Quálitas Controladora, S.A.B. de C.V. ($Q)

Good morning, and welcome to Qualitas' First Quarter 2026 Earnings Results Webcast. The conference will begin now. It is my pleasure to turn the call over to Jorge Perez, Qualitas' IRO.

Good morning, and thank you for joining Qualitas First Quarter 2026 Earnings Call. I'm Jorge Perez Rivero, Qualitas IRO, joining me today are Bernardo Risoul, our CEO; as well as our CFO, Robert Araujo. As a reminder, please note that information discussed on today's call may include forward-looking statements. These statements are based on management's current expectations and are subject to many risks and uncertainties that could cause actual events and results to differ materially from those discussed during today's call. Qualitas undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. With that, I will now turn the call over to Bernardo, our CEO, for his remarks.

Thank you, Jorge, and good morning, everyone. It is truly great to be with you all again. Let me start by saying that we are very pleased with the way we have started 2026. Our first quarter results reflect a strong start to the year with solid performance across both financial and operational key metrics underscoring the consistency of our strategy, the strength of our business model and the disciplined execution of our key initiatives in a dynamic environment. As we communicated to the market back in January, we expect 2026 to be a transition year as the company implements several initiatives to mitigate the impact of the VAT regulatory change. First quarter has confirmed what we are up against. Claims have increased as a result of VAT new dynamics. Competition has been aggressive, suppliers are increasing costs due to minimum wage adjustment and duties from China, and customer cash is limited. But at the same time, first quarter has confirmed that the multiple actions we have implemented have been successful to partially mitigate. So -- and that our business model is resilient. Let me be clear, first quarter numbers are encouraging while we recognize that challenges remain and 2026 will not be an easy year. On the top line, written premiums grew 15.3% and claims ratio came in within our technical range, recognizing the lower seasonal frequency during the quarter and leading to a combined ratio of 90.2% below of our long-term target. Furthermore, our investment portfolio continues to deliver financial income ahead of references rates led by the time duration extension. According to the latest amispheres, which were released in March during 2025, and Qualitas held 33.9% written premiums market share and 36.2% in earned premiums in the Mexican auto insurance industry. Within this, Qualitas leadership stands out in the heavy equipment segment where we hold a 45.2% market share. More importantly, in terms of profitability in a year affected by the resolution of the tax authorities regarding the VAT matter, which led to a fourth quarter onetime effect, Qualitas led the way, holding 80.2% of the sector underwriting results standing out as the only auto insurer among the top 13 to achieve a positive operating bottom and assurance. Full year 2025 industry statistics show that Qualitas Mexico posted a combined ratio of 171 basis points better than the top 5 companies and 510 basis points better than the total industry, excluding Qualitas. This confirms that despite price aggressiveness has been eased during this first quarter, profitability of the sector continues to be stressed. In this environment, we remain focused on the strategic priorities that have guided Qualitas in recent years. Our 3-pillar strategy continues to provide a clear framework to strengthen the business, enhance our competitive position and drive sustainable value creation over the medium and long term. Mexico remains at the core of our strategy, representing more than 95% of our underwriting. In our core market, we continue to focus on the elements that have consistently differentiated Qualitas, service excellence, close relationships with our agents, innovation across multiple fronts and disciplined pricing and underwriting. Together, the strength continue to position us favorably in a competitive and evolving market. Winning in Mexico is at the top of the list. At the end of last year, after the confirmation of the VAT legal changes, we increased prices to partially offset the impact, while also starting specific efforts towards further cost reductions. Having a diversified portfolio in terms of business is a strength playing in our favor, as its first quarter, a softer performance in the individual and traditional fleet business were more than offset by some other new large accounts. We will continue to seek business retention, but not at all cost, expecting that as we have seen in prior cycles, some of those accounts will return in the future behind our value proposition where we are doubling down on service with first quarter delivering the best overall customer favorability in 4 years. In terms of Mexico's market dynamics according to AMDA, industry figures remain relatively favorable overall, although with clear differences by segment. During the quarter, total new vehicle sales in Mexico increased 2.1% year-over-year, supported by a 3.7% increase in light vehicles, while heavy vehicle sales declined 28.0%. Looking ahead, AMDA estimates for 2026 continue to suggest modest growth in light vehicles and a more challenging environment for heavy units. Regarding our second pillar to accelerate our subsidiary growth I would like to emphasize the progress we continue to make since it is steadily gaining traction. To demonstrate so LATAM subsidiaries grew 42% this quarter in U.S. dollars. We remain focused on capturing these opportunities with discipline, strengthening local capabilities, expanding our footprint by opening offices in main seats of each country and above all, continuing to replicate Qualitas operating DNA in those markets where we see attractive long-term potential. In parallel, we continue to make progress on our vertical integration strategy, which we view as a relevant driver of long-term value creation. Our vertical businesses are contributing with operating efficiencies that are gradually translating into a positive effect on our loss ratio by capturing economies of scale, logistical efficiencies, customized risk prevention programs and stronger coordination across the value chain, we are enhancing our claims management capabilities and improving overall cost efficiency. As we look ahead, we will strive to make 2026 another strong year, but never at the expense of doing what is right for the long term of the business. In that sense, we are all working against 5 main priorities. We have specific KPIs by each area and individual linked to variable compensation. We are revamping our IT and innovation team to cope with business needs. Just as an example, we have over 100 projects that will improve service reduce cost or increase productivity. All these efforts are underpinned by our plan to strengthen Qualitas culture across all employees. Mexico's GDP outlook remains below ideal levels. Qualitas has shown in recent years that its growth trajectory has become less dependent on broader macroeconomic conditions. And this quarter is a great testimony of that. Before closing, I would like to take a moment to recognize our team. Their dedication, commitment and execution are what makes these results possible and what gives us confidence in our future. And with that, let's move on to the financial details and take a deeper dive into the quarter results. Roberto, please?

