect subsidiary Esho incorporated Hospital Samaritano. As a result from this incorporation, Esho proceeded with the exchange of shares of minority shareholders of the Hospital Samaritano for shares from its own issuance. 47/98

48 The value of non-controlling interest in the companies acquired in 2011 in the amount of R$ 6,707 was represented by the proportional value of the share in net assets on the date of business combination and shown as a component of equity. Hospital Pasteur In April 2011, indirect subsidiary Esho signed an agreement for the acquisition of 99.99% of the capital of Hospital Pasteur for the amount of R$ 90,000, recording a goodwill of R$ 90,726 (R$ 36,617 of which were temporarily allocated as Buildings and R$ 9,865 as Brands). The acquisition amount shall be paid as follows: Down payment: R$ 3,815 paid in April 2011; R$ 85,000, paid in 34 monthly installments adjusted by IPCA from May 2011; and R$ 1,185 to be paid in March 2014, adjusted by IPCA. Lincx In July 2011, the Company through its subsidiary Amil Assistência, signed a Purchase Agreement with the controlling shareholders of Lincx Sistemas de Saúde Ltda. ( Lincx ), for the acquisition of 99.99% of its total capital, for the amount of R$ 170,000, recording a goodwill of R$ 176,183. The transference of the controlling interest was also approved in July 2011 by ANS. The acquisition amount shall be paid as follows. Down payment: 35% of the acquisition price, equivalent to R$ 59,500, paid in July 2011; Installment 1: R$ 25, 500, adjusted by CDI, paid in October 2011; Installment 2: R$ 59,500, adjusted by CDI, in January 2012; and Installment 3: R$ 25, 500, adjusted by CDI, to be paid in July The fair values of identifiable assets and liabilities and goodwill of the acquired companies, registered at the respective dates of acquisition are as follows: 48/98

49 Excelsior Fair value recognized in the acquisition Hospital Samaritano Hospital Pasteur Lincx Current Assets 30,966 41,609 6,605 35,330 Non-current assets 606 1,024 1,324 - Investment Property and equipment 31,403 68,804 51,926 1,133 Buildings 21,521 49,539 46, Previous accounting value 3,860 18,557 9, Value allocated 17,661 30,982 36,617 - Other 9,882 19,265 5,884 1,103 Intangible assets 20,915 29,266 9,929 - Brands - value allocated 9,497 29,096 9,865 - Membership portfolio - value allocated 8, Other 2, Total Assets 83, ,738 69,784 36,463 Current liabilities 42,267 26,395 17,716 28,550 Non-current liabilities 8,320 12,479 6,312 14,096 Total liabilities 50,587 38,874 24,028 42,646 Shareholders equity 33, ,864 45,756 (6,183) Non-controlling interest - (6,707) - Goodwill in the acquisition 16,827 65,615 44, ,183 Total acquisition amount 50, ,772 90, , Investments Controlling Company 12/31/ /31/ /31/ /31/2010 Amil Assistência 2,469,599 1,978, Amico Saúde 390, , Advances for future acquisition of investment ,992 Investment properties (i) ,365 36,250 Other investments Total 2,859,745 2,367,632 38,435 38,313 49/98

50 (i) Investment properties, represented by properties held for rental gains and/or capital appreciation are recorded by fair value method, based on valuations conducted by a specialized and independent company. The main information on direct subsidiaries held on are summarized as follows: Amil Assistência Amico Saúde 12/31/ /31/ /31/ /31/2010 Current Assets 1,380,278 1,106, , ,296 Non-current assets 2,613,400 2,199, , ,593 Current liabilities 1,332,384 1,083, , ,688 Non-current liabilities 191, ,993 44,992 96,845 Shareholders' equity 2,469,599 1,978, , ,356 Net Revenues 6,809,387 4,156,314 1,548,889 1,291,867 Net Income 233, ,478 88,339 88,288 Number of shares/quotas 1,745,675 1,519, , ,771 Interest % % 99.99% 99.99% Equity income 233, ,478 88,339 88,288 Changes in investment balances of the Controlling Company for the years ended December 31, 2011 and 2010 are as follows: Amil Assistência Amico Saúde Total Balances on 12/31/2009 1,162, ,523 1,456,322 Capital increase 724,775 9, ,103 Other comprehensive income 10, ,557 Effects from initial adoption (IFRS) (1,053) (1,903) (2,956) Equity income 105,478 88, ,766 Goodwill on share subscription Dividends and Interest on capital stock (25,051) - (25,051) Balances on 12/31/2010 1,978, ,356 2,367,632 Capital increase 403, ,254 Other comprehensive income (5,794) 953 (4,841) Equity income 233,812 88, ,151 Dividends and Interest on capital stock (i) (140,115) (89,336) (229,451) Balances on 12/31/2011 2,469, ,146 2,859,745 (i) Dividends in the amount of R$ 142,946 (R$ 66,730 - Amico Saúde and R$ 76,216 - Amil Assistência) and Interest on Capital Stock in the amount of R$ 86,505 (R$ 22,606 - Amico Saúde and R$ 63,899 - Amil Assistência). 50/98

51 Changes in consolidated investment balances for the years ended are as follows: 12/31/ /31/2010 Balances at the beginning of the year 38,313 20,088 Addition - 2,063 Write-offs (i) (3,839) - Fair value adjustment 3,961 16,162 Balances at the end of the year 38,435 38,313 (i) Sale of property and write-off of down payment for future acquisition of investment. 16. Fixed assets Annual depreciation rate - % 12/31/ /31/2010 Accumulated depreciation Net Net Cost Own Land - 149, , ,512 Buildings 4 568,205 (86,165) 482, ,773 Facilities 10 90,930 (26,271) 64,659 40,295 Leasehold improvements in third parties properties 4 331,760 (78,042) 253, ,703 IT equipment 20 87,315 (67,153) 20,162 22,062 Hospital equipment ,078 (181,233) 104, ,098 Machinery 10 27,290 (6,958) 20,332 19,658 Furniture and fixtures ,231 (52,892) 56,339 48,173 Aircraft 4 50,910 (7,087) 43,823 26,356 Vehicles 20 16,139 (11,133) 5,006 3,120 Fixed assets in progress (i) - 197, , ,638 Subtotal 1,914,967 (516,934) 1,398,033 1,126,388 Leasing Vehicles 20 11,209 (4,608) 6,601 4,612 IT equipment 20 25,119 (8,699) 16,420 13,465 Hospital equipment 10 44,327 (8,367) 35,960 7,064 Furniture and fixtures 10 3,896 (604) 3, Subtotal 84,551 (22,278) 62,273 25,304 Total 1,999,518 (539,212) 1,460,306 1,151,692 51/98

52 (i) It mainly refers to expenditures incurred by subsidiaries Amico Saúde and Cemed Care to build properties of its network, amounting to R$ 27,588 (R$ 60,485 on December 31, 2010), and Bosque, amounting to R$ 114,833 (R$ 73,481 on December 31, 3010), to build Hospital das Américas in Rio de Janeiro. Breakdown of fixed assets Land, buildings, facilities, facilities and improvements Equipment, machinery, furniture and fixtures Construction in progress Other Total Balances on 12/31/ , , ,720 33, ,587 Additions 69,595 42,599 85,626 4, ,750 Write-offs (1,402) (88) (298) (43) (1,831) Depreciation (33,978) (47,642) - (6,849) (88,469) Transfer 179,842 5,807 (176,533) 26 9,142 Acquisition of companies 44,990 48,198 26,123 2, ,513 Balances on 12/31/ , , ,638 34,088 1,151,692 Additions 60,416 63,382 89,295 32, ,313 Write-offs (48) (56) (14) (368) (486) Depreciation (47,513) (44,722) - (6,210) (98,445) Transfer 167,808 2,078 (77,693) (5,602) 86,591 Acquisition of companies 53,289 9,985 11,065 1,302 75,641 Balances on 12/31/ , , ,291 55,430 1,460,306 Review of assets economic-useful life The Company and its subsidiaries annually analyze the term of remaining economic-useful life of fixed assets. In 2010, as a result of this review, the weighted average annual depreciation rate of aircraft decreased from 10% to 4%, with effects recorded as of January 1, /98

