Quálitas Controladora, S.A.B. de C.V. (Q) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Good morning, and welcome to Qualitas' Second 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 Second Quarter 2026 Earnings Call. I'm Jorge Perez Rivero, Qualitas IRO. Joining me today are Bernardo Risoul, our CEO; as well as our CFO, Roberto 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 great to be with you all again. Let me start by saying that while the second quarter confirmed that 2026 continues to be a transition year for Qualitas, we are encouraged by the way the company is navigating a demanding environment. The quarter reflects the complexity of the market, the resilience of our business model, as well as the early and ongoing benefits of the actions we began implementing at the end of last year. As we have been communicating, 2026 poised itself to be quite unique as we would have to cope not only with the implications of global turmoil and Mexico's stagnant GDP growth, but also with the effects associated with the VAT regulatory change in which the sales tax paid in claims is no longer credited. On top of that, competition has intensified, and supplier costs continue to rise due to minimum wage adjustments. In the case of Mexico, for example, GDP is expected to grow by roughly approximately 1%, tightening disposable income across companies and individuals. In that context, we continue to move forward with initiatives focused on operating efficiencies, cost control, pricing discipline and further leveraging the advantages that come from our leadership position, scale and vertical integration capabilities. These efforts are helping us partially offset the new cost dynamics despite the mentioned challenging market conditions. From a quarterly performance standpoint, written premiums were basically flat, while presenting a 7.7% growth on a year-to-date basis. To better understand these results, it is important to look at the market dynamics as we are at the stage of the underwriting cycle where several competitors are increasingly relying on price cuts to seek volume growth. This is not new. We have seen it before and even anticipated. But what has been a bit unexpected is the depth and aggressiveness, especially in a year where the whole industry is digesting the mentioned effects of VAT changes. In several cases, both fleets and individuals, premiums are below a year ago despite the explained inflationary headwinds. On this front, our compass for all decisions is doing what is best for Qualitas in the long term. We have never managed the company to deliver a quarter but rather sustainable value creation. Easier said than done, but it basically resumes to defend all accounts where it makes sense to do so, but also wise, when deciding to let some of those go, especially if there is certainty that those accounts will come at a loss. When it comes to pricing, we will be aggressive, but not irresponsible. In parallel, we will continue to strengthen our service, which, by the way, continues to improve, being at the highest satisfaction survey in the past 5 years. And by doing so, seek to recall those customers that leave because of a lower price once the cycle normalizes. We have determined that while seeking efficiencies and productivity, we will not jeopardize services in any way but rather double down on it as a long-term competitive advantage. The environment is pushing us to go beyond on cost control, and we are relentlessly doing so. For instance, our loss ratio remained within our technical target range despite not only the mentioned VAT impact, but the fact that this year's rainy season appears to be starting earlier than usual with heavy rains already observed throughout the second quarter. Keeping loss ratio in control led to a cumulative combined ratio of 92.8%, in line with our full year objective. Our investment portfolio continues to be a solid contribution to results, benefiting from the timely extension of duration, allowing us to continue generating financial income above reference rates despite the downward trend in interest rates. Overall, this translated into an ROE for the period of 21.4% -- according to the latest AMI figures, as of Q1 2026, Qualitas remains the undisputable leader in the Mexican auto insurance industry with a market share of 34.2% in written premiums, 37.4% in earned premiums and 45.4% in the heavy equipment segment. In underwriting results, Qualitas accounted for 83% among the top 5 auto insurers in the sector. More importantly, our leadership continues to be reflected not only in scale, but also in profitability and operating performance, reinforcing the strength of our business model even during periods of elevated market pressure. Looking ahead, we remain cautiously optimistic for the rest of 2026. As we enter the second half, a period typically characterized by higher claims volumes and the impact of underwriting at lower premiums, we are committed to executing our defined strategic priorities continuing to invest in key areas and proactively adjusting our operations to remain agile and ready to respond. Regarding our 3-pillar strategy, winning in Mexico remains our foremost priority. Our insurance business in Mexico continues to be the main driver of the group and the foundation of our long-term value creation. From a new vehicle sales standpoint, according to AMDA, the quarter continued to show a positive trend, both in light and heavy units with growth of 7.1% in light vehicles and 8.2% in heavy units. These figures were a pleasant surprise and an outlier relative to some other sectors in Mexico. We do expect a slowdown in personal auto, while commercial vehicles, including trucks and buses, are expecting to recover from a year-to-date decline of 11.5%. New vehicle sales remain an important industry metric. Even if the competitive landscape and the broader macroeconomic context continue to remain fluent. At the same time, our priority remains on serving and retaining our existing customer base. Regarding our second pillar, we continue to see encouraging progress in our international subsidiaries. I would like to emphasize the traction and positive momentum we are experiencing with strong performance across all priority markets. Our LatAm subsidiaries grew 39% this quarter in U.S. dollars, consolidating as a strong option through our proposal that relies on excellence in