Thank you, Bernardo, and good morning, everyone. We started the year on a strong foot, delivering better-than-expected top line growth as well as better-than-expected loss ratio performance. resulting in a combined ratio favorable to our target range with a resilient investment portfolio. As already mentioned, while this is just 1 quarter of a challenging year, it is always better to be ahead of the curve. Going directly to our top line performance, written premiums were up 15.3% for the quarter. In our Mexican operation, the traditional segment accounted for approximately 66% of total written premiums, posting year-over-year growth of 12.9%. Within this segment, individual business grew 3.8%, while fleets increased 25.7%. The fleet business was boosted by a few large policies. Within this segment, we continue to experience significant pricing pressures as competition seeks to attract volume, a behavior historically links to healthy combined indexes. Against that backdrop, we stay focused on our underwriting discipline and portfolio quality to support our long-term profitability over short-term market share. Regarding the financial institution segment, which represented approximately 30% of total written premiums, it grew 25.6% year-over-year. This performance continues to reflect the continued shift in consumer preferences toward larger vehicles, such as SUVs and pickups, which carry higher average premiums as well as by a higher mix of multi-annual policies and increased market share with key financial institutions. As reported, our international subsidiaries contributed by 4.2% of total written premiums. Across Latin America, subsidiaries posted a strong growth, with 20.3% year-over-year. It is important to highlight that our LatAm subsidiaries results during the quarter were particularly affected by foreign exchange effects, mainly as a result of the U.S. dollar depreciation. This had an impact on the reported growth in peso terms. Excluding this FX effect, LatAm written premium growth in U.S. dollars would have been 41.9% compared to the reported 20.3%. In the U.S., premiums declined 77.1%. This is consistent with our strategy to reshape the portfolio towards profitability. Specifically, in addition to the domestic program exit, back in 2021. As of January 1 this year, Qualitas no longer underwrite commercial cross-border, serving now our bi-national customers through a commercial partnership with the leading niche insurance provider. As a result, our U.S. operation is focusing on properly managing the runoff of both programs and on building a binational PPA winning proposition. This decision has reduced the risk associated with continuing to ensure the truck segment and reflects our disciplined approach to focusing on those businesses where we see a clear right to win. Including all subsidiaries, we closed the quarter with almost 6.1 million insured units, up by more than 200,000 units versus the same quarter of last year, equivalent to a 5-year compound annual growth rate of 9.1%. Back to our financials. Earned premiums increased 11.7% for the quarter, growing at a slower pace than written premiums mainly due to both the premium growth and the higher mix of multi-annual policies, which increased by 4.9 percentage points versus the first quarter of 2025 and now represent 26.9%. During the first quarter, we constituted $2.8 billion reserves, consistent with the company's underwriting growth and mix. This represents an increase of $991 million compared to the same quarter of last year. Moving now to our costs. The claims ratio stood at 62.6% for the quarter, reflecting a strong performance despite the effects associated with the new 2026 income law. This result was primarily driven by the effective implementation of the initiatives we have put in place, including targeted pricing adjustments, strict cost control measures and efficiencies across our vertically integrated operations. In Mexico, the loss ratio stood at 61.2% for the quarter below our desired and sustainable range of 62% to 65%, highlighting the strength of our underwriting discipline and operational execution even under a more challenging regulatory environment. It is important to highlight that the claims ratio also reflects a seasonal component as the first half of the year typically benefits from lower frequency levels, with reduced impact from weather-related events, such as the rainy season and extraordinary hurricanes, which are more commonly observed in the second half of the year. Frequency for the quarter stood at 6.3%, representing a decrease of 9 