53 17. Intangible assets Annual amortization rate - % 12/31/ /31/2010 Accumulated amortization Net Net Cost Defined useful life Software (i) ,235 (69,794) 58,441 60,258 Clients portfolio (ii) 26 62,382 (22,351) 40,031 40,039 Point-of-sales 3 6,055 (554) 5,501 5,730 Brands 26 9,497 (1,739) 7,758 - Non-competition agreement 20 3,506 (1,461) 2,045 2,746 Software - leasing 20 1,677 (88) 1, Subtotal 211,352 (95,987) 115, ,089 Undefined useful life Goodwill in indirect subsidiaries (iii) Excelsior 16,827-16,827 - Bosque 22,777 (2,833) 19,944 19,944 ASL 11,109-11,109 11,109 Esho 1,190-1,190 1,190 51,903 (2,833) 49,070 32,243 Goodwill in merged subsidiaries (iii) Amesp Sistema 253,000 (84,333) 168, ,667 Medial Saúde 182, , ,123 Lincx 176, ,183 - Blue Life 160,515 (21,318) 139, ,197 Hospital Samaritano 65,615-65,615 - Hospital Pasteur 44,244-44,244 - Hospital Pró-Cardíaco 51,116-51,116 51,116 Grupo Life 72,796 (6,466) 66,330 66,330 Clinihauer 46,686 (35,747) 10,939 10,939 Grupo Saúde 33,418 (1,671) 31,747 31,747 Santa Lúcia 23,360-23,360 23,360 Med Card Saúde 20,713 (2,751) 17,962 17,962 Semic 19,660 (3,768) 15,892 15,892 HCB 17,144-17,144 17,144 SAE Serviços de Análise 11,800 (224) 11,576 11,576 Ampla 9,219 (839) 8,380 8,380 UN Diagnósticos 6,946 (1,023) 5,923 5,923 E-Nova Odontologia 2,086 (730) 1,356 1,356 Hospital Ipiranga 363 (26) ,197,227 (158,896) 1,038, ,049 Brands 584,851 (2,945) 581, ,891 Subtotal 1,833,981 (164,674) 1,669,307 1,331,183 Total 2,045,333 (260,661) 1,784,672 1,440,272 (i) Basically, the acquisition of licenses and customization of corporate systems. 53/98

54 (ii) (iii) In 2011, based on membership loss history, the Company revised its estimate of remaining economic useful life of its membership portfolio. As a consequence of this revision, the weighted average annual amortization rate of these intangible assets was changed to 26%, and an expense, in the amount of R$ 8,999, was registered in the 2011 result. Goodwill generated in the acquisition of investments is based on future profitability expectation, supported by an independent expert s report and, up to December 31, 2008, they have been amortized over a period of ten years. Impairment test The Company conducted, in the fourth quarter of 2011, impairment test for all intangible assets with indefinite useful life recorded on December 31, 2011, as described in note The recoverable value of these assets was determined based on the value in use from cash flows discounted from cash generating units. These cash flows were calculated based on the track record of sector s growth, market estimates of GDP growth and inflation index, Management outlook for administrative costs and expenses for the next years and the discount rate based on the weighted average cost of Company s capital. As a result of this work, the Company fully wrote-off the value attributed to the brand Total Laboratórios (R$ 2,945), which was no longer used since then. In 2010 the Company wrote-off in the amount of R$ 5,632 from the goodwill of the acquisition of Clinihauer. Changes in intangible assets 12/31/ /31/2010 Balances at the beginning of the period 1,440,272 1,249,065 Additions Goodwill 388, ,176 Portfolio 8, Brands 48,458 30,128 Software 14,085 13,678 Acquisition of companies 4,023 1,070 Other items , ,108 Impairment write-offs Goodwill - (5,632) Brands (2,945) - (2,945) (5,632) (-) Transfers (i) (86,659) (9,142) (-) Amortization (29,682) (18,127) Balances at the end of the period 1,784,672 1,440,272 (i) Basically goodwill allocation in buildings. 54/98

55 18. Technical provisions 12/31/ /31/2010 Provision for healthcare claims payable (i) 419, ,237 Provision for incurred but not reported claims (ii) 529, ,436 Remission provision (iii) 3,315 3,060 Total 953, ,733 Short-term 951, ,495 Long-term 1,521 1,238 Total 953, ,733 (i) Provision to guarantee events already occurred, booked and not paid yet. RN ANS 209/09 determined the recording of this provision as of January 1, 2010, whose accounting registry is made at the full amount informed by the renderer or beneficiary at the moment of health plans operators collection. (ii) Provision to make the payment of events which already occurred and not yet reported. (iii) Provision for guarantee of obligations from the contractual clauses of remission of health plan premiums related to the coverage of health assistance executed with the beneficiaries of controlled operators and calculated by independent actuaries. Additionally, healthcare plan operators of the group are subject to the following requirements established by RN ANS n. 159/07: Minimum adjusted shareholders equity Base capital of R$ 5,596, multiplied by factor K, which depends on the region of trade and segment of the operator; Solvency Margin Maintain shareholders equity higher than 20% of the healthcare premium of the last twelve months, or 33% of the annual average of net events payable of the last 36 months, whichever is the highest. The maximum term allowed for the compliance is 10 years, in which the operators must observe the minimum cumulative proportion of 1/120 per month as of January 2008; and 55/98

56 Guaranteeing assets The technical provisions and contingencies related to SUS reimbursement require the recording of financial guarantees to be held in accordance with the rules established by RN ANS n. 159/07. On December 31, 2011, financial guarantees exclusively comprised financial investments (see Note 5). Liabilities adequacy test The Company hired a specialized and independent firm to conduct an actuarial study on the adequacy of its liabilities related to health plans in effect as of December 31, This test is performed annually and aims at checking if the technical provisions recorded are sufficient to meet the liabilities deriving from these agreements. Based on discounted cash flows for estimated cash inflows and outflows to individual and corporate customer portfolios, it was not necessary to complement liabilities already established. These flows were calculated based on actuarial claim assumptions, selling and administrative expenses estimates, adjustment of payments and medical costs, and carried to present value. Changes in technical provisions Claims payable Remission IBNR Total Balances on 12/31/ ,759 3, , ,867 Recordings 5,336, ,884 5,413,179 Reversals (362,577) (1,178) (43,354) (407,109) Write-offs (4,939,585) - - (4,939,585) Acquisition of companies 14,050-5,331 19,381 Balances on 12/31/ ,237 3, , ,733 Recordings 5,327,901 1,156 81,491 5,410,548 Reversals (224,410) (910) (31,304) (256,624) Write-offs (5,022,969) - - (5,022,969) Acquisition of companies 30, ,233 62,314 Balances on 12/31/ ,832 3, , ,002 56/98

57 19. Loans and financing 12/31/ /31/2010 Financial charges Shortterm Short- Description Beginning Maturity Guarantee Long-term term Long-term Financings: Banco Safra, Finame Sep/05 Feb/12 TJLP % p.a. Equipment Banespa Mar/06 Mar/11 TJLP % p.a. Equipment BNDES (i) May/06 Jun/11 TJLP % p.a. Equipment and receivables - - 1,250 - BNDES (ii) Jul/06 Jun/14 TJLP % p.a. Receivables 6,202 9,217 6,226 15,362 Banco Itaú BBA (iii) Jul/07 Jul/12 USD % p.a. Receivables 3,634-6,136 3,575 Banco Itaú Jul/07 Jan/ % p.a. Retention of ownership BNDES (i) Mar/08 Mar/12 TJLP % p.a. Equipment HSBC May/08 Apr/11 CDI % p.a. Commercial paper - - 1,538 - HSBC Sep/08 Sep/11 CDI % p.a. Commercial paper Banco Itaú Jun/09 May/14 CDI % p.a. Guarantee General Electric Aug/09 Aug/13 USD + Libor % Commercial paper p.a ,081 1,236 BNDES (i) Dec/09 Jul/17 TJLP % p.a. Guarantee 4,004 18,031 3,502 20,827 General Electric Jan/10 Jan/13 Libor % p.a. Equipment General Electric Mar/10 Mar/13 USD + Libor % Equipment p.a Banco Itaú BBA Jun/10 Nov/12 CDI + 3.4% p.a. Guarantee 1, HSBC Jun/10 Jul/14 CDI % p.a. Retention of ownership 5,104 4,951 3,176 9,025 General Electric Jan/11 Dec/15 USD + Libor % Commercial paper p.a , Banco Itaú BBA, Finame (iv) Jun/11 Jan/21 TJLP % p.a. Aircraft Banco Itaú BBA, Finame (iv) Jun/11 Jan/ % p.a. Aircraft 1,615 12, Other , ,748 1,399 Subtotal 25,762 49,621 27,632 52,679 57/98

58 12/31/ /31/2010 Financial charges Shortterterterterm Long- Short- Long- Description Beginning Maturity Guarantee Leasings: Foreign currency (v) - - USD % p.a. Equipment Domestic currency a 22.80% p.a. Equipment and vehicles (v) 21,115 22,849 10,034 6,439 Subtotal 21,115 22,849 10,962 6,439 Total 46,877 72,470 38,594 59,118 (i) Financing obtained with the Brazilian Development Bank (BNDES) to build and expand the Company's own network, as well as to buy hospital equipment; (ii) Financing for the construction of Vitória Hospital in São Paulo; (iii) On December 31, 2011, the balance of loans was R$ 3,641 (R$ 8,778 on December 31, 2010) and the swap differential receivable was R$ 7; (see Note 33); (iv) Financing obtained with BNDES for the acquisition of aircraft by indirect subsidiary Aeromil. (v) Commitments arising from leasing agreements for IT, hospital equipment and vehicles, with terms ranging from 24 to 36 months. The assets must be acquired at the end of the agreement term for a residual and symbolic amount. The balance of leasing is shown below. 58/98