service. We remain committed to investing in these operations and building their capabilities with a long-term perspective. We are making good progress towards them becoming an engine of profitable growth. As for our U.S. subsidiary, we continue to reshape the portfolio toward profitability. We are focused on properly managing the runoff of the businesses we have decided to exit while continuing to build a stronger and more competitive binational PPA proposition. This approach has reduced the risk associated with the commercial segment and reflects our disciplined focus on those businesses where we believe we have a clear right to win. Overall, in this important pillar, our strategy remains focused on disciplined growth strengthening local capabilities and continuing to replicate Qualitas operating DNA in those markets where we see attractive long-term potential. In parallel, we continue to move forward on our third pillar through our new businesses and vertical integration strategy. These businesses continue to strengthen our operating model by generating efficiencies, improving coordination across the value chain and supporting better claims management and cost control. As in prior quarters, we see these benefits materializing gradually but they are increasingly becoming an important component of our long-term competitiveness. We will continue to assess avenues of growth in new segments or markets as long as they fit with Qualitas DNA and can be accretive to our operations. Before closing, I would like to recognize our team. Their commitment, discipline and execution continue to be the foundation of our results and the reason why we remain confident in the future of Qualitas. 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. Going directly to our top line performance, written premiums for the quarter showed a marginal decline of 0.5%, which translates into a 7.7% growth for the first half of the year consistent with our full year top line expectations. It is important to highlight a onetime effect resulting from a shift of coverage in one of our largest multiannual accounts. Excluding this effect, written premiums growth would have been 3.4% and year-to-date would have stood at 9.5%. In our Mexican operation, the traditional segment accounted for 63% of total written premiums posting a decline of 3.2% in the quarter, while showing an increase of 5.5% growth year-to-date. Within this segment, individual business grew 2.5% in the quarter and 3.1% year-to-date while fleets decreased 12.4% in the quarter and grew 8.9% year-to-date. The referred one-timer came into the fleet business, which would have grown mid-single digit if normalized. Regarding the financial institution segment, which represented 32% of total written premiums, it grew 5.9% in the quarter and 15.4% year-to-date. The growth within this segment was also affected by the competitive environment in specific brands and models with some financial institutions. As reported, our international subsidiaries contributed approximately 5% of total written premiums year-to-date with LatAm strong growth being partially offset by the U.S. operation decline. Across Latin America, as reported, our subsidiaries posted strong growth of 26% in the quarter and 22.9% year-to-date. It is important to highlight that our LatAm subsidiaries' results have been affected by foreign exchange effects, mainly due to the depreciation of the U.S. dollar. This has had an impact on the reported growth in peso terms. Excluding this FX effect, written premiums in LatAm would have grown 38.8% in U.S. dollar terms during the quarter compared to the reported 26% and 40.1% year-to-date compared to the reported 22.9%. In Colombia, performance remains in line with our expectations as we continue adapting to the market's unique characteristics. We are building a solid foundation with the same service excellence DNA that defines our group committed to achieving sustainable growth through the same discipline and vision that have proven to be part of our success. As of today, we have 20 active offices enabling USD 11.4 million of written premium, well above our initial projections. Our goal by year-end is to have 25 offices open. But most importantly, to consolidate as the preferred options to those agents that have given us an initial opportunity. In the U.S., premiums declined 80.3% in the quarter and 78.8% year-to-date, consistent with our expectations as we focus only on the private passenger auto business line. Including all subsidiaries, we closed the quarter with more than 6.1 million insured units, up by approximately 120,000 units versus the same quarter of last year equivalent to a 5-year compound annual growth rate of 8.5%. Back to our financials. Earned premiums increased 4.4% for the quarter and 8% year-to-date growing at a faster pace than written premiums. As you know, earned premium growth is directly correlated with reserve behavior. During the quarter, we released MXN 322 million in reserves compared to MXN 730 million in reserve constitution in the second quarter last year. For the first semester of the year, reserve constitution totaled MXN 2.6 billion, 2% below the same period last year. This, combined with the deceleration seen in written premiums and the change in the mix of multiannual policies in the portfolio, which declined from representing 23% in Q2 2025 to 20.7% in Q2 2026 explains the dynamics of our earned premiums. Moving down to our costs. The loss ratio stood at 64.8% for the quarter. This result reflects the early start to the rainy season as well as the impact of higher average claim costs resulting from the VAT effect, which by the end of the first half of 2026, represented approximately 340 basis points of the loss ratio. All of this was partially offset 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 as well as the reduction in thefts coped with the continuous improvement in our recovery rate during the year. Furthermore, on a year-to-date basis, our loss ratio closed at 63.7%, standing at the midpoint of our 62% to 65% target range. In Mexico, the loss ratio stood at 63.9% for the quarter and 62.5% for the first half of the year, well within 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 and intense competition. It is worth mentioning that frequency for the quarter was 6.6%, representing a decrease of 23 basis points versus the same quarter last year. As