basis points versus the same quarter last year, representing the lowest level recorded in the past 4 years through our comprehensive risk prevention initiatives, cost discipline and advanced data analytics. We have been working diligently to improve our cost performance. While we are optimistic about the positive impact of these efforts, it is important to recognize that this remains a work in progress and that this quarter's loss ratio was also the result of several variables aligning positively in our favor. Therefore, we remain cautious in interpreting these results as we still need to monitor the performance of these variables going forward. Regarding [indiscernible]. In this first quarter of the year, [indiscernible] cases decreased 13.8% for Qualitas despite having more insured units becoming an important building block for our claim cost performance. Qualitas recovery rates stood at 47.6% and 610 basis points above the rest of the industry and improving versus last year. We continue enhancing our technological tools and coordination with suppliers and authorities to reduce costs and improve efficiency. Moving to our acquisition ratio. It stood at 22.6% for the quarter 42 basis points above the same quarter of 2025, driven by the stronger growth in the financial institution segment, which carries higher commissions. Still, our acquisition ratio remains in line with our expectations and cost control indicators. Then our operating ratio for the quarter stood at 5%, including the employee profit sharing provision and fees paid to service office and corporate bonuses that are linked as well to their successful performance during the period, aligning productivity and control efficiencies towards the positive results of Qualitas. If we were to exclude employees' profit sharing from this provision that bylaw must be incorporated, our operating expenses ratio would have stood at 3.9% for the quarter. All of the above resulted in a combined ratio of 90.2% for the quarter, favorably below our 92% to 94% target. Operating results exceeded our expectations, underscoring our underwriting discipline, the team's commitment to service excellence and strict cost control. They also reflect the early benefits of the operating efficiency measures we began implementing at the end of last year. In addition, the quarter benefited from a combination of favorable factors, including seasonality, improved theft recovery, a better average claim cost and lower frequency and severity. While we are encouraged by these results, we continue to view them with prudence as several of these variables will need to be monitored over the coming quarters. Even amid a volatile environment, Qualitas continues to demonstrate the resilience of its business model and its ability to deliver sustainable growth and value to its stakeholders. Now moving to the financial side of our business. Comprehensive financial income decreased 23.3% for the quarter, mainly reflecting the lower interest rate environment versus the same period last year as well as the onetime gains realized in the first quarter of 2025. As benchmark rates have continued to decline, the reinvestment yield of the portfolio has moderated accordingly, affecting quarterly financial income. Nonetheless, we remain mainly invested in fixed income, which represented 86.8% of our total $54 billion portfolio with an average duration of 2.5 years and a yield to maturity of 8.3%. In the case of our Mexican subsidiary, yield to maturity stood at 8.9%. With the current portfolio composition for each 25 basis point decrease in rates the annual benefit on portfolio valuation is approximately $300 million. The remainder of our portfolio allocated to equities remained resilient. Although, as you may be aware, after a strong rally in late 2025, the S&P 500 listed a negative return of 4.3% in the first quarter of 2026, as uncertainty persisted across markets amid geopolitical risks, trade tensions and concerns about a potential economic slowdown. All our investment assets follow accounting guidelines and are classified as available for sale, so their performance, whether gains or losses is reflected on our balance sheet until realized. Our investment strategy has not had any relevant changes in 2026. We continue to target a fixed income duration of around 2 to 2.5 years as reference rates remain in the mid- to high single digits in Mexico, following the guidelines and strategy defined by our investment committee as part of our institutionalized corporate governance. We delivered comprehensive financial income of $1.2 billion