59 Breakdown of leasing by nature 12/31/ /31/2010 Hospital equipment ,198 IT equipment ,420 Vehicles ,660 Furniture and fixtures Software use rights ,401 On December 31, 2011, amounts related to loans and financing are broken down as follows, per year of maturity: to Total /98

60 20. Debentures Description Amount issued Controlling Company and Beginning Maturity Financial 12/31/ /31/2010 charges 2 nd issue (i) 150,000 Mar/10 Mar/ % of CDI 155, ,569 Cost of issuance (83) (55) Subtotal 155, ,514 3 rd issue 1 st Series 300,000 Oct/10 Oct/13 CDI + 1.3% 307, ,421 2 nd Series 300,000 Oct/10 Oct/14 CDI % 307, ,518 3 rd Series 151,000 Oct/10 Oct/15 CDI + 1.6% 154, ,833 4 th Series 149,000 Oct/10 Oct/15 IPCA % 164, ,381 Cost of issuance (4,229) (6,072) Subtotal 929, ,081 4 th issue 300,000 Dec/11 Dec/ % of CDI 301,491 - Cost of issuance (990) - Subtotal Total 1,385,669 1,072,595 Short-term 190, ,667 Long-term 1,194, ,928 Total 1,385,669 1,072,595 (i) In March 2011 the Company renegotiated the maturity of this issuance from March 2011 to March Costs related to this renegotiation will be amortized during the remaining term of the contract. Please find bellow the general conditions of the Company s debentures Second issuance Common, not convertible into shares. Type: Unsecured, single series, firm commitment guarantee. Third issuance conditions of the four series Common, not convertible into shares. Type: four series, floating guarantee. 60/98

61 Fourth issuance Common, not convertible into shares. Type: Unsecured, single series, firm commitment guarantee. Financial covenants The 3 rd and 4 th issues of debentures are subject to early expiration if not held the following debt ratios and interest coverage: (i) net debt / adjusted EBITDA equal to or less than 3.00 and EBITDA / net financial result over or equal to Suppliers and other accounts payable 12/31/ /31/2010 Short-term Long-term Short-term Long-term Accounts payable in the acquisition of investments: Hospital Samaritano 44,532 40, Hospital Pasteur 29,978 37, Hospital Pró-Cardíaco 27, ,566 24,565 Excelsior 17,887 5, Esho 18,591 20,141 16,365 34,095 Lincx 93, Santa Lúcia ,762 - Other Subtotal 232, ,203 57,751 58,660 Suppliers 110,196 1,755 94,199 1,358 Commission payable 8,874-16,351 - Rentals 7,727-6,305 - Other 35,368 25,104 33,593 25,156 Total 395, , ,199 85,174 On December 31, 2011, amounts related to accounts payable on the acquisition of indirect subsidiaries have the following composition by year of maturity: 61/98

62 , , ,876 Total 337, Taxes and contributions payable 12/31/2011 Controlling Company 12/31/ /31/ /31/2010 IRPJ and CSLL ,934 INSS and FGTS ,934 30,087 PIS and COFINS ,520 20,827 ISS ,740 15,366 SAT ,687 IRRF ,371 13,642 Other 1 3 5,825 7, , ,037 Short-term ,605 91,891 Long-term ,146 Total , ,037 As additional cash flow information, we present below the income tax and social contribution amounts paid in the period: Amounts paid in the period Controlling Company 12/31/ /31/ /31/ /31/2010 IRRF IRPJ and CSLL Total Tax installment program In 2009, subsidiaries adhered to the new special tax installment payment program, granted through Law 11,941/09 ( REFIS IV ), waiving the existing federal taxes 62/98

63 installments (PAES, PAEX and usual installment payments), and recording new nonsocial security tax liabilities (PIS, COFINS, IRPJ and CSLL). In 2011, this new installment program was concluded and the subsidiaries opted for using the tax loss balance, if any, to pay interest rates and fines, as provided for in said law. The amounts of this and the other installment programs are as follows: 12/31/ /31/2010 Federal taxes Other than social security (i) 56,938 76,693 Social security taxes (ii) 23,909 32,878 Other taxes (iii) 36,892 42,806 Total 117, ,377 Short-term 37,341 26,756 Long-term 80, ,621 Total 117, ,377 (i) (ii) (iii) PIS, COFINS, IRPJ, CSLL and CPMF required by both the Secretariat of the Federal Revenue of Brazil and Office of General Counsel of the National Treasury; Tax liabilities payable to the Brazilian Social Security Institute (INSS) levied on payroll and services rendered by third parties; Taxes required by both state (ICMS) and municipal (ISS and IPTU) tax administrations. On December 31, 2011, the amounts related to the tax installment program are broken down as follows: , , , , , , to ,792 Total 117,739 63/98

64 24. Provision for contingencies 24.1 Contingencies with probable loss risk The Company and its subsidiaries record provision for contingencies based on the opinion of their legal counsels. Lawsuits with probable loss risk are fully provisioned, as follows: 12/31/ /31/2010 Labor claims 38,194 60,899 Civil claims (i) 81,330 77,466 Tax claims (ii) 28,300 18,074 Regulatory claims 77,915 51,087 Total 225, ,526 Changes in provision for contingencies 12/31/ /31/2010 Balances at the beginning of the year 207, ,705 Recordings 152,792 42,078 Reversals/ Write-offs (160,628) (90,653) Transfers 8,494 - Acquisition of companies 17,555 56,396 Balances at the end of the year 225, , Contingencies with possible loss risk Amil Participações and its subsidiaries are also parties to several proceedings, the loss expectations of which are classified as possible, according to the opinion of the Company's legal counsels. The Company has not recorded provision for the amounts related to these proceedings, but it reports them, as follows: 12/31/ /31/2010 Labor claims 64,716 52,174 Civil claims (i) 165, ,030 Tax claims (ii) 29,779 51,169 Regulatory claims 73,227 42,828 Total 333, ,201 64/98

65 (i) (ii) The main issues discussed in provisioned civil lawsuits are related to contractual matters, such as grace period, termination of agreements, coverage exclusion and pre-existing conditions; The main issues discussed in tax lawsuits are related to administrative challenges. The Company has escrow deposits, whenever required, recorded in its longterm assets referring to ongoing claims (see Note 12). The health plan operators controlled by the Company are classifying as contingency with probable loss risk the amount of reimbursement due to SUS according to amounts provided by the ANS, net of prescribed debts. 25. Shareholders' equity 25.1 Capital stock The Company is authorized to increase its capital stock up to the limit of five hundred and forty million (540,000,000) common shares, regardless of amendments to the bylaws, upon Board of Directors resolution. The Board of Directors may, according to the plan approved at a General Shareholders Meeting, and within authorized capital limit, authorize the Company to grant stock options to its management, employees, and service providers, as well as to the management, employees, and service providers of other companies controlled by the Company, without preference rights for the shareholders, as approved by the general meeting. At the Extraordinary General Meeting held on April 30, 2010, the capital stock increase of R$ 5,122 was approved, with the issue of 1,362,218 new non-par registered common shares with voting rights, at the issue price of R$ per share, which were subscribed by subsidiary Amil Assistência, on behalf of its shareholders. Therefore, subscribed capital stock increased from R$ 1,155,702 to R$ 1,160,824. Such capital increase was subject to the non-exercise of the right to withdraw by shareholders of Medial Saúde (at the first incorporation) and/or by shareholders of Amil Assistência (at the second incorporation). As most of holders of shares merged exercised their right to withdraw within the legal term and received the proposed reimbursement amount. Approximately 1,125,066 new shares issued on April 30, 2010 were not assigned to shareholders and, consequently, the amount of R$ 4,231 was not paid in the period. 65/98

66 Therefore, out of the subscribed capital stock, in the amount of R$ 1,160,824, represented by 361,785,118 non-par registered common shares, on June 30, 2010, R$ 4,231 (1,125,066 shares) were not paid. The Extraordinary General Meeting held on September 16, 2010 approved the decrease in subscribed capital stock in the amount of R$ 4,231, with the cancellation of 1,125,066 common shares from R$ 1,160,824 to R$ 1,156,593 (360,660,052 common shares with no par value) Capital reserve The Company records the share-based compensation effect as capital reserve (see Note 34). Additionally, as a result of the corporate restructuring involving Amil Participações, Amil Assistência and Medial Saúde, the Company in 2010, recorded R$ 891 for goodwill in share subscription Expansion reserve According to Article 26 of the Company s Bylaws, Amil Participações allocates part of its net income for the year for a statutory profit reserve named Expansion Reserve, to finance expansion of the Company s and/or its subsidiaries activities. At the Board of Directors Meeting held on March 12, 2012, the allocation of R$ 116,347 of net income for the year ended December 31, 2011 was allocated to this reserve (R$ 80,598 in 2010) Treasury shares The members of the Company s Board of Directors approved, as of October 2, 2008, a program of repurchase of shares issued by the Company. The repurchase of shares aims at the efficient application of funds and their later utilization in the Stock Option Plan and it will not result in the reduction of capital stock and is realized by using the reserves available. The repurchase of shares observes the limit of 6.5% of outstanding shares (6,642,000 shares), which corresponds to 1.8% shares issued by the Company and is performed at market price. The first repurchase program was effective from October 2, 2008 to June 29, 2009 and the second program from August 10, 2009 to February 5, 2010 On December 31, 2011, the Company had 2,757,134 treasury shares in a total amount of R$ 30,627 (2010 2,936,287 shares totaling R$ 29,832). The average acquisition cost of these shares was R$ ( R$ ) 66/98