for thefts, year-to-date theft cases decreased 15.3% for Qualitas despite having more insured units becoming an important building block for our claim cost performance. Qualitas' recovery rate stood at 49.4%, 619 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 25.1% for the quarter and 23.7% for the first half of the year, driven by the stronger growth of the financial institution segment, which carries higher commissions. Then our operating ratio stood at 5.8% for the quarter and 5.4% for the first 6 months of the year, including the employee profit sharing provision as well as fees paid to service offices and corporate bonuses linked to their successful performance during the year, aligning productivity and control efficiencies towards the positive results of Qualitas. The quarterly ratio increase was also influenced by the deceleration in written premiums as a lower top line base naturally puts additional pressure on the ratio. Excluding employee profit sharing, which will by law must be incorporated our operating expenses ratio would have stood at 5% for the quarter and 4.4% for the first 6 months of the year. All of the above resulted in a combined ratio of 95.7% for the quarter and 92.8% for the first half of the year, standing within our 92% to 94% full year target. Once again, I would like to reiterate that Qualitas business model is built for the long run. Even while facing adverse factors during the year, our focus will always be on turning value to our stakeholders through sustained business profitability. Now moving to the financial side of our business. Comprehensive financial income decreased 4.7% for the quarter and 15.1% year-to-date, mainly reflecting the lower interest rate environment versus the same period last year. As benchmark rates have continued to decline, the reinvestment yield of the portfolio has moderated accordingly, lowering quarterly financial income. Nonetheless, our investment committee and team have remained very responsible and diligent while at the same time, taking advantage of selective windows of opportunity that have emerged in recent months as a result of macroeconomic volatility. In those periods, we have been able to lock in products, offering attractive yields and extend the longer end of the curve in order to maintain our duration within the ranges we have been targeting. Results speak for themselves as we currently stand on the Mexico portfolio on a yield to maturity of 8.9%, where reference rate in Mexico stands at 6.5%, a 240 basis point delta that will allow us to continue seeing strong results for the coming quarters. We remain mainly invested in fixed income, which represented 85.7% of our total MXN 53.4 billion portfolio with an average consolidated duration of 2.6 years and a yield to maturity of 8.4%. With the current portfolio composition for each 25 basis point decrease in rates, the annual benefit on portfolio valuation is approximately MXN 309 million. The rest of our portfolio allocated to equities has remained resilient during the first half of the year. For example, although the S&P 500 stumbled in the first quarter of the year, a positive 9.6% return was still observed on a year-to-date basis, setting a relatively more constructive tone as markets headed into the second half. All our investment assets are classified as available for sale, meaning their unrealized gains or losses are reflected in the balance sheet until realized even as uncertainty persists across markets amid geopolitical risks, trade tensions and concerns about a potential economic slowdown. Our investment strategy has not had any relevant changes in 2026. We have continued targeting 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. Our comprehensive financial income reached MXN 1.2 billion during the quarter and MXN 2.3 billion year-to-date, delivering 7.4% ROI in both quarterly and year-to-date perspective. Total unrealized gains are approximately MXN 2.4 billion including FX impact. The unrealized gains increased from the MXN 1.5 billion level at the end of Q1 this year due to the performance of our equity portfolio and the interest rate reduction of 25 basis points observed during the quarter, which led to higher valuations of our fixed income assets reflected on the balance sheet. When considering all positions on a mark-to-market basis, ROI would have stood at 13.6% for the quarter and 8.9% for the year. Approximately 21% 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. The duration of our portfolio enhances our ability to weather market fluctuations. Going forward, 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 was 30% year-to-date, in line with historical levels. Net income reached MXN 1.4 billion for the quarter and $2.9 billion year-to-date with net margins of 8% and 7.5%, respectively. Our 12-month ROE stands at 18.3%, reflecting the full year onetime VAT impact recognized during Q4 of last year. ROE for the period stood at 21.4%. Despite headwinds, we continue to be committed to our long-term ROE of close or above 20%, including this 2026. Our regulatory capital stood at MXN 6.6 billion with a solvency margin of MXN 16 billion, equivalent to a solvency ratio of 341%. In turn, our trailing 12-month earned premium-to-capital ratio stood at 2.9x. Our performance delivered industry-leading profitability, while our strategic execution has ensured earnings durability and capital efficiency, positioning us well to navigate volatile times. As we have been communicating, we are in the midst of our transition year, navigating a complex and challenging environment. but in challenging environments, character shows and service is where character becomes tangible to our customers. Our results this quarter reflect some of these headwinds, yet the full picture is what matters. And our full picture is built on a simple principle when our clients need us most, Qualitas delivers. That is our foremost priority. In closing, we are proud of our solid first half performance. We delivered profitable growth, paving the way for the future and reaching key milestones despite external pressures. Our capital position remains robust, and our strategy is clearly defined. While the second half may present new challenges, we are fully prepared to navigate them and continue delivering long-term sustainable value. 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 Guilherme Grespan at JPMorgan.