during the quarter, delivering a 7.4% ROI. Total unrealized gains are approximately $1.5 billion, including FX impact. The unrealized gains were reduced from the $2 billion level at 2025 year-end due to our equity portfolio performance and the fluctuations observed particularly during the first quarter in interest rates that led to lower valuations in our fixed income assets reflected on our balance sheet. When considering all positions on a mark-to-market basis, ROI would have stood at 4.2% for the first quarter of the year as the equity market performance gets back on track and interest continues easing these unrealized gains will adjust accordingly. Approximately 21.3% of our portfolio is invested in U.S. dollars, given our international presence. For every peso that the exchange rate appreciates or depreciates the estimated annual impact is around MXN 665 million, serving as a natural hedge against FX depreciation. Looking ahead, we expect our investment portfolio to continue delivering steady performance with our fixed income allocation serving as an anchor during periods of volatility in equity markets. Following the negative performance of the S&P 500 in the first quarter of 2026, our portfolio continued to prove resilient, supported mainly by our fixed income exposure, which provided stability and consistent returns. The duration of our portfolio enhances our ability to weather market fluctuations. Looking ahead, the financial markets in 2026 are expected to present a mix of challenges and opportunities. Despite the volatility in equity markets, our strategic focus on fixed income leads us to believe that our investment approach remains well balanced. Our effective tax rate for the first quarter of 2026 stood at 29.7%, in line with historical levels. Net income for the quarter reached $1.6 billion with a net margin of 7.2%. Our 12-month ROE stood at 16.8% driven by the full year onetime VAT impact recognized in the fourth quarter of 2025. Our ROE for the quarter stood at 23.7%. Our performance delivered industry-leading profitability, while our strategic execution has ensured earnings durability and capital efficiency, positioning us well to navigate volatile times. In our business, consistency discipline and reliability remain essential. This approach continues to position Qualitas as a resilient and trusted long-term partner, allowing us to deliver sustained value to our stakeholders across different market cycles. Although service remains and will continue to be our top priority, our financial focus for 2026 is centered on 3 main objectives: a, sustaining a healthy pace of underwriting growth; b, maintaining cost discipline to keep loss ratio within our target range; and c, delivering resilient investment income. Our regulatory capital stood at $6.4 billion, with a solvency margin of $13.8 billion, equivalent to a solvency ratio of 14%. In turn, our trailing 12-month earned premium to capital ratio stood at 2.7x. In terms of capital allocation, let me remind you of our general shareholders assembly proposals next week on April 29. First, a cash dividend payment of MXN 9 per share, payable in 2 installments representing a 71% payout and in line with what we had anticipated to the market of being at the high end of our dividend policy range. If approved, over the past 3 years, Qualitas would have distributed over $10.9 billion in dividends more than in the first 10 years combined. We also proposed a new $800 million share buyback fund. As a reminder, we do not disclose formal guidance or targets, but rather overall expectations for the year. Therefore, we maintained top line growth in the high single digits to low double with earned premiums growing steady. The loss ratio is expected to remain at the higher end of the technical range objective of 62% to 65%. The acquisition ratio and operating ratio should continue in line with historical levels. leading to a combined ratio at the upper end of our long-term target range of 92% to 94%. I'm pleased to share that our quarterly results have exceeded expectations. This achievement is a testament to our team's dedication and strategic initiatives. However, it is important to remain prudent as we navigate the complexities of the current global landscape. Ongoing market dynamics and volatility require us to remain focused and vigilant in our approach. Thank you for your continued support and confidence in our company. Together, we will navigate these challenging times and seize the opportunities that lie ahead. And now operator, please open the line for questions. Thank you.