67 and both minimum and maximum costs were R$ and R$ , respectively. The Company s shares, on December 31, 2011, closed at R$ (2010-R$ 17.80). Thus, the market value of treasury shares at the end of this period totaled R$ 45,300 ( R$ 52,266) Other comprehensive income Includes the asset valuation initial adjustment to fair value of investment properties, variation of fair value of derivative financial instruments intended for cash flow hedge (see Notes 15 and 33) and gains and losses from changes in interests in subsidiaries capital Allocation of net income for the year As per the Company s Bylaws, the results verified are allocated as follows: (i) reduction of losses, if any; (ii) 5% for recording of legal reserve, limited to 20% of the capital stock, (iii) mandatory dividends, and proportional to the number of shares. In the year in which the mandatory dividend exceeds the profit realized amount, the Annual General Meeting ( AGO ) shall allocate the excess to the unrealized profits reserve, as provided for in Article 197 of Law 6,404/76; and (iv) 100% of the remaining net income, after both legal and statutory deductions for the expansion reserve. On January 21, 2010, the Management approved the payment of interest on capital stock ( JCP ), in the gross amount of R$ 6,000 (R$ 5,113 net of withholding income tax), as advance of 2009 minimum dividends. At a meeting held on March 5, 2010, the Board of Directors, subject to the approval of the Annual General Meeting, approved the payment of supplementary dividends of R$ 21, /31/ /31/2010 Net income for the year Controlling Company 175, ,945 Recording of legal reserve (8,755) (6,347) Base balance for distribution 166, ,598 Minimum percentage 25% 25% Minimum dividends payable 41,588 30,150 Additional proposed dividends 8,418 9,850 Total dividends 50,006 40,000 Recording of expansion reserve 116,347 80,598 67/98

68 25.7 Earnings per share Basic earnings per share is calculated by dividing the net income for the year attributed to the holders of controlling company s common shares by the weighted average number of outstanding common shares during the year, excluding treasury shares. Diluted earnings per share is calculated by dividing the net income attributed to the holders of controlling company s common shares by the weighted average number of outstanding common shares during the year plus the weighted average number of common shares that would be issued in the assumption of stock options exercise with the exercise value lower than the market value, excluding treasury shares. 12/31/ /31/2010 Net income for the year Controlling Company 175, ,945 Weighted average number of outstanding common shares 357, ,956 Basic earnings per share (in R$) Weighted average number of outstanding common shares 357, ,956 Stock options effect 395 1,030 Shares applicable to dilution 358, ,986 Diluted earnings per share (R$) Related parties transactions 26.1 Related parties transactions and balances Related parties transactions have terms, prices and other conditions similar to those carried out with third parties. The main operations and balances summarized by related parties are as follows: 68/98

69 12/31/ /31/2010 Related parties Accounts Receivable / Advances Accounts Payable Accounts Receivable / Advances Accounts Payable CDPI ,097 Hospital de Clínicas de Niterói 23 7, ,403 Hospital Pasteur Preslaf Laboratório Dr. Sérgio Franco ,959 Serv Baby 2,651 2, Hospital Santa Paula 190 1, ,490 Hospital 9 de Julho 219 9,137-4,119 Pro Echo ,193 Mult Imagem Other 3,296 2,525 1,059 1,270 Total 6,573 22,556 1,592 24,619 12/31/2011 9/30/2010 Related parties Revenue Cost/ expense Revenue Cost/ expense CDPI - - 1,234 24,559 Hospital de Clínicas de Niterói 1,987 78,816 1,887 76,088 Hospital Pasteur - - 1,411 33,107 Preslaf 2,193 42,651 2,756 41,475 Laboratório Dr. Sérgio Franco - - 3,233 85,471 Serv Baby , ,418 Hospital Santa Paula , ,856 Hospital 9 de Julho 2,677 65,471 1,808 45,981 Pro Echo ,153 Mult Imagem ,055 Other 1,423 50, ,969 Total 9, ,486 14, ,132 69/98

70 Below, the main operations that generated the figures shown in the aforementioned tables: a) Medical, hospital and diagnosis care The subsidiaries have entered into accreditation agreements to provide these services with the following related parties: Agreements maturing in 2017 Carpevie, Hospital de Clínicas de Niterói, Hospital Santa Paula, Preslaf, Hospital 9 de Julho, Serv Baby; and Agreements with indefinite maturity LAF - Serviços Hospitalares and Medise. b) Rental Subsidiaries have rental agreements, with maturities up to 2012 of properties belonging to shareholders and associated companies. c) Revenue from coverage of medical and hospital assistance and dental costs Revenues from the sale, by Company s operators, of health plans to related parties. In January 2011, MD1 Diagnósticos S. A., controlling company of CDPI, Laboratório Dr. Sérgio Franco, Pro Echo, Mult Imagem, was acquired through shares exchange with DASA Diagnósticos das Américas S. A., becoming an integral subsidiary of this company. The company s management concluded that, since that date, MD1 s subsidiaries are no longer Amilpar s related parties. In April 2011, the Company, through its indirect subsidiary ESHO, took control of Hospital Pasteur, which started to have its numbers consolidated into Amilpar s results. 70/98

71 26.2 Key Management Personnel compensation In 2011, the Company considered as Key Management Personnel only the members of its Board of Executive Officers and Board of Directors. In addition to fees, bonuses, supplementary private pension plan, the key management personnel are eligible to the Company s stock option plan. Below, the annual compensation and stock option plan expenses attributed to key management personnel: 12/31/ /31/2010 Fees and bonuses 3,901 6,436 Benefits ,070 6,814 Share-based compensation expenses 3,680 2,341 Total 7,750 9, Net revenues and cost of services 12/31/ /31/2010 Healthcare plan premiums 8,662,939 7,446,805 Variation in remission provision (246) 473 Revenues from other operations 611, ,913 Taxes on sales (265,538) (186,747) Net Revenues from services 9,008,826 7,635,444 12/31/ /31/2010 Claims (7,032,947) (6,022,701) Recovered claim payments 418, ,578 Variation in IBNR Provision (50,186) (32,530) Cost of services (6,664,526) (5,692,653) 71/98

72 28. General and administrative expenses Controlling Company 12/31/ /31/ /31/ /31/2010 Personnel (866) (679) (540,482) (488,859) Outsourced services (i) (846) (2,623) (355,102) (292,416) Real estate and maintenance (ii) (174) (383) (271,764) (256,786) Depreciation and amortization (1) (1) (65,900) (59,978) Marketing (25) (32) (116,192) (67,374) Taxes (iii) (8,084) (85) (39,843) (30,378) Contingencies - - 7,836 48,575 Other (16,640) (8,718) (110,413) (95,889) Total (26,636) (12,521) (1,491,860) (1,243,105) (i) Attorney, consulting, call center, information technology, among other; (ii) Expenses with maintenance and use of the Company s and its subsidiaries facilities, such as electricity, water, maintenance services, security, and other; (iii) Taxes and contribution, except those directly calculated on sales. 29. Selling expenses Expenses with commissions to brokers for the sale of medical and hospital assistance and dental care plans. In the year ended December 31, 2011, selling expenses totaled R$ 450,180 (R$ 379,737 on December 31, 2010). 30. Other operating revenues and expenses, net 12/31/ /31/2010 Other operating expenses Allowance for losses on receivables (i) (68,874) (56,866) Cost of real estate operations (ii) (37,232) (28,278) Allowance for losses on credits (iii) (15,679) - Impairment (2,945) (5,632) Other (iv) (38,688) (39,974) Subtotal (163,418) (130,750) 72/98

