Disclaimer The material that follows is a confidential presentation of general background information about Qualicorp S.A. and its subsidiaries (collectively, Qualicorp or the Company ) as of the date of the presentation. It is information in summary form and does not purport to be complete. No representation or warranty, express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness, or completeness of this information. This confidential presentation may contain certain forward-looking statements and information relating to Qualicorp that reflect the current views and/or expectations of Qualicorp and its management with respect to its performance, business and future events. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like anticipate, believe, estimate, expect, forecast, plan, predict, project, target or any other words or phrases of similar meaning. Such statements are subject to a number of risks, uncertainties and assumptions. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in this presentation, including: market acceptance of Qualicorp s products or services; volatility in the healthcare industry, the Brazilian economy and the financial markets; changes in legislation, accounting standards, taxation and government policies affecting the healthcare sector; ability to stay abreast of changes in technology; ability to continuously introduce competitive new products and services, while staying competitive in existing ones. In no event, neither Qualicorp nor any of its affiliates, directors, officers, agents or employees, nor the selling shareholder, placement agents or underwriters, shall be liable before any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements contained in this presentation or for any consequential, special or similar damages. All forward-looking statements in this presentation are based on information and data available as of the date they were made, and Qualicorp undertakes no obligation to update them in light of new information or future developments. This presentation and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without Qualicorp s prior written consent. Securities may not be offered or sold in the United States unless they are registered or exempt from registration under the United States Securities Act of 1933, as amended. Any offering of securities to be made in the United States will be made solely by means of a confidential offering memorandum that may be obtained from the placement agents or the underwriters. Such confidential offering memorandum will contain detailed information about Qualicorp and its business and financial results, as well as its financial statements. This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever. 2
Thousand Highlights 3Q13 Qualicorp reached strong gross sales in 3Q13 (average 37k/month) as a consequence of: (i) maturation of new regions; (ii) offering of new products / operators; and (ii) a more efficient sales force; Churn remained higher than historical, increasing less than expected if we consider the typical seasonality of third quarters. Even with a high churn level we could present a sequential improvement. Affinity Health Portfolio Affinity Health Net adds Portfolio 3Q13 3Q12 % change 3Q13/4Q12 2Q13 % change 3Q13/2Q13 Affinity Health Lives Total Portfolio (BOP) 1,322,246 1,039,893 27.2% 1,275,532 3.7% (+) Gross Adds 111,460 270,564¹ -58.8% 123,469-9.7% (-) Churn (85,994) (57,609) 49.3% (76,755) 12.0% New Lives Added (net) 25,466 212,955-88.0% 46,714-45.5% Total Portfolio (EOP) 1,347,712 1,252,848 7.6% 1,322,246 1.9% ¹ Includes Padrão and Aliança. Source: Company Data. 250 213 200 150 100 47 50 9 19 25 0 3Q12¹ 4Q12 1Q13 2Q13 3Q13 Net Sales - Affinity Health ¹ During 3Q12 we incorporated approximately 84k lives from Grupo Padrão and 100k lives from Grupo Aliança. Source: Company Data. 3
R$ Million Highlights 3Q13 Our EBITDA margin reached 38.8%, which represents an improvement of 248bps when compared to 3Q12, even with a higher bad debt (+100pp) which shows our operational leverage in other expense lines of the income statement. In a sequential comparison, the margin expansion was even higher (361bps) Adjusted due EBITDA to the and dilution EBITDA of Margin expenses and bad debt reduction. Provision for Doubtful Accounts (PDA) 350 300 250 200 150 100 50 0 38.8% 37% 36.9% 317.9 251.3 36.3% 32.8% 174.0 34.5% 101.5 123.8 91.3 2009 2010 2011 2012 3Q12 3Q13 40% 39% 38% 37% 36% 35% 34% 33% 32% 31% 30% 29% 10,0% 9,0% 8,0% 7,0% 6,0% 5,0% 4,0% 3,0% 2,0% 1,0% 0,0% 6.0% 5.4% 5.8% 4.9% 7.4% 6.1% 9.3% 8.5% 8.4% 7.8% 8.1% 7.6% 7.1% Adjusted EBITDA EBITDA Margin Reported Pro forma Source: Company Data. ¹The Adjusted EBITDA is not audited and represents management view of the company results. It excludes stock option expenses, non-recurring expenses and adds the interest on late penalties. 4
Main messages We still see a number of opportunities for continued growth on gross adds Strategies to control churn post price readjustment partially offset its expected increase. Our strategies to keep PDA under control such as usage of collection agencies and SERASA are bearing fruits and should keep on. There are still more efficiency gains to absorb coming from: (i) new IT platform; (ii) initiatives to improve internal processes. We are confident that Qualicorp will emerge from this economic turmoil in a much better shape with improved internal controls, more robust distribution channel and cost control initiatives! 5