[Operator Instructions] Our first question comes from Pablo Ordonez at GBM.

Congratulations on your results, which clearly confirm Qualitas superb execution in this challenging environment. So thank you for the update on the guidance, Roberto and Bernardo. If we can get more color on your dynamics in terms of your top line growth, definitely, this fleet performance in the quarter was a surprise. Is this a one-off? Should we expect this to be a recurring business? And also, what has been the -- can you give us an update on your pricing strategy? What has been the performance by this segment is elasticity in line with your expectations? This can be very helpful.

Let me start by addressing the pricing question before. And as we've said in the past, pricing is an ongoing process at Qualitas and one that differentiates us from the market. We have a lot of data. We have strong processes, tools, and we focus on pricing considering several multi-vectors, not only car type value usage, but also set code with specific consideration as well, such as coverage. So pricing, I would say, continues to be a stronghold for a Qualitas. Now when it comes to pricing this year, everything started end of 2025 to address the noncreditable VAT. And our approach has been to absorb a portion of the impact while gradually adjusting pricing across our portfolio. And we believe this is the right balance between protecting profitability and maintaining a competitive value proposition for our users. And as you recall, during the last quarter, we alluded to the fact that last pricing adjustment in 2025, also incorporated the fact that during the 2025 year we had in decreased prices. So the fact that we increased in the range of 6% to 8% resulted into a net effect of around 3% to 5%. Now important, that would be addressable only for the individual segment. which it is relevant, but not the only one where we have seen stronger competition and Robert alluded that in his remarks is on fleets -- and as I referenced, during this quarter, we were basically flat in number of units, but premiums were down 13%. So that is a combination between the performance of those fleets with a lower loss ratio but also a stronger competitive pressure. Going forward, I can tell you that we will continue to adjust pricing as needed. Always the objective will maintain profitability and competitiveness while also targeting a combined ratio within or as close as the 90% to 94%. So when it comes to pricing, I think it will continue to be a bit dynamic year. we will continue to balance that short-term interest to maintain volume, but the long-term objective of being profitable. I think it is important to remark that we will not jeopardize making the right decisions for the mid and long term of the business at the expense of short-term gains. And with that said, I think it links to your first part of the question, which is top line. I think it would be fair to say that despite a very strong first quarter, our objective for the year remains at the high single to low double digits. So we will continue to see quarter evolution that may be somehow volatile, but it's certainly a good start -- the figures that we posted for the first quarter.

Just a quick follow-up on this on the top line. Did you see -- so in these numbers, because I mean, if fleets are growing 25%, financial institutions 25%, would you expect a deceleration in this segment and eventually an uptick in the individual segment because at the same time, we have seen a positive performance of auto sales in Mexico.

Yes, positive within a mild expectation because the AMDA expectation for the year is to be somewhere in the 1% to 3% growth. This first quarter was slightly ahead of that, but they do expect a slowdown in the individual segment. That said, and to your question on fleets, the onetime -- I wouldn't say it's a onetime. Having a portfolio helps to balance some segments with others and the fact that individual did grow but at a more advocated ranges now in the mid-single digit we did have 2 boosters that I wouldn't say it's a one-timer, but it's always a concern whether we would be able to keep those large accounts next year when they're up for renewal. So Net-net, I think we should continue to see high single to low double-digit growth in the top line.

Our next question comes from Andres Soto at Santander.

Thank you for the presentation, and congratulations on the results. My question is regarding the competitive environment. I would like to understand what are you seeing on the ground regarding the competitor strategies to pass on through prices, the VAT increase? How are your [ plans ] reacting to your announced price increases? And what can we expect looking ahead, looking at market share for Qualitas.