73 Other 1, ,936 14,334 Amil Participações S.A. 12/31/ /31/2010 Other operating revenues Rental 10,697 6,645 Revenues from real estate operations (ii) 36,665 40,970 Other (iv) 54,687 19,522 Subtotal 102,049 67,137 Total, net (61,369) (63,612) (i) In 2011, the Company recorded provisions in the amount of R$ 531,935 (R$ 286,602 on December 31, 2010) and reversals of R$ 463,061 (R$ 229,736 on December 31, 2010). (ii) (iii) (iv) Revenues and costs related to the disposal of real estate intended for sale. In 2011, the Company recorded provisions for losses on other credits. Basically advance to suppliers. In 2010, mainly gains from administrative proceedings for reimbursement of taxes (PIS). In 2011, mainly gains from REFIS. 31. Financial result Controlling Company 12/31/ /31/ /31/ /31/2010 Financial expenses Loans, financing and debentures (137,156) (85,626) (161,801) (108,718) Tax installment payment (i) (78) (13) (12,861) (23,020) Other (ii) (2,530) (2,099) (75,889) (53,088) Subtotal (139,764) (87,738) (250,551) (184,826) Controlling Company 12/31/ /31/ /31/ /31/2010 Financial revenue Overdue amounts receivable ,813 37,994 Financial investments , ,738 91,946 Subtotal 1,883 12, , ,274 Total, net (137,881) (75,590) (56,064) (40,552) (i) (ii) Charges on taxes and contributions registered in the REFIS and PAES programs. These amounts are monetarily restated according to the TJLP and Selic rates variation; Basically adjustment of accounts payable due to acquisition of companies and discounts granted by subsidiaries, in the trade of healthcare plans, with the purpose of obtaining new customers and increasing its beneficiaries base. 73/98

74 32. Insurance The Company and its subsidiaries adopt the policy of hiring insurance coverage for the assets that are subject to risks at amounts considered by the management as sufficient to cover possible losses, considering the nature of their activities. The policies are in force and premiums were duly paid. On December 31, 2011, the Company and its subsidiaries had the following main insurance policies hired from third parties: Item Administrative and hospital complex Airmedical equipment Coverage type Property damage to buildings, facilities, machinery and equipment Property damages to aircraft and equipment and physical damages Amount insured 1,019, ,213 Vehicles Property damages and physical 158,100 injuries Other Civil liability 89,690 The risk assumptions adopted, given their nature, are not part of the audit scope of the quarterly information; consequently, they were not audited by our independent auditors. 33. Financial instruments and risk management 33.1 General comments The Company and its subsidiaries participate in operations involving financial instruments with the purpose of financing their activities, protect long or short positions taken, or investing their financial resources available. The risks associated to these instruments are managed through conservative strategies, aiming at liquidity, profitability, adequate term and security. Market models and information are used in internal controls in order to estimate the amount of fair value that may be different when different assumptions and methodologies are used. The Company s main financial assets and liabilities on December 31, 2011 are as follows: a) Financial investments The policy of financial investments adopted by the Management establishes the institutions with which the Company and its subsidiaries may operate the limits of 74/98

75 allocation of funds, and objectives. On December 31, 2011, the financial investments were concentrated in investment funds managed by renowned banks that operate under standards of support and supervision of CVM (Brazilian Securities and Exchange Commission) and participate in the Código Anbima de Regulação e Melhores Práticas (Anbima Code of Regulation and Best Practices). Company s and its subsidiaries financial investments in funds are priced through mark-to-market. Such structure enables a greater diversification of investment portfolio through the direct purchase of financial assets such as government and private securities and quotas from other investment funds, portfolio analysis management, risk management and the accomplishment of the investment policy of the financial resources adopted by the Company that seeks a profitability close to the CDI variation, in highly liquid and secure investment. b) Loans, financing and debentures The debentures issued, and loans and financing contracted by the Company and its subsidiaries are substantially indexed to the TJLP, CDI, IPCA variation and the US dollar. They were obtained for the construction and extension of the Company s own network, the purchase of hospital equipment, acquisition of other companies and the refinancing of the short-term debt of companies acquired in previous years. c) Derivatives The Company and its subsidiaries do not have derivatives transactions that are speculative, because the policy, established by the administration, restricts the use of these operations only as protection. The exchange swap hedge operations (Plain Vanilla) held by subsidiary Amil Assistência aim at hedging the Company against exposure of certain loans and leasing to exchange rate variation. As these financial instruments offset the variations of future cash flows of specific loans (payment of falling due installments subject to exchange variations), they were classified under the cash flow hedge category. In the evaluation of these instruments, the Company listed the risks of item purpose of hedge with the specific information of operations and management procedure. The Management continuously calculates the effectiveness of these instruments and on December 31, 2011 they presented effectiveness regarding the debts purpose of this coverage and, therefore, remained classified as cash flow hedge. Therefore, mark-tomarket of swaps were recorded in shareholders equity in the asset valuation adjustment account in the amount of R$ 263 and it will be recorded in the profit and loss statement upon the payment of operations, where it is expected that long position swap is identical to the liability purpose of hedge. 75/98

76 33.2 Classification and fair value of financial instruments Fair values of financial instruments are calculated projecting future flows of operations, using the BM&F Bovespa curves. Market values of exchange coupon swap x CDI were obtained using the market exchange rates effective on the balance sheet date and the rates projected by the market were obtained from currency coupon curves. In order to assess the coupon of positions indexed in foreign currency, the straight-line convention of 360 consecutive days was adopted and for the coupon assessment of positions indexed to CDI, it was adopted the exponential convention of 252 business days. Because they are settled within 30 days, the amounts of accounts receivable (healthcare receivables and accounts receivable from other activities) and payable (provision for events to be settled and suppliers) represent substantially their fair values on December 31, The accounting and fair values of the financial instruments on December 31, 2011 and their respective classifications are as follows: 12/31/2011 Controlling Company Fair value Book value Fair value Book value Financial assets Loans and receivables Cash and banks ,046 92,046 Healthcare receivables , ,844 Accounts receivable from other activities ,843 99,843 Fair value through income statement Financial investments 4,996 4,996 1,414,514 1,414,514 Financial liabilities Amortized cost Provision for events to be settled , ,832 Suppliers and other accounts payable 1,295 1, , ,112 Loans and financing , ,354 Debentures 1,397,467 1,385,669 1,397,467 1,385,669 Derivatives designated as hedging Derivatives at fair value - - (7) (7) 76/98

77 33.3 Sensitivity Analysis Exchange swap Subsidiary Amil Assistência contracted swap operations in order to hedge its dollardenominated loans with final maturity in July According to these agreements, subsidiary Amil Assistência has long position in U.S. dollars, increased by pre-fixed rate of 6.75% p.a., and short position pegged to the CDI, increased by a pre-fixed rate of 0.9% p.a. The agreements were entered into with Banco Itaú BBA S.A. and are recorded in the OTC Clearing House (CETIP). Having in mind that the long position flows of the swap agreements will be fully offset by the liability flows of the debt in U.S. dollars, fluctuation scenarios were not estimated for the future U.S. dollar rate. Management considers that the risk of being under a liability status referring to the CDI is the rise in the CDI rate. In order to analyze instruments subject to the CDI variation, management used in its analysis the effective rate of 10.87% for the CDI rate as of December 31, 2011 and, based on market expectations, the expected rate of 9.84% on December 31, In addition, the Company considered the impairment of 25% and 50% in order to project the possible and unlikely scenarios, respectively: Risk Book Value Probable scenario Rise of 25% in the index Rise of 50% in the index Financial investments CDI Variation 1,414, , , ,782 Accounts payable in the acquisition of investments CDI Variation (269,804) (26,549) (33,186) (39,823) Accounts payable in the acquisition of investments IPCA Variation (67,284) (3,580) (4,474) (5,369) Loans and financing TJLP Variation (38,399) (2,304) (2,880) (3,456) Loans and financing CDI Variation (11,472) (1,129) (1,411) (1,693) Loans and financing USD Variation (8,073) Debentures CDI Variation (1,221,358) (120,182) (150,227) (180,272) Debentures IPCA Variation (164,311) (8,741) (10,927) (13,112) Derivatives CDI Variation /98

78 33.4 Risk management The Company and its subsidiaries are exposed to several risks inherent to the nature of its operations. Among the market risk factors that may affect the Company s businesses, the main are: a) Credit risk The credit risk associated to the possibility of not receiving amounts billed against the Company s customers is softened by the sales made to a spread customer base and by the legal possibility of interrupting the assistance provided to beneficiaries of the healthcare plans after a certain period of default. The Company and its subsidiaries are also subject to the credit risk associated to its financial investments and amounts receivable from swap operations. Such risk is reduced by the restriction of its operations to renowned financial institutions in the market and mainly investments in fixed income government bonds with immediate liquidity. b) Exchange rate risk Amil Assistência and other subsidiaries have loans and financing denominated in foreign currency. The risk linked to such liabilities arises from the possibility of exchange rates fluctuations that may increase the balances of these liabilities. The loans and financing subject to such risk represented 0.5% of the total consolidated debt on December 31, 2011 (1.1% in 2010). The total debt in foreign currency is covered by exchange swap hedge operations, except for financing agreements with General Electric. The positive or negative effects not realized in the hedge operations (curve) are recorded in the income as financial gain or loss. In addition, just as the other companies in the supplementary healthcare sector, the Company is also subject to the effects of exchange rate variation on the costs of services provided, having in mind that part of the medicines and medical and hospital materials is pegged to exchange rate variation. c) Interest rate risk The risk inherent to the interest rate arises from the possibility of interest rates fluctuations linked to the TJLP, CDI and IPCA indexes, on the balances of loans, financing and debentures. In order to reduce exposure to domestic market interest rate fluctuation, the company and its subsidiaries concentrate their financial investments in government bonds indexed to CDI variation. 78/98