Industry Overview Relationship with Clients + Relationship with Providers (MLR Management) Client Health Plan +$ Operators -$ - Medical Providers Hyperinflation Private Healthcare Plan Law Creation of ANS ANS Regulations on Affinity Plans Present Until 1994 1998 1998 2009 2013 1986 1987 1997 2008 2010 2011 Junior - Individual Salesman First Affinity Contract Foundation of Qualicorp General Atlantic Carlyle IPO 6
Million Source: Caderno de Informação da Saúde Suplementar - ANS (09/2013). Industry Overview The Brazilian Private Healthcare Sector has approximately 49 million members, which represents 24.5% of the total population. The majority of the covered members are concentrated in Group plans : (i) 64.5% in corporate plans; and (ii) 13.4% in affinity group plans, which is the largest business for Qualicorp. Private Healthcare Sector Membership Growth Private Healthcare Sector Members Breakdown 1.9% 60 50 40 30 20 10 0 33.8 35.4 37.2 39.3 41.5 18.7% 19.3% 20.1% 21.0% 21.9% 47.0 48.7 42.6 45.4 24,8% 22.2% 23.5% 24.1% 49.2 24.5% 40 30 20 10 0 20.2% Corporate Affinity 13.4% 64.5% Individual Uninformed 35.735.9 36.0 36.2 36.7 36.9 37.1 38.4 9.7 9.7 9.7 9.8 9.8 9.9 9.9 9.9 Lives Covered % Covered Population Source: Caderno de Informação da Saúde Suplementar - ANS (09/2013) / IBGE. Group Individual Over the last two years group plans membership grew by 6.6% versus only 3% in the individual segment, as shown in Exhibit (2), which indicates a potential shift in preference given more competitive prices. 7
Industry Overview Number of Healthcare Operators in Brazil 99 Benefit Administrators (6.6%) 3.000 2.800 2.600 2.400 2.200 2.000 1.800 1.600 1.400 1.200 1.000 2,723 2,407 2,639 2,709 2,178 2,067 2,273 2,091 1,930 1,762 1,618 1,538 1,695 1,601 1,497 Benefit Administrator Self Management Medical Cooperative Dental Cooperative Philanthropy Group Medicine Number of Operators Group Dental Health Insurance Company Source: Caderno de Informação da Saúde Suplementar - ANS (09/2013). According to ANS, Brazil has 1,497 active Healthcare operators. Out of those, 99 are benefit administrators like Qualicorp. Given the high level of fragmentation in the sector, we consider ourselves as leaders in this segment, with 1.8 million members in the affinity segment and 2.7 million in the corporate segment. 8
R$ Billion Industry Overview Private Healthcare Sector Revenues (R$) Operators Revenue X MLR 100 90 80 70 60 50 40 30 20 81% 81% 81% 37.3 32.6 28.7 42.6 79% 52.2 80% 80% 60.7 82% 65.8 74.6 80% 84.6 82% 84% 95.4 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenues MLR% Source: Caderno de Informação da Saúde Suplementar - ANS (09/2013). The Exhibit shows the evolution of the Healthcare sector revenues and MLR, indicating a strong expansion since 2003 but still high level of costs. We highlight that Qualicorp is not exposed to underwriting risks, which places the company in an unique position among the healthcare sector. At the same time, to guarantee the sustainability of our business we engage strong efforts to keep the MLR of our portfolio under control, enabling competitive prices and strong growth. 9
Leading, Full-Service Benefits Administrator in Brazil Affinity (Professional Associations) Partners with leading Brazilian professional associations and health plan operators to offer health plans to association members at reduced prices Offers value-added services to over 400 professional associations Direct relationship with beneficiaries Corporate and Other (Companies / HR) Benefits consultant and health plan broker Third-party administrator (TPA) Connectivity (Medlink) Mass insurance product sales (PraxiSolutions) 10 Qualicorp has a unique business model which provides access to high quality healthcare services to millions of Brazilians
Qualicorp Overview Relationship with Clients Relationship with Providers (MLR Management) Affinity/ Corporate Clients 91% Health Plan Operators Benefit Administration Health Management / Administration Individual Customers Collection and Services (Ownership) - Billing - Collection - Call center Medical Management Infrastructure Proprietary IT Knowledge/Intelligence Client Pool/Customer Base 3% TPA (Third-Party Administration) HCIT (Healthcare Information Technology) PBM (Pharmacy Benefit Management) PPO (Preferred Provider Organization) Services already offered by Qualicorp (under expansion) Being evaluated according to opportunity Medical Providers 6% Brokerage (Sales) - Scale - Sales Force Mass Insurance Products 11
Thousand Thousand Qualicorp - Segments Affinity Members Corporate and Others Members 2.000 1,719.1 1,736.8 1,837.9 3.000 2.500 2,124.9 2,634.0 2,758.2 2,428.2 2,575.4 1.500 1,376.7 457 484 490 2.000 1.000 850.6 422 1.500 500 182 669 954 1,262 1,253 1,348 1.000 500 0 2010 2011 2012 3Q12 3Q13 0 2010 2011 2012 3Q12 3Q13 Health New Products Corporate TPA SME Health Management Exhibits show the evolution of Qualicorp membership base growth divided by segment. We currently have over 4.5 million lives among affinity and corporate clients, and our most recent results (3Q13) show growth of 5.8% y/y in the affinity membership base and 7.1% in the corporate segment.