My question is just on the top line, two-folded question. But you mentioned in the release that you have a change in coverage for a multiannual account. It wasn't 100% clear to me what exactly does it means if it's you lost the client to a competitor, if you declined to reduce the coverage, if it's a timing recognition issue? So if you can provide a little bit more color on what you mean by this comment? And then the second point of the question is what is the outlook for the year, right? You used to have, if not mistaken, a soft guidance of high single-digit to low double-digit written premium growth. I just want to confirm what is the latest kind of soft guidance for the top line in the year for -- after this print, right?

I'll take a couple of the questions that you mentioned. First, regarding the one-timer reflected on the quarterly premiums, there is one large multiannual premium that changed coverage from a full coverage to a limited and reduced extension. So important to note the customer is still with us. And just as a reference, we go back to Q4 of 2024, we called out into this same audience, one large fleet, which accounted to a significant booster in what was a growth of 30% back then in the quarter. So it is linked to that and somehow also speaks because customers adapting to market and financial conditions, which, as we mentioned, are currently skewed to seeking cheaper or fair prices. So again, that one-timer accounted for around 3 points of growth for the quarter, and we wanted to call it out because the base business is still growing in the low to mid-single digits for the quarter. And again, if we were to see the 6 months year-to-date, we are still posting a growth that is still attractive closer to 9%. Now if I were to shift to your second question, what can we expect moving forward? I think it's fair to anticipate that aggressive pricing will continue likely throughout 2026. And probably until losses -- loss ratio starts bringing the deals of the suboptimal underwriting decisions being made. So considering that and what is likely to be an ease on new car sales, we do expect the second half premium growth will be tighter, but I would say still positive. And at this point, we believe top line for the year should end up in the mid- to high single digits. Now importantly, the discipline we've taken across all fronts lead us to still hold our bottom line expectations, and it was called out by Roberto that as of the beginning of the year, we saw a combined index at or slightly up of our 92% to 94% and an ROE close to the 20% long-term target. Those bottom line targets still hold and prevail, and that is important because as we see that top line, particularly challenging momentum, bottom line will hold. Now I would also like to highlight that we will continue to invest in businesses that are ramping up such as Qualitas Salud and Qualitas Colombia. We will also sustain investment on IT and the staffing on key roles. Those are businesses and innovation that will create value and growth in the upcoming years, and therefore, we have decided not to take any investments away. Lastly, I will also mention that we will not cost on service matters. We will actually double down on it as a main competitor advantage and what we believe will prevail in the long run. So with that, Guilherme, I'm hoping I cover both the particular situation on the shift of coverage on that large multiannual premium and as well as the expectations as we see the second half of what has been a transition year.