79 34. Employees benefits 34.1 Stock option plan At the Extraordinary General Meeting held on August 1, 2008, the Company approved the stock option plan, which aims at aligning the interest and objectives of the beneficiaries with the strategies and the results expected by the Company. Managers, employees and individuals providing services to the Company or other companies under the Company s control may be selected as beneficiaries of the options granted under the plan, as long as they are linked to the Company for a minimum term of 6 months. Said plan does not comprise the performance conditions of employees to be entitled to the options. The stock option plan is managed by the Company s Board of Directors that has authority to establish the appropriate rules with regard to the granting of options each year, through stock option programs ( Programs ). The granting of options through the Programs must respect the maximum limit of 3% of the shares issued by the Company, as long as the total number of shares issued or liable to be issued under the plan is always within the limit of the authorized capital of the Company. The shares issued within the scope of the plan will be entitled to the same rights of the shares existing in the respective dates of issue, including the right to fully receive dividends and interest on capital stock. The options may be exercised in three tranches and the subscription price is restated according to the Extended Consumer Price Index (IPCA) between the grant date and the date of the effective exercise of the options. Information related to Company s stock option plans is summarized below: Program Grant date Exercise date 1 st tranche Exercise date 3 rd tranche Number of shares granted Number of shares exercised Number of outstanding shares 1 st 8/11/2008 8/11/2009 8/11/2011 2,350,370 (1,336,335) 1,014,035 2 nd 9/17/2009 9/17/2010 9/17/2012 2,551,074 (745,846) 1,805,228 3 rd 8/9/2010 8/9/2011 8/9/2013 2,722,778 (128,027) 2,594,751 4 th 8/8/2011 8/8/2012 8/8/2014 2,722,776-2,722,776 Total 10,346,998 (2,210,208) (8,136,790) Program Price on the grant date Average price restated on the exercise date Average repurchase price 1 st nd rd th /98

80 The weighted average fair value of the stock option plan was calculated using the pricing models of Black-Scholes options assuming the following: Program Payment of dividends Volatility Risk-free rate Expectation of exercise Weighted average cost 1 st 1.12% 50.88% p.a % 3 years nd 5.16% 56.38% p.a. 8.60% 3 years rd 0.60% 51.89% p.a % 3 years th 0.47% 46.90% p.a % 3 years 5.41 Share-based compensation expense in 2011, calculated based on the fair value on the grant date of stock options was R$ 16,303 ( R$ 8,168). If all outstanding options could be executed and considering outstanding shares on December 31, 2011, the current shareholders dilution in the net income per share would be 2.27% (1.68% on December 31, 2010), according to the calculation below: 12/31/2011 Total shares issued 360,660,052 (-) Treasury shares (2,757,134) 357,902,918 Number of outstanding stock options 8,136,790 Total 366,039,708 Dilution % 2.27% To avoid the need to issue new shares and the consequent dilution of shareholders, the Company is repurchasing its own shares to meet the possible exercise of granted options (see Note 25.4). When the subsidiary Medial Saúde was acquired in December 2009, it already had its own stock option plan. Throughout 2010, Medial Saúde negotiated with its employees the cancellation of the stock option program. On December 31, 2011, there were no remaining options to be exercised related to this program Supplementary private pension plan In August 2009, the Company implemented a supplementary private pension plan, in the defined contribution type to every employee who has been working for the Company for over one year. The plan is possible through contributions made by the participants (employees) and the sponsors (Amil Participações and its subsidiaries), credited in the participants individual accounts. Contributions made by the 80/98

81 employee vary from 3% to 8% of the base salary and those made by the sponsors vary from 50% to 150% of the employee s contribution percentage. Contributions to the plan are recognized as expenses when effectively incurred, i.e., when services are provided by the Company s employees and, in 2011, they reached the amount of R$ 2,927 ( R$ 2,559). The Company or its subsidiaries do not have any liability or right to any surplus or deficit that might occur in the plan. 35. Business segment information The Company carried on the segmentation of its operational structure, taking into account how Management conducts business. Based on segmentation criteria set forth by CPC 22, information for the years ended was reviewed by the Company and summarized as follows: 12/31/2011 Operators Hospitals Eliminations Net revenue 8,503,125 1,737,695 (1,231,994) 9,008,826 Cost (6,558,088) (1,338,432) 1,231,994 (6,664,526) Gross profit 1,945, ,263-2,344,300 Depreciation and amortization Cost - 62,227-62,227 Expense 65, ,900 65,900 62, ,127 Current assets 1,822, ,177 (168,382) 1,938,479 Current liabilities 1,690, ,293 (168,382) 2,128,198 Fixed assets 528, ,306-1,460,306 Intangible assets 1,499, ,595-1,784,672 12/31/2010 Operators Hospitals Eliminations Net revenue 7,332,207 1,285,019 (981,782) 7,635,444 Cost (5,697,364) (977,071) 981,782 (5,692,653) Gross profit 1,634, ,948-1,942,791 Depreciation and amortization Cost - (52,251) - (52,251) Expense (59,978) - - (59,978) (59,978) (52,251) - (112,229) Current assets 1,513, ,142 (124,285) 1,605,370 Current liabilities 1,544, ,928 (124,285) 1,675,179 Fixed assets 465, ,133-1,151,692 Intangible assets 1,427,553 12,719-1,440,272 81/98

82 The operators segment represents operations with health and dental plans, whose revenues represented 97.6% and 2.4%, respectively, of the total received for this business segment. The hospitals segment represents the own network of healthcare assistance to members of plans sold by subsidiaries operators and to third parties (individuals and beneficiaries of other healthcare plans). With the acquisition of the hospitals Pró-Cardíaco, Samaritano and Casa de Saúde Santa Lúcia, revenues from services to third parties in 2011 reached 33.0% of the total segment, representing an increase of 63.2% over the previous year. 82/98

83 DECEMBER 2011 RESULTS REVENUES GROW 19% AND EBITDA INCREASES 31% IN 2011 Rio de Janeiro, March 12, 2012: Amil Participações S.A. (BM&FBOVESPA: AMIL3; Bloomberg: AMIL3 BZ; Reuters: AMIL3.SA), the largest healthcare operator in Brazil, announces today its consolidated results for December 31, 2011, in accordance with Brazilian corporate law and the ANS account chart. Since December 2010, Amilpar s consolidated financial statements have included the new accounting rules aligning Brazilian corporate law with International Financial Reporting Standards (IFRS). As a result, the figures of previous periods may present variations in relation to the figures already published. HIGHLIGHTS Membership 5.8 mi +9.6% Revenues R$ 9.3 bi +18.6% Total membership stood at 5,820.5 thousand at the end of December 2011, 9.6% up on the 4Q10 and 2.1% higher than in the 3Q11. Adjusted Operating Revenues totaled R$ 2,521.1 million in the 4Q11, 22.5% up year-on-year and 6.8% more than the previous quarter. In 2011 operating revenues amounted to R$ 9,274.6 million, 18.6% up on MLR 71.3% -1.1 p.p. The 4Q11 Medical Loss Ratio came to 71.2%, 0.3 p.p. down on the 4Q10 and 1.4 p.p. less than in the 3Q11, while the annual ratio stood at 71.3%, 1.1 p.p. lower than in EBITDA R$ mi +30.9% Adjusted EBITDA was R$ million (with a margin of 9.0%) in the 4Q11, 29.3% higher than in the 4Q10, and R$ million (with a margin of 8.6%) in 2011, 30.9% up on the same period of Net Income R$ mi +33.6% Adjusted net income totaled R$ 83.5 million in the 4Q11, 50.7% higher than the same period in the previous year. In 2011, Adjusted Net Income came to R$ million, 33.6% up on Based on accounting net income, will be proposed the distribution of R$ 50.0 million in dividends, corresponding to R$ per share. HIGHLIGHTS 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Total Membership (thousands) 5, , % 5, % 5, , % Adjusted Operating Revenues (R$ million) 2, , % 2, % 9, , % EBITDA (1) (R$ million) % % % EBITDA Margin (1) 9.0% 8.6% 0.4 p.p. 7.2% 1.8 p.p. 8.6% 7.7% 0.9 p.p. Medical Loss Ratio (2) 71.2% 71.5% -0.3 p.p. 72.6% -1.4 p.p. 71.3% 72.4% -1.1 p.p. Net Income (1) (R$ million) % % % (1) Adjusted, excluding non-recurring effects and non-cash provisions (2) Excluding provision variations Conference Calls English :00 AM NY (11:00 AM Brasília) Phone: +1 (412) Code: Amilpar Webcast: Portuguese :00 PM NY (2:00 PM Brasilia) Phone: +55 (11) Code: Amilpar Webcast: 83/98