Thousand Qualicorp - Segments Professional Associations Affinity Health Net adds 500 470 473 400 300 200 100 0 231 143 86 2009 2010 2011 2012 9M13 Number of Professional Associations 250 200 150 100 50 0 213 47 9 19 25 3Q12¹ 4Q12 1Q13 2Q13 3Q13 Net Sales - Affinity Health Source: Company Data. We increased the number of partnered associations to 473 in 9M13, keeping the strong pace of growth. ¹ During 3Q12 we incorporated approximately 84k lives from Grupo Padrão and 100k lives from Grupo Aliança. Source: Company Data.
Qualicorp Adds Value to All Constituents in the Affinity Segment Individual Beneficiaries Improves access to private healthcare Discounts up to 50% compared to individual plans Additional value-added services Health Plan Operators Most effective way to address individuals Improves access to individual policyholders with attractive demographics and income profile Lower MLRs and zero delinquency Professional Associations Improves negotiating power Revenue-sharing agreements with Qualicorp provide source of income help attract new members Augments association database through tracking and data Management Brazilian Government 14 Improves accessibility of private healthcare system Alleviates burden on public healthcare system
Uniquely Positioned to Aggregate Interests and Demands in the Affinity Market Brokerage 1,000,00* Accountants Medical Lawyers Dentists Engineers Public Servants Others 200,000* 50,000* 250,000* 100,000* 100,000* 150,000* 150,000* Professional Associations * The numbers used in this example are for illustrative purposes only. 15
Qualicorp: Unique Business Model Brokerage (Sales) Benefits Administration We Own the Client ( Umbrella Contracts ) Marketing of products Direct marketing Database marketing Customer register Implement customer register changes Manage costs and utilization rates Provide distribution channels Send ID and manuals for the clients Manage conflicts between operator and beneficiaries Call center Sales Identify the best option for the customer Services Prepare invoice Charge the client Pass through the payment Contact companies and associations Enable healthcare services Clarify doubts regarding plans Monitor pregnancy and chronic diseases Originate beneficiaries Prepare proposal for clients Reimburse clients Manage hospitalization passwords Negotiate premium adjusments Discuss commercial terms with beneficiaries Healthcare and Preventive Medicine promotion Report changes in the terms negotiated Identify opportunities with operators and health insurance companies 16 BENEFICIARIES COMPANIES PROFESSIONAL ASSOCIATION
Traditional Business Model After Sales Administrative Services Commercial / Sales MLR - Health Management 17
Qualicorp s Business Model Qualicorp is uniquely positioned as a complete service provider along the entire healthcare value chain Health benefit administrator Monitor pregnancy and chronic diseases Processing of transactions Call center Enable health care services TPA Mass insurance products HCIT Brokerage PBM Benefits design consulting Management of risks PPO 18
Key Investment Highlights Fast Growing, Underpenetrated and Large Addressable Market Unique Business Model which Creates Value for All Constituents and Assumes No Underwriting nor Reimbursement Risk Leading Position with Significant Scale and Long-Standing Customer Relationships Multiple Opportunities for Continued Growth Strong Operational and Financial Performance Management Team Led by Respected Industry Pioneers Ongoing Organic Growth and Attractive Acquisition Opportunities 19
Expansion Plan Growth Strategy Multiple Avenues to Continue to Drive Long Term Sustainable Growth Geographic Expansion Cross-sell new products Opportunities from Market Evolution Acquisitions/Partnerships How We Have Delivered Added partnerships with operators nationwide, including unique opportunities with the three largest Brazilian healthcare plan operators Bradesco Saúde, Intermédica and Amil. Entered the emerging middle class market. Continued to leverage long-standing relationships with partners such as SulAmérica. Expanded geographically to new markets in Brazil. Organic Currently, Qualicorp is pursuing all of these growth avenues Strong organic growth in number of beneficiaries Track record of implementing multipronged growth strategies and tremendous room for future expansion 20