Andres, thanks for joining us this morning. So let me address that question in different segments because I think the dynamic that is happening is different. So when you think about the financial business or the financial institutions, we could see that late last year, we did see the price increases and very much across the board, given that it's a multi-annual business, Qualitas led the way, but also our competitors also went into price adjustments. When you think about, as Bernardo highlighted, when you think about the traditional business within fleets, we did see a significant pricing pressure, as I mentioned in my remarks. So that is a very different dynamic that going after volume and really pushing hard on pricing. That's what we should expect also going forward. And when you think about the individual, it's a little bit more one by one, but it's also being a softer as we saw the 3.8% adjustment or growth versus the previous quarter. So I think there are multiple things happening in the competitive environment. And our competitors are not necessarily doing on one not -- one single action. So there are multiple actions. And actually that -- that is playing on service, on cost control and also how they're managing their pricing. So all in all, I think the competitive environment is different in -- difference in the multiple segments. And we should see that moving in the same direction in the rest of the year. So I don't know, Bernardo, if you want to complement on that.

Yes, Andres, let me be blunt on this one. We will be aggressive when it comes to pricing, but we will not be responsible. So we're willing to take some losses on the top line, recognizing that we've seen this performance back in a few cycles over the past decade. And we know usually how this works out. They turn to last around 6 to 9 months. Eventually, competition will not like to lose money and prices will be more to healthier levels. So I think to your point on market share, no one has ever been recognized at Qualitas due to market share. We all see it as a thermometer, but we will not make decisions based on market share, but rather what is the right thing for the long-term sustainability of the business.

That's great. And now that Roberto mentioned the fleet segment. Can you guys help us quantify what -- from this 15% growth in written premiums, what part of that is driven by these couple of cases that you mentioned on the fleet segment?

[indiscernible] large accounts or few large tons, we would be seeing fleets basically flat.

Perfect. That's very helpful. And then my question regarding the loss ratio. When I compare the loss ratio on a year-over-year basis, I see 290 bps deterioration. Is this what you see as the run rate for the year considering the VAT impact? Or -- are you seeing room for additional deterioration above this around 300 basis points on a yearly basis?

Yes, Andres. Indeed, when you look at the loss ratio, as reported, you see that deterioration moving from last year's quarter of 59.7 to what we posted as a 62.6. So you see that. I think it's important to highlight that back in Q1 2025, that 59.7% didn't have any of the VAT impact. If we were to compare apples-to-apples, we would have seen a 63.1% in last year's loss ratio compared to the 62.6%. But actually, that is a significant improvement, knowing that we're not only looking at the VAT, but also as spare parts inflation and maybe the other movement -- pieces that we've been highlighting. So that's 1 take. The other thing is, given that the 62.6% is quite favorable, with in addressing the multiple factors that played in our favor in this quarter. So when you think about frequency, for example, we highlighted that it has been the lowest in the last 4 years, so that is a significant achievement. When you think about theft, for example, we also highlighted that we reduced 13.8% in thefts for the quarter. That also is a big a chunk of what we see as a building block for contributing to these performance. When you think about recovery, highlighting on -- comparing to the industry, we also managed to really prove our recovery rate compared to the industry and based on all the actions that we've been putting in place to do so. And also, let's not forget about the seasonality fact, right? So if you were to ask me, hey, are you going to be able to keep the 62%, 63% over the next quarters I would say that we need to take into account the seasonality factor, right? We know as a definition that the first half is lower in the loss ratio compared to the second half, and we should expect so as we move into the remaining of the year. So there are multiple things helping us in this regard. So I would highlight the fact that, yes, obviously, we have kept it under control. We knew that this was going to be coming a very challenging 2026 and a new -- very challenging Q1, Q2. So we put a lot of our action plan in place back in Q4. And we're now trying to get that benefit as we move into 2026. So we will have to monitor it carefully. There is a lot of moving pieces. 2026 is still a long year to go. But we're certainly prepared to be addressing many of these challenges as we move along. Hope that helps, Andres.