84 SUMMARY OF THE YEAR The year of 2011 was marked by a series of challenges due to uncertainties in the international markets with the continuation of the European crisis. Despite all the difficulties, however, Brazil once again did exceptionally well in comparison with other countries, recording substantial improvements in several indicators. It closed the year with unemployment rate of around 5%, one of its lowest levels, and inflation declined, converging towards the government s target despite the cuts in the basic interest rate. As for Amil itself, it was even more present in the lives of a significant portion of Brazil s population. The Company closed the year with a client base of thousand companies and 5.8 million members, who benefitted from 44.1 million tests, thousand hospital admissions, 14 thousand land and air rescues and more than 26 million calls to our call center. We also recorded excellent operating results. Revenues totaled R$ 9.3 billion and adjusted EBITDA stood at R$ million, more than 30% up on the previous year, both of which historical record figures for us. Despite the challenges, the Company also had several opportunities, having acquired Hospital Samaritano, Hospital Pasteur and Lincx, further improving its positioning in their respective areas of influence and client bases. In terms of organic growth, one of the Company s main fronts is the dental plans segment. Amil Dental is currently the second largest dental plan operator in Brazil, with annual membership and revenue growth of 28% and 35%, respectively. Despite representing a small percentage of Amilpar s total revenue (approximately 2.5%), the segment is exceptionally attractive thanks to its higher profitability. We remain confident in Amil and Brazil s performance for New challenges and opportunities lie ahead and we are fully prepared to take them on. Revenues Medical Loss ratio EBITDA Net Income 7, % 9, % -1.1 p.p. 71.3% % % , % 2, p.p. 71.5% 71.2% % % Q10 4Q11 4Q10 4Q11 4Q10 4Q11 4Q10 4Q11 84/98

85 OPERATING PERFORMANCE MEMBERSHIP Amilpar closed December 2011 with 5,820.5 thousand members (54.4% in corporate, 19.6% in individual and 26.0% in dental plans), an increase of 9.6% (6.8% of which organic and 2.8% through acquisitions) over the same period of last year. MEMBERSHIP In thousands Dec Dec Δ % Dec.11 x Dec.10 Corporate Health Plans 3, , % Individual Health Plans 1, , % Dental Plans 1, , % TOTAL 5, , % Medical Plans Evolution (Thousands of Members) Medical plans totaled 4,304.2 thousand members in the 4Q11, 4.3% up on the same period last year. 4, , % 4, % 4, % 4, % The individual portfolio closed 4Q11 with 1,139.0 thousand members, 12.9% up on 4Q10, fueled by the acquisition of Excelsior Saúde, most of whose members (around 110 thousand) are individuals, Var. 12M. +4.3% which was consolidated since February Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 therefore continue to monitor its client base in order to maintain the cost/revenue ratio of each client. Dental plan membership grew by 28.2% in 2011, or thousand members, closing the year at 1,516.3 thousand. This segment continues to be a major growth opportunity for the Company, especially due to cross-selling opportunities and its low penetration in relation to the medical plans. It is worth noting that the Company maintains a permanent focus on revenue and margins and will 1, ,222.1 Dental Plans Evolution (Thousands of Members) +3.3% 1, % 1, % Var. 12M % 1, % Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 85/98

86 OPERATING REVENUES Adjusted Operating Revenues closed the 4Q11 at R$ 2,521.1 million, 22.5% (12.0% Adjusted Operating Revenues (R$ million) organic and 10.5% from acquisitions) up on the 4Q10, and 6.8% more than in the 3Q11. In 2011, adjusted operating revenues came 2, , , % 2, % to R$ 9,274.6 million, 18.6% more than in +4.1% 2, % 2010 (10.7% organic and 7.9% from Var. 12M % acquisitions). For better understanding our performance indicators, it should be noted that the Company provides outpatient and 4Q10 1Q11 2Q11 3Q11 4Q11 inpatient healthcare services for third parties through its own network in order to maximize its capacity utilization. These services are recorded under Revenues from other operations, which mostly reflects revenues from these services. These revenues moved up in comparison to the previous year, chiefly due to the consolidation in Rio de Janeiro of hospitals Samaritano and Pasteur in 2011, and the full consolidation of Hospital Pró-Cardíaco (in 2010 it was consolidated only as of May). These revenues are shown below in the breakdown of adjusted operating revenues: ADJUSTED OPERATING REVENUES RECONCILIATION R$ million 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Healthcare plan premiums 2, , % 2, % 8, , % Revenues from other operations % % % ADJUSTED OPERATING REVENUES 2, , % 2, % 9, , % The increase presented in 2011 compared to 2010 reflects the Company s strategy of focusing in revenue and margins, along with the combination of strong organic growth with strategic acquisitions. It is important to mention the strong performance of dental plans, which presented an increase in its revenue by 35.1% in 2011 and by 48.3% year-on-year in the fourth quarter. HEALTHCARE PLAN PREMIUMS DISTRIBUTION 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Corporate Health Plans 1, , % 1, % 5, , % Individual Health Plans % % 3, , % Dental Plans % % % PREMIUM PMPM 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Corporate Health Plans % % % Individual Health Plans % % % Dental Plans % % % 86/98

87 MEDICAL COSTS AND MEDICAL LOSS RATIO The Medical Loss Ratio stood at 71.2% in the 4Q11, 0.3 p.p. less than in the 4Q10 and 1.4 p.p. down on the previous three months. The annual ratio came to 71.3%, 1.1 p.p. down on the year before, reflecting the correct plan pricing policy of the plans sold by the Company and the alignment of Amil s practices Medical Loss Ratio 73.4% 72.6% 71.5% 67.9% 71.2% -1.1 p.p. 72.4% 71.3% and policies with those of 4Q10 1Q11 2Q11 3Q11 4Q the recently acquired companies. The attention given to chronic patients, with specialized medical centers devoted to their care, has significantly improved these patients quality of life and, consequently, reduced their hospital admissions, with a positive impact on our results. MEDICAL LOSS RATIO RECONCILIATION R$ million 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Adjusted Operating Revenues 2, , % 2, % 9, , % Claims, net of recovered claim payments 1, , % 1, % 6, , % MEDICAL LOSS RATIO 71.2% 71.5% -0.3 p.p. 72.6% -1.4 p.p. 71.3% 72.4% -1.1 p.p. The Medical Loss Ratio presented in this report does not include the impact of the accounting provision for Incurred but Not Reported Events (IBNR). This provision has only an accounting/ non-cash impact and does not represent the effective management of the Company s healthcare costs, being subject to possible positive or negative variations throughout the year, thereby distorting comparability with previous periods and the Company s real operating efficiency. This provision registered an expense of R$ 18.0 million in 4Q11 and of 19.8 million in 4Q10. OPERATING EXPENSES manageable administrative expenses* totaled R$ million in the 4Q11, 14.3% of adjusted operating revenues, 0.8 p.p. less than the 4Q10. The 2011 administrative expenses ratio stood at 14.2%, 0.7 p.p. lower than the same period of last year. The tax expenses line under administrative expenses, increased in the fourth quarter due to the effect of PIS and COFINS taxes (of R$ 8 million), on the payment of Interest on Capital Stock by subsidiaries to Amilpar. It is important to note that, despite the impact on the Company's accounting results, these taxes had no cash effect as they were fully offset by tax credits. Other administrative expenses included R$ 6.3 million from the cost of the stock option program, granted to the Company s top executives, calculated through the highly conservative Black-Scholes pricing model. However, these expenses will only have an accounting effect as the Company has been using its shares held in treasury to cover the Stock Option Plan. These treasury shares were acquired through 87/98

88 share buyback transactions between October 2008 and November 2009, at a historical average price of R$ ADMINISTRATIVE EXPENSES R$ million 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Personnel Expenses % % % Third-Party Services % % % Real Estate and Operations % % % Tax Expenses n.m % % Contingency Provisions (5.9) (13.4) -56.0% (3.3) 78.8% (7.8) (48.6) -84.0% Other % % % Total Administrative Expenses % % 1, , % (-) Non-recurring items (18.9) (15.3) 23.5% (13.5) 40.0% (60.9) (61.1) -0.3% (-) PIS/COFINS on Interest on Capital Stock (8.0) 0.0 n.m. 0.0 n.m. (8.0) 0.0 n.m. (-) Contingency Provisions, Net % % % Total Adjusted Administrative Expenses % % 1, , % Administrative Expenses Index 14.3% 15.1% -0.8 p.p. 14.2% 0.1 p.p. 14.2% 14.9% -0.7 p.p. * Excluding non-recurring effects, PIS and COFINS taxes on Interest on Capital Stock and the non-cash variation in legal contingency provisions Additionally to the previously mentioned effects, administrative expenses in this quarter were impacted by R$ 12.6 million of non-recurring items, especially expenses associated with acquisitions and operating efficiency projects such as contract terminations, consulting and legal fees (for more details, see the table of non-recurring items). For comparative purposes, these expenses were also affected by the companies consolidated in the last 12 months, still in the optimization, tax planning and synergies achievement process (Lincx, Excelsior, Samaritano and Pasteur). The main non-recurring items in administrative operating expenses are shown in the table below: NON-RECURRING EXPENSES R$ million 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Consulting, auditing and legal expenses n.m % % Integration costs related to acquisitions n.m % % Write-off of escrow deposits n.m. 0.0 n.m % Other (contractual terminations, SOP costs, etc) n.m % % TOTAL % % % % of Adjusted Operating Revenues 0.7% 0.7% - 0.6% 0.1 p.p. 0.7% 0.8% -0.1 p.p. Expenses with marketing and advertising amounted to R$ 28.0 million, versus R$ 20.1 million in the 4Q10, the increase being due to the new radio and TV advertising campaign this year. In 2011, these expenses represented approximately 1.3% of adjusted operating revenues. Selling expenses represented 4.7% of adjusted operating revenues in the 4Q11, totaling R$ million. In 2011 were 4.9% of adjusted operating revenues. 88/98