Significant Growth Opportunities Unparalleled Partnerships with the Largest Brazilian Health Plan Operators Growth Strategy Going Forward (Affinity Segment) Top Health Plan Operators in Brazil Add New Professional Associations Expand Membership of Existing Associations Deepen Penetration Within Existing Associations 21
Expand Geographically to New Markets in Brazil Belém Fortaleza Target high growth markets outside São Paulo and Rio de Janeiro Identify and prioritize attractive new regions with the support of specialized consulting companies Manaus Salvador Recife Utilize Bradesco Saúde, Amil and Intermédica s strong capabilities and brand names to support geographic expansion Brasília (DF) São Paulo Belo Horizonte Vitória Continue to leverage relationship with SulAmérica Curitiba Rio de Janeiro Porto Alegre 22
Expansion of Higher Income Class Dramatic Shift in Income Classes (1) Notes: (1) Classes A/B: monthly income above R$4,855 Class C: monthly income between R$1,126 and R$4,854 Class D: monthly income between R$706 and R$1,125 Class E: monthly income below R$705 Source: World Health Organization Statistics 2010 Data as of 2007, World Bank, ANS and Analise Institute. 23
Cross-Sell New Products and Services to Existing Customers Health Insurance Dental Life Insurance Personal Accident Insurance ExtrAssist Continue to leverage brand, exclusive association and provider relationships and existing customer base Capitalize on substantial cross-selling potential through PraxiSolutions acquisition to drive growth Identify additional products / geographies for cross-selling with support of specialized consulting firms Invest in marketing and advertising to increase awareness of Qualicorp s product offerings Cross-Selling Initiatives Deepen Relationship with Professional Associations and Improve Customer Stickiness 24
Leverage Existing Platform to Expand as Healthcare Market Evolves Third-Party Administrator (TPA) Leading TPA in Brazil Healthcare Information Technology (HCIT) Significant collection of medical data Acquisition of one of the largest connectivity companies in Brazil (Medlink) Mass Insurance Products Consists of a broad range of insurance products including life, accident, etc PBM and PPO Products Evaluated according to opportunity Services already provided by Qualicorp Services being evaluated by Qualicorp 25
Successful Execution of Acquisitions Grow Through Selective Acquisitions APRIL 2011 APRIL 2011 JULY 2011 OCTOBER 2011 Provides connectivity Provides approximately Adds mass insurance Provides individual and services to complement 60,000 additional lives to products to existing platform corporate collective Qualicorp s businesses the affinity portfolio and allows for cross-selling healthcare insurance already implemented in through distribution through a brokerage service the TPA segment channels across Brazil (2,000 distribution points) 26
Successful Execution of Acquisitions DECEMBER 2011 MARCH 2012 JULY 2012 AUGUST 2012 Expands geographic Adds new opportunities in Reinforces strategy to increase Reinforces position in the public presence and adds new the Corporate segment and penetration in Affinity Group Health segment, increase penetration in associations and providers expands Qualicorp s plans by adding 84,000 lives to Affinity Health plans by adding 140,000 geographic footprint portfolio, mainly in Rio de Janeiro and lives to Affinity/Corporate São Paulo and also in Paraná, Ceará portfolio, mainly in the Federal and the Federal District of Brazil District of Brazil Selected and disciplined acquisitions of affinity brokerage portfolios support growth Operational leverage: incremental contribution margin of more than 60% for every new affinity member Add new capabilities: (i) Continue to broaden product offering; (ii) Leverage track record of increasing cross-selling through PraxiSolutions acquisition 27