No, that's very helpful color, Roberto. But can we assume if you -- if we compare first quarter of the year that sort of eliminate and that shows 290 basis points. I understand the lower frequency, which is on theft, which is more difficult to predict. But can we assume that that's give or take the impact of the VAT increase on your loss ratio in the short term?

Yes, Andres. It does consider -- and it is affected by the VAT impact. both incur accidents on 2025 as well as -- sorry, incur accidents in 2026, and those that were incurred late 2025 and paid during this year. I think when it comes to claim cost rather than looking at on a stand-alone quarterly basis, I would always encourage to see the overall year, that's where we get the lower quarter in terms of weather and frequencies, and the high quarters. So I think it would be fair to say that at this point, we continue to see the 62% to 65% of claim ratio as our goal for the year.

Our next question comes from Ernesto Gabilondo at Bank of America.

Bernardo, Roberto and Jorge, it was a good quarter in terms of premium growth and claims costs. So congrats on that. So my question is a follow-up in the loss ratio. So you were saying that you still expect this ratio to be within your guidance range of 62% to 65% for the full year. So I just wanted to double check if this is considering the 2026 VAT impact? And also related to this, how do you see the loss ratio evolving in the competition? How much do you sense that competition has increased prices. And I'm also wondering if you have seen any competitor that has been aggressive in terms of pricing, like not following you or the industry in terms of increasing prices. I just wanted to check if you are seeing someone there. And my second question is on how should we think about the ROE for this year? Do you think that you can keep the almost 24% posted in this quarter? Or how should we think about the ROE during this year?

Thanks for joining us. Let me take the first piece of the question. So as it relates to loss ratio for our expectations for the remaining of the year, when you think about that 62% to 65%, the answer is yes. We want to keep it within that range for the remaining of the year, including the VAT impact. So that already in Q1, that we've been able to manage it, but we would expect to continue to grow as we see the second half going up on everything that I just mentioned previously. But I think it's important to highlight that, that is going to be an impact, and it's going to be included into our figures. Bernardo, you want to take...

So having had confirmation from Roberto that our loss ratio for the year, including the VAT, we will be within the 62, 65 as a goal. I will also say that ROE will continue to be aimed to be at 20%. We've already indicated that we could potentially be slightly below, but it will depend as a few things evolving in the next quarter. Now to your question regarding competition, let me just highlight that during this quarter, we got Amy's figures for 2025. And we confirm that the impact of the VAT was clear, was there for everyone. A lot of companies in the auto segment posted combined ratios above 100%. So we stood out but this confirms that pricing pressure is there for everyone to take. That doesn't mean that everyone took it because over the first quarter, I had the benefit of being in over the 10 states not visiting our offices, talking to agents and reality is different in every single city. We see different players, different approaches on pricing. Some of them did follow and then roll back, some of them actually went down in their intention to gain some volume, which we know is not necessarily a permanent, not a sustainable advantage. But I wouldn't say that we've seen the market reacting in the way we thought they would or at least not in the first quarter, and we see some erratic behavior from competition. We will stay close to them. And as I said, we will be aggressive. We will defend businesses as long as we have a right to win, but we will not be responsible on following any crazy pricing behavior. That doesn't include any technical reason.

Our next question comes from Kaio Prato at UBS.

I just have one on my side, please, on operating expenses. So we saw a drop on the line of almost 8% this year. improving the operating ratio. Just wondering if you can discuss a little bit more about the moving parts of design? And what should be the expectations for the overall efficiency for 2026 going forward?