89 SELLING, GENERAL & MARKETING EXPENSES R$ million 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Marketing Expenses % % % Marketing Expenses Index 1.1% 1.0% 0.1 p.p. 1.8% -0.7 p.p. 1.3% 0.9% 0.4 p.p. Selling Expenses % % % Selling Expenses Index 4.7% 5.2% -0.5 p.p. 4.7% - 4.9% 4.9% - Other Net Operating Expenses n.m % % Other Net Operating Expenses Index 0.9% 0.4% 0.5 p.p. 0.5% 0.4 p.p. 0.7% 0.8% -0.1 p.p. Other net operating expenses were impacted in the 4Q11 by the write-off of credits/ provisions totaling R$ 10.1 million, due to the alignment of accounting policies and practices in acquired companies (IFRS). OPERATING CASH GENERATION (EBITDA AND EBITDA MARGIN) Adjusted EBITDA totaled R$ million in the 4Q11, 29.3% up on the 4Q10. In 2011, adjusted EBITDA came to R$ million (with a margin of 8.6%), a 30.9% improvement over the same period last year. This result reflected mainly the improvement in Company s operating performance % % % Adjusted EBITDA (R$ million) % % 8.6% % % % % 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 EBITDA RECONCILIATION R$ million 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Operating Income % % % Depreciation and Amortization % % % Financial Revenues - Operating resources % % % Change in Technical Provisions % % % Risk and remittance provisions (0.4) (0.5) (0.5) IBNR provision Other non-recurring/ non-cash effects % 13.5 n.m % PIS/ COFINS on Interest on Capital Stock Credit provision/ Write-offs Non-recurring expenses and Stock Option cost ADJUSTED EBITDA (1) % % % Adjusted EBITDA Margin 9.0% 8.6% 0.4 p.p. 7.2% 1.8 p.p. 8.6% 7.7% 0.9 p.p. (1) Adjusted EBITDA corresponds to EBITDA plus related non-recurring expenses, mainly: (i) professional fees in connection with past acquisitions; (ii) costs related to the acquisition and integration of companies; and (iii) tax refinancing that affected the net income of each respective period. EBITDA and adjusted EBITDA are not Brazilian GAAP measurements, and do not represent cash flow for the periods indicated. EBITDA and adjusted EBITDA do not have standardized meanings and, accordingly, our definition of EBITDA and adjusted EBITDA may not be comparable to those adopted by other companies. 89/98

90 EBITDA is used to measure Company s effective operating cash generation. As a result, those items that only impacted accounting results/ income, with no effect on operating cash generation, were adjusted in the EBITDA reconciliation table above, under Other non-recurring/ non-cash effects. FINANCIAL RESULT The consolidated net financial result in the quarter ended on December 31, 2011 was an expense of R$ 19.0 million, versus an expense of R$ 29.9 million in the 4Q10. In 2011, the financial result accumulated an expense of R$ 56.1 million, versus an expense of R$ 40.5 million in the same period of The financial result mainly reflected the effect of the inflow of funding raised in Sep/10 to conclude the acquisition of Medial and affecting only partially that year. FINANCIAL RESULT R$ million 4Q11 4Q10 Δ % 4Q x 4Q Δ % 11 x 10 Financial Revenues % % Revenues from late penalties and interest on arrears % % Short-term investments % % Other financial revenues % % Financial Expenses % % Expenses with interest on loans % % Expenses with taxes % % Other financial expenses % % Net Financial Result (19.0) (29.9) -36.5% (56.1) (40.5) 38.5% NET INCOME Accounting Net Income, on which dividends are calculated, totaled R$ 32.0 million in the 4Q11, substantially higher than the R$ 5.8 million recorded in the same period of last year. In 2011, Net Income came to R$ million, 35.8% up on Based on the net income presented above, the Company s Board of Directors proposed the payment of R$ 50.0 million in dividends, to be ratified by the Annual Shareholders Meeting, on April 19, This amount corresponds to R$ per share, 25% higher than the amount distributed in the previous year. Amilpar posted adjusted Net Income (adjusted for non-recurring items and changes in technical provisions, net of taxes) of R$ 83.5 million in the fourth quarter of 2011, 50.7% up on the same period last year. In 2011, adjusted Net Income was R$ million, 33.6% higher than in 2010, mainly reflecting the Company s improvement in operating result, partially offset by the increase in the net financial expense. 90/98

91 ADJUSTED NET INCOME RECONCILIATION R$ million 4Q11 4Q10 Δ % 4Q x 4Q 3Q11 Δ % 4Q x 3Q Δ % 11 x 10 Change in technical provisions Non-recurring/ non-cash effects (1) Total % % % (x) Income and social contribution tax rates 34% 34% 34% 34% 34% Tax benefit (2) Total, Net (3) % % % Net Income (+) Change in technical provisions and (3) non-recurring expenses, net of taxes (+) Write-off of deferred tax credits (4) ADJUSTED NET INCOME % % % Adjusted EPS (1) PIS/ COFINS on Interest on Capital Stock, provision for doubtful accounts and other non-recurring expenses. (2) Tax benefit from the change in technical provisions and non-recurring expenses. (3) Change in technical provisions and non-recurring expenses net of income and social contribution taxes. (4) Write-off of deferred tax credits (non-cash) from the incorporation process of acquired companies. It is important to mention that the write-off of deferred tax credits in the table shown above has a counterpart in the line of Income and Social Contribution Taxes of our Income Statement. Considering that this adjustment will have only accounting/ non-cash effects, it should not be considered to calculate the income tax rate of the Company. Thus, the income tax and social contribution rates were 24.4% in 4Q11 and 26.9% in CASH AND DEBT POSITION The Company closed 2011 with consolidated total cash of R$ 1,506.6 million, approximately R$ million of which guarantees for mandatory provisions. Amilpar s gross debt increased in comparison with the 4Q10 figure mainly due to the R$ 300 million debenture issue at the end of 2011, basically aiming the debt profile improvement. FINANCIAL POSITION R$ million Δ R$ Dec/11 x Dec/10 Short-term debt Long-term debt 1, GROSS DEBT 1, , Cash and cash equivalents Cash investments (Mainly provisions' guarantees) TOTAL CASH 1, , NET CASH (74.1) 91/98

92 CAPITAL EXPENDITURES CAPEX Most of the Company s consolidated capital expenditures are being allocated to the expansion of its own network, the development of IT systems and acquisitions. In the 4Q11, Amil invested R$ million, including R$ 43.5 million in acquisitions (R$ 25 million related to the second installment of Lincx acquisition) and maintenance CAPEX of R$ 20.3 million. In 2011, CAPEX totaled R$ million, R$ million of which in acquisitions and R$ million in other investments focused on organic growth - mostly for the construction of Hospital das Américas (in Rio de Janeiro) and Hospital TotalCor (in São Paulo), and the maintenance of its assets (R$ 71.4 million in the year). In 2011, the line other investments includes R$ 19.0 million related to the new jet for air rescue transport acquired by the Company. CAPEX R$ million 4Q11 4Q10 Δ % 4Q x 4Q Δ % 11 x 10 Acquisitions / Options * n.m % Improvements on third parties real estate % % Land, buildings and installations % % Machinery and equipment % % Furniture and fixtures n.m % Information technology % % Other n.m n.m. TOTAL % % * 2010 figures include the acquisition of Medial totaling R$ million. DEBENTURE ISSUE AND EXTENSION OF DEBT PROFILE At the end of December 2011, the Company issued debentures worth R$ 300 million in order to extend its debt profile and strengthen its net cash position. The debentures were issued in a single series, maturing in three years, with restricted placement efforts, in accordance with CVM Instruction 476. The main characteristics are presented below: Total Amount: R$ 300 million Term: three years Remuneration: 110% of the CDI interbank rate Remuneration payment: Every six months Amortization: single installment on maturity IR GLOBAL RANKINGS AWARDS Amilpar was recognized by the 2011 IR Global Rankings as the company with the world s best Financial Disclosure practices in the health sector. The Company s Annual Report was also elected the world s best annual report in the health sector and Latin America s second best across all sectors. In the 2011 edition, 620 companies from more than 33 countries took part. The IRGR awards are held by MZ Group and supported by KPMG, Arnold & Porter LLP and Sodali. 92/98