Revenue Streams Payer Individual Beneficiary Revenue to Qualicorp Membership Fee Benefits Admin Fee Recurrence Initial Monthly Health Plan Operator New Sales Fee Brokerage Royalty Initial Monthly Monthly Around 90% of all revenues are recurring 28
R$ Million R$ Million Financial Data Net Revenues Adjusted EBITDA and EBITDA Margin 1000 800 600 400 200 309.0 470.0 680.5 920.7 +26.9% 251.6 319.3 350 300 250 200 150 100 50 32.8% 101.5 37% 174.0 251.3 36.9% 317.9 34.5% 36.3% 91.3 38.8% 123.8 0 2009 2010 2011 2012 3Q12 3Q13 0 2009 2010 2011 2012 3Q12 3Q13 Adjusted EBITDA EBITDA Margin Source: Company Data. Source: Company Data. ¹The Adjusted EBITDA is not audited and represents management view of the company results. It excludes stock option expenses, non-recurring expenses and adds the interest on late penalties. 29
R$ Million Financial Data Adjusted Earnings (R$) Our Adjusted Earnings consider adjustments from extraordinary expenses. During 3Q13 the adjustments refer only to non-cash Stock Option Plan expenses and to monetary adjustment in the call option to acquire Aliança (non-cash effect). During 3Q12 the adjustments refer to acquisition expenses, impairment, non-cash Stock Option Plan expenses and to monetary adjustment in the call option to acquire Aliança (non-cash effect). Adjusted for these factors, our earnings reached R$58.6 million in 3Q13, with an increase of 99.3% y/y. 120 100 80 60 40 20 0 98.2 90.2 77.3 +99.3% 59.1 58.6 29.4 2009 2010 2011 2012 3Q12 3Q13 Source: Company Data. 30
Financial Data Affinity Health Portfolio Portfolio 3Q13 3Q12 % change 3Q13/4Q12 2Q13 % change 3Q13/2Q13 Affinity Health Lives Total Portfolio (BOP) 1,322,246 1,039,893 27.2% 1,275,532 3.7% (+) Gross Adds 111,460 270,564¹ -58.8% 123,469-9.7% (-) Churn (85,994) (57,609) 49.3% (76,755) 12.0% New Lives Added (net) 25,466 212,955-88.0% 46,714-45.5% Total Portfolio (EOP) 1,347,712 1,252,848 7.6% 1,322,246 1.9% ¹ Includes Padrão and Aliança. Source: Company Data. The Exhibit shows an increase of 7.6% y/y (+1.9% q/q) in the gross additions, confirming the positive results of our sales strategy and geographic expansion. We still have opportunities to improve the churn level, which remains our main challenge for 2013. Among several actions, we are reinforcing the client retention area through the: (i) Insourcing of retention operations and change in management (specialization); (ii) creation of the Client Retention Committee; (iii) development of new services offered, etc. 31
Financial Data %PDA/Net Revenue 10,0% 9,0% 8,0% 7.4% 9.3% 8.4% 8.1% 7,0% 6,0% 6.0% 5.4% 8.5% 7.8% 7.6% 7.1% 5,0% 4,0% 5.8% 4.9% 6.1% 3,0% 2,0% 1,0% 0,0% Reported Pro forma Source: Company Data. The relevant variance of the churn level, which increased mostly due to the bad conditions of macroeconomic scenario and the acquired portfolios, has led to higher provisions for doubtful accounts. The company is putting in place several initiatives to contain PDA, including (i) stimulate direct debt; (ii) test sending the bad payers to the black list; (iii) hiring of specialized collection and consultancy agencies, etc. 32
Share Performance Ownership Breakdown 0.5% 6% 4% 1% Management Free Float L2 Participações FIP (Júnior) 27.3% 72.2% 12% 50% 27% Brazil USA Europe Asia Americas¹ Oceania Source: Company Data (09/30/2013). Our shareholder structure is organized as shown above. Júnior holds 27.3% of our shares, Management 0.5% and the remaining 72.2% is free float. Of the total free float, 73% are under foreigners funds and only 27% under locals. 33
Share Performance QUAL3 X IBOV QUAL3 (11/22/13) + 65.4% IBOV (11/22/13) - 15.3% IBOV Index QUAL3 BZ Equity Source: Company Data (10/22/2013). Since the IPO, Qualicorp shares presented a strong outperformance compared to BM&FBOVESPA index. While IBOV index presents a reduction of 15.3% since our IPO, our share price increased 65.4% in the same period. 34
Million Share Performance Historical Average Daily Trading Volume (R$) 180 160 140 120 100 80 60 40 20 - IPO Follow On Carlyle Sale Block Source: Company Data (10/22/2013). ¹On November 29th and 30th and December 4th of 2012, the volume was R$988.1, R$483.6 and R$366.4 million respectively mainly due to Carlyle s disposal of Qualicorp s shares. 35
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