On operating expenses, yes. As we mentioned in Q4, we knew that we were going to be a tough start of the year, so there are a couple of things that we've been highlighting. So obviously, we've been focusing on targeting pricing. We've been focusing on the Fed recovery and all the different pieces that have helped us on the loss ratio. But that doesn't leave the other piece, which is the operating expenses out. So we've been very strict on our cost control. So we've been really managing the business not at expense of service. Service is our top priority. But everything we can do besides that to look at synergies, efficiencies or anything related to project initiatives to automate or use whether it's AI or whether it's new technology that has helped. But also on that front, we've been able to see -- when you compare year-over-year, quarter-to-quarter operating expenses, there is a link to the performance of the holding group. So there is a portion of that helping as well on the service fees. When you think about the loss ratio that we had last year, that has been to the variable on the service fees as well as the earnings profit sharing. So that has also played a couple of factors. So there's a multiple factors that have played even after that, we've also been looking at, for example, the U.S. We know that it's also a business that started the year with a decline given the new partnership that we have highlighted. So we've been also managing those expenses to the limits so that we can make it more profitable. So all in all, when you think about that line, that has contributed in different fronts.

And Kaio, let me just complement Roberto on 2 things. One, productivity will continue to play a big role for Qualitas. If you look about 1 metric that we don't posted, let me just take you through it, which is written premium by employee, we basically double that metric seems when compared to 2021, 2020. So we were posting around $6.8 million per employee in written premiums, we're currently at 11.3%. So that speaks to our mindfulness on making Qualitas a company that also stands in terms of productivity and cost control. That doesn't come at the expense of service. And let me just make sure that everyone walks away recognizing that the results are not only strong on financial, but also what you [indiscernible] which is service. Customer satisfaction rates for this quarter were the highest in the past 5 years. And those metrics come from users themselves that help us guide or help us share feedback on where do we stand across of all the elements of the service process starting from the call until the reception back of their [indiscernible].

[Operator Instructions] Our next question comes from Carlos Gomez Lopes.

Congratulations on the very good results. You have emphasized a lot how you are still conservative for the rest of the year that this first quarter has objectively been a very good one. Should we interpret that perhaps there has been some transfer of revenues because of the way the contracts are assigned from the second quarter to the first quarter. Do you anticipate the seasonality to be felt in the second quarter? Or you are just generally conservative for the rest of the year and thinking that pricing will have any influence? And again, this is a particularly good period, but it should [indiscernible].

Thank you, Carlos. I appreciate the transparency. No, there hasn't been any shift of cost nor premiums between quarters. This is just the performance as it was. I think the conservative comes from a reality check on the world where we're living. If you look at quarter end market perspective, financial interest rates and stock markets, they changed radically versus 2 weeks afterwards. So that is also something that we're seeing when it comes to prices, competitive environment, cost increases. So we want to be cautious that in the current times worldwide, not only in Mexico, it is hard to anticipate what exactly is going to happen with so many vectors impacting the business. So I think it is not something that we know it's going to happen. It's just a reality on what we're leaving through. And that, again, is true not only for the operations side of the business but also for the financial income of the business. Also I think that would be a fair response. And hopefully, as we see next quarter evolving, we'll have more clarity on what the year is going to [indiscernible] I think there's another [indiscernible] fair to your question.

Yes. I followed you was a very good answer. Thank you very much. If I could follow up with something completely unrelated. Your solvency ratio has been coming down in the last couple of quarters. Where would you like it to be by the end of the year?

So thanks, Carlos. Regarding actually, the sovereignty ratio, we see a decline from 352 by year-end to 314. And that actually has to do with every year in Q1, we go through the subsidiary dividend payment provisions. So that is a process that we normally do. And this is from the Qualitas Mexico subsidiary to the holding company. As I stated in my remarks, next, we will have in our general shareholders assembly and we will be proposing a dividend of MXN 3.6 billion. When that is locked, then our subsidiary, it takes that as a committed to the holding group and that provision now becomes a liability. So that has driven the reduction to [indiscernible]. Now let me be very clear, even when you think about the solvency at 300, the solvency margin remains extremely strong and really underscores the solid foundation of the company. It really reflects the strength of our position and really enable us to take opportunities. So when you think about our solvency ratio, I would have -- I would expect to continue to be -- now after this temporary decline, I would expect to continue to be growing in the next quarters, getting to what we measure is more on an earned versus capital ratio and our target is to be on a 3x of that ratio. So currently, we're at 2.7%. So I would expect to continue to evolve in a slightly higher figures. Hope that helps Carlos.

This concludes today's conference call. Thank you all for participating, and have a pleasant day.