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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 our long-term target. Furthermore, our investment portfolio continues to deliver financial income ahead of reference rates led by the timely duration extension.

According to the latest AMIS figures, which were released in March during 2025, 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 one-time 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 line apart from bancassurance.

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 hasn't 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 this 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 cities 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 linked 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 underwrites commercial cross-border, serving now our binational 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 in 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 thefts, in this first quarter of the year, theft 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%, 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 by law 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 posted 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 314%. 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 MXN 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.

Thank you for your question. 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 a lot on pricing considering several multi-vectors, not only car type value usage, but also ZIP code with specific considerations as well, such as coverage. So pricing, I would say, continues to be a stronghold for Qualitas.

Now when it comes to pricing during 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 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 is relevant, but not the only one, where we have seen stronger competition and Robert alluded to that in his remarks is in fleets. And as a reference, 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 with maintaining 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 very 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 educated 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.

Congratulations on the results.

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 clients 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 different -- 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 irresponsible. 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?

It will be basically without these 2 large accounts or few large accounts, 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 part inflation and maybe the other moving pieces that we've been highlighting. So that's one take.

The other thing is, given that this 62.6% is quite favorable, we've been 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 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 we compare first quarter of the years that sort of eliminate the seasonality 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 the -- and it is affected by the VAT impact, both incurred accidents on 2025 as well as -- sorry, incur accidents in 2026, and those that were incurred in 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 weathers 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. Just wanted to double 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 into 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 AMIS 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, 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 this 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 this line and what should be the expectations for the overall efficiency for 2026 and going forward?

Thanks for your question. On operating expenses, yes. As we mentioned in Q4, we knew that it was 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 FX 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 one metric that we don't post, but let me just take you through it, which is written premium by employee, we basically doubled that metric seems when compared to 2021, 2020. So we were posting around MXN 6.8 million per employee in written premiums, we're currently at MXN 11.3 million. 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 [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 car.

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

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 signed 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 normalize.

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 change 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 living 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 voice on the line. Carlos, I'm not sure you're able to follow us -- would that be fair to your question?

Yes. I followed you and it 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?

Yes. So thanks, Carlos. Regarding actually the solvency 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 week, 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 takes that as a committed to the holding group, and that provision now becomes a liability. So that has driven the reduction to 360. 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 2.7x. 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.

Good morning, and thank you for joining Quálitas' Fourth Quarter and Full Year 2025 Earnings Call. I will pass the call over to Jorge Pérez, Quálitas' IRO.

Good morning, and thank you for joining Quálitas Fourth Quarter and Full Year 2025 Earnings Call. I'm Jorge Pérez, Quálitas IRO. Joining me today are Jose Antonio Correa, our Executive President; Bernardo Risoul, our CEO; and Roberto Araujo, our CFO.

Before we begin, 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. Quálitas 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 Jose Antonio, our Executive President, for his remarks.

Thank you, Jorge. Good morning, everyone. It's great to be with you once again, and let me begin by wishing you all the very best for the year ahead.

2025 proved to be a year of strong performance alongside notable regulatory changes for Quálitas and for the insurance industry as a whole. As we review our results, we would like to highlight several key developments, and I would like to begin by formally recognizing the commitment of our agents, policyholders and employees, whose efforts enabled a strong full year performance amid a challenging macroeconomic environment.

This strong execution continues to be clearly reflected in our industry's positioning and operating metrics. For example, according to the latest AMIS figures, as of September, Quálitas remains the clear market leader with 32.7% market share in written premiums and 35.9% in earned premiums. Furthermore, Quálitas accounted for 45.9% of the industry's total operating income, while posting the best combined ratio among the top 5 companies. I am glad of the 2025 results once everything is considered, which includes the VAT regulatory changes and its effects in P&L for the year.

In 2025, our top line grew 9.4% despite pricing pressures and a challenging macroeconomic environment. Profit wise, net income was above MXN 5 billion, and we delivered an ROE above 20%, consistent with our long-term target. Bernardo and Roberto will provide further detail in a few minutes.

To provide a broader perspective, in the last 4 years, Quálitas has doubled the size of the business, driven by our differentiated business model. Additionally, in 2025, Quálitas surpassed 6.1 million insured units, adding more than 335,000 units and representing 5.8% increase versus 2024, achieving a 10% compounded annual growth rate over the last 5 years.

Looking ahead, we expect 2026 to be a complex operating environment, but Quálitas remains well positioned to excel driven by our disciplined execution towards our 3-pillar strategy. Thus, we are confident Quálitas will continue in delivering another year of solid results and value creation. Aligned with this long-term perspective on our commitment to sustainability, I would like to briefly revisit the leadership transition we announced last quarter, which reflects a well-structured internal succession plan, aimed at strengthening our governance and ensuring strategic and cultural continuity.

As I transition from my role as CEO to Executive President, I do so with unshakable confidence in Bernardo Risoul, who has assumed the role of Chief Executive Officer on January 1, 2026. Since joining Quálitas in early 2019 as CFO and later serving as International CEO and Deputy CEO, Bernardo has consistently demonstrated a strong leadership, deep knowledge of our business and a clear alignment with our values and long-term purpose-driven vision. I am very proud of this transition and confident that Bernardo is the right leader for the next phase of Quálitas.

From my new role, I look forward to continuing to support him and the management team as we remain focused on creating sustainable value for all stakeholders.

And with this in mind, I would like now to hand it over to our new CEO, Bernardo. Please go ahead.