Our next question comes from Arnon Shirazi at Citi.

Thank you for the opportunity of making questions here. Nice to be here. My question is related to the VAT. I see that year-to-date impact was 320 bps in loss ratio. I know that it's too early to call, but hold the impression so far. How do you manage the increase in cost in general? And what expectations for the second half of this year, mainly related to the VAT impact? Thank you and congrats for the results.

Good morning, Arnon, and thank you for joining us this morning. As you pointed out, yes, we are experiencing and digesting the VAT impact in -- not only in 2025, but also in 2026. As we called out we, see our loss ratio for the first half of the year at 53.7%, and that already takes into account 3.2 percentage points of VAT impact. So if we were to exclude that, certainly would even much better than last year at that same point. Now some of the things to be able to digest that impact we've been highlighting back even from Q4 2025, we've been fairly adjusting pricing where the market allows us and in the different segments. We've also been very proactive that we cannot only take that price down to the customer and see what the market how we react. But rather, we've been putting a lot of control discipline behind our figures. And taking advantage of our scale and our operational efficiencies so that we can make the most out of our competitive advantages. So by looking at that, if we were to only stay -- let me give you just a flavor of if we wouldn't have done anything compared to last year, we would be even in a much worse situation and we would be having a much bigger impact into the VAT for our loss ratio. So there are a couple of initiatives behind the scenes that are occurring, and that has led us to be able to keep in control not only the quarter the 64.8% that on top of the VAT, we had the earlier rainy season. But when you look at the full year figures, we've been able to keep in the mid-range of our long-range target. So we've been being very active to try to digest this impact. Now to the second portion of your question, what should we expect we should expect to continue having this because this would continue to be playing in the second quarter, the noncredit VAT will continue to be hitting our P&L. But still, we will continue to be driving initiatives to manage those efficiencies. So I hope that answers your question or not.

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

My first question is a follow-up on premium growth, competition and technical reserves. So given a softer macroeconomic backdrop and tougher competition, can you provide us some color on what are you detecting in terms of the pricing strategy from competition? I don't know if they are maintaining prices, lowering or raising the prices? Is there a segment in which competition has been more aggressive and how should we expect the release of technical reserves throughout the rest of the year? So that's my first question. Second question is on the operating costs. How should we think about this ratio if there is more moderation in the premium growth in the second half due to the weaker macro and competition? And my last question is if you can give us probably your two main risks for the rest of the year and for next year, that will be very helpful.

Thank you, Ernesto, and good morning. Great having you. So let me take the first one that relates to what we have been talking about premium growth and competition. And at the beginning of the year, we were already expecting that the claims cycle the traditional pricing pressure was going to be there. We did think that due to the increased pressure between the inflation and the VAT changes, we thought it was going to ease, but that was not happening or that has not happened. Prices across all 3 segments have tightened, but especially relevant in fleets. So as you think about where are we seeing most of the pressure, I would say, is the fleet segment because that tends to be the way that competition increases volume, more volume all at once. And I would say that in fleets, while service continues to play a big role, the macroeconomic conditions tend to shift the decision or at least in the short term, more to prices. So price cuts are not new. Some of the competitors have taken some accounts below what loss ratios are and historic loss ratios. So they're basically banking on gaining volume at the expense of bottom line. And from our view, we're willing to be aggressive but not irresponsible. And as I called out in my remarks, all Qualitas has been making our decisions that are right for the long run. We will defend those businesses that make sense, but we're also willing to let those that do not see a long-term relation or a loss. And hopefully, we will see them back as time goes on. I think for the balance of the year, as you call out, we do recognize that price sensitivity will remain. Thus, we also need to accelerate cost-saving projects because we need to be competitive not only on service, but also on prices. And we're doing so, and we will expect to continue seeing the benefits along the year. I will just wrap it up on this section that it is more an art than a science. Many factors come into play. But as I stated, this is not the first time we go through them. And as before, doing what is right usually pays out. We're really hoping that the industry as a whole restores profitability. We will do our part, but I think it's fair to say that we will not be shy to defend our business. So we will not stand still. We will not see our accounts that we work throughout the years go, and we're ready to put on a fight as we are, but we're also ready to be once again responsible when it comes to making the decisions. So with that said, Roberto, do you want to take the operating cost?

Well, let me just address the reserves question as well. Thanks, Ernesto. So when you think about reserves, you're absolutely right. So in the first quarter, we saw a significant double-digit growth, 15.3% for the quarter, and that led us to make a reserve constitution. On the other side, on this quarter, we see the flattish written premium growth that we've been talking about. And that led us to a reserve release. When you think about what is coming to the future, that will have to depend on the ease of the written premiums growth will actually play an important role on those most likely releases or adjusting as to how also interact with the growth in the financial institutions. So depending on how we play out in the second quarter, that would also had an impact on a driver on whether it would end up with a reserve constitutional release. But as you know, this is tremendously leading to the ease of the rating premiums growth. Now turning into the second question, when you think about operating expenses, when you look at the quarter-by-quarter, it's basically not keeping it flat. If you compare it to last year, we actually on a year-to-date basis, we reduced our expenses despite the salary increases and the inflation and some of the natural expenses going up. So we've been keeping an eye and a tight control on this line item. But as indicated in my remarks, if the written premium starts easing out, that will have additional pressures onto the ratio. It also is linked to our operating expenses on profit sharing and also on the bonuses on our profit model. So as we would go into the loss ratio to the second half of the year, depending on the rainy season, depending on how pricing pressures play out and that would translate into more pressure into a combined ratio, that will also have an adjustment favorable on profit sharing and service office fees to be able to contain that absolute number and therefore, would not be driving it higher. But that will also tell a little bit of the story that we've been keeping it very tight. And as we see the second half, we'll keep it even tighter so that we can deliver on our 92% to 94% combined ratio target.

And just before we move on to new questions on your third question, Ernesto, what are the main risks that we see for the next 6 to 18 months. I would say First and foremost would be that the price cuts continue for a longer period of time. Recall that we're playing in a market that is fully free competition. We have around 36 players, insurance companies serving the auto segment in Mexico. We have large local multi-segment. We have bancassurance. We have global companies. They all have different strategies. They all have different funding sources and likely different time horizons. So I would say if we were to see longer periods in which we're not able to fully reflect the increases on cost and VAT changes that could put a little bit more pressure as we think about the midterm. And the second would be something that is outside of our control at this stage, which is how do we see the U.S. and Mexico trade agreements coming to closure and if we were to see a significant increase on tariffs, especially those auto spare parts coming from the Asia or China specifically, that could drive cost a little bit beyond what we expect. But I think we have historically been very agile to adjust. And hopefully, we won't see that happening. But I would call out to be that second risk as we think about the next 18 months.

Our next question comes from [ Ricardo Boire ] at BTG Pactual.

Can you provide more color on the profile of the players that are intensifying competition? You mentioned they are sacrificing bottom line from market share gains. So I wanted to check if this could be a customer acquisition strategy for the auto industry or if they are not specializing in auto and could be trying to acquire clients to then monetize in other products? And for my second question, the financial results have been very resilient despite the low interest rates. So I wanted to see what should we expect in terms of of the spread versus the reference rate, if you should see an accommodation in the following quarters? Or are this around 9% return or close to that is still feasible for the year in your view?

Well, let me take the first, and I'll let Roberto address the financial income. The profit of players that I just mentioned, I think there are 3 to 4 that stand out, but they're different in nature. We believe some of them are seeking to rebalance some of their portfolio and have a more weight towards the auto segment, which has recently proven to be quite profitable. And I think in a large way is because of our results. We also believe that there are some players that globally, they want to stand out in Mexico, and they're trying just once again seek volume to be more relevant and to gain scale. But I wouldn't call out yet to be unique. I think this is part of cycles that we've seen before. And I would say we got to hold a little bit more to make sure that short-term results such as the quarter results do not drive decisions that will harm the long term of the business. So again, I would say that at this stage, the cycle has not been different in terms of players or length. It has been a little bit different in terms of depth, but we're yet to see how this evolves in the next 6 months. Roberto, do you want to take the financial income?