Thank you, Jose Antonio, and good morning, everyone. It is an honor to be back on these calls under the new role from which I will devote myself to build a strong organization that focuses on creating value to policyholders to agents, investors and our communities.

I would like to begin by thanking Jose Antonio for his leadership, guidance and continued support as Executive President of Quálitas, as well as to the Board of Directors for their confidence in me. Having had the opportunity to serve the company in different roles over the past several years, I stepped into this position with a deep understanding of our business, our culture and the responsibility we have to our stakeholders.

I am proud to be part of a great team, I am confident in our ability to continue delivering sustainable growth and long-term value, and I am certainly energized to lead the way into an exciting and promising future.

With that, let me turn to some high-level notes regarding the current market dynamics, including the latest regulatory topics regarding sales tax or VAT. In terms of Mexico car sales, according to the Association of Auto Distributors, AMDA, new vehicle sales in 2025 were broadly flat, deaccelerating versus prior years.

At the same time, the competitive environment became more aggressive with pricing pressure across certain segments as players sought to attract volume and behavior historically linked to healthier combined indexes. Against that backdrop, we see a focus on our underwriting discipline and service execution, prioritizing adequate pricing, portfolio quality and long-term profitability over short-term market share.

Related to service, our core differentiator, I am glad to share that in 2025, NPS across all measured variables and service APIs improved versus prior years, being the highest since we started measuring them. This approach is at the heart of why Quálitas continues to deliver consistent performance through different market cycles.

Now let me move to another key topic, the VAT legislation that was approved under the 2026 revenue law. We continue to refine the implementation of this new process in close coordination with the authorities, emphasizing that the resolution reached while representing an important financial impact in 2025 and beyond, has provided certainty and clarity, bringing to closure a relevant matter for the whole insurance industry.

As part of this resolution, we reflected the full 2025 VAT impact in our fourth quarter and full year results. Despite this, we acknowledge that 2026 will be a transition year in which we will continue to navigate through these changes, digesting effects of policies issued with technical models that had not incorporated this new cost dynamic.

Roberto will provide further details on the specific figures later on this call. With this topic behind us and supported by the strength of Quálitas and the dedication of our team, we're moving forward from a position of strength into 2026, which, as mentioned, will be a year of transition for the company. Quálitas is well positioned to overcome the impact of these new roles through the proving agility, adaptability and resilience of our business model.

Changing gears into another key strategic matter, I want to highlight the progress made in our U.S. subsidiary where the outlook has improved meaningfully, as we execute changes in our model. Specifically, in addition to domestic program exit back in 2021, as of January 1, we will no longer underwrite commercial cross-border serving now our binational customers through a partnership. As a result of this, our U.S. operation will focus on properly managing the runoff of both programs and continue building a binational PPA winning proposition. We have resized the organization to operate more efficiently. We are all focused on committed to this new path that better aligns with our strength and potential to create value.

With that context in mind, let me now share a few highlights of our 2025 full year performance. We delivered record annual written premiums of MXN 75.8 billion, underscoring the strength and consistency of our business. Top line growth was in line with our expectations, reaching 9.4% for the full year, despite significant pricing pressure. We maintain a sustainable loss ratio, resulting in a combined ratio of 94.1% or 90.6% when excluding VAT impact, outperforming our 92% to 94% long-term target.

On the investment side, our well-managed portfolio in which we had increased duration led to another year of strong financial income despite interest rates easing faster than expected. The trifecta of strong top line, solid operating and financial results led to a net income of MXN 5.1 billion and 12-month ROE of 20.2%. All this, again, despite the VAT impact.

During 2025, Quálitas continued to advance on each of the 3 pillars of our corporate strategy, aimed at strengthening the business and driving sustainable mid- to long-term growth. For example, operating with excellence and maintaining service as the core of our model. In 2025, our call center delivered meaningful improvements, handling 3.3 million calls, while reducing average response time from 6 to 5 seconds, enabling faster assistance when it matters the most at the first moment of truth.

These operational gains translating into a 95% customer satisfaction rate above prior year's level, reinforcing our commitment to continuous improvement, efficiency, and best-in-class service. Talking about accelerating our international expansion, we continue to scale our Colombia business, delivering strong results and in less than a year, closing with 1,200 agents, more than 9,500 insured units and 15 offices across the country, all exceeding our initial projections.

We expect this growth trajectory to continue into 2026, positioning Colombia as an increasingly important contributor to Quálitas long-term growth strategy. Beyond international markets, we're also deepening our tech capabilities. In 2025, we've made progress in leveraging AI to unlock the value from our data assets and together with our technology subsidiary, DCT, strengthen our value proposition by delivering more targeted solutions and value-added services, including enhancing our risk prevention programs.

Delivering the above-mentioned results, seeding the future projects and strengthening our organization in a year that had particularly unprecedented challenges across so many vectors is a true testimony of what Quálitas is able to do. A praise to everyone who made it possible, which is also the source of our optimism towards the future. I recognize 2026 will not be an easy ride. We acknowledge the reality we face, but we'll never surrender to it. We have the capabilities. We have the tools and most importantly, the team and the determination to capture the opportunities that are out there. I remain confident that Quálitas is well set to outstand and continue creating value.

And with that, I will hand it over to Roberto for a deeper dive into our quarter and full year financial performance.

Thank you, Bernardo, and good morning, everyone. Our fourth quarter and full year results reflect the strength of our strategy by delivering solid top line growth, disciplined underwriting, a resilient investment portfolio and a combined ratio at the upper end of our long-term target range.

Let me walk you through the details. Starting with top line performance. Written premiums grew 6.4% in the quarter and 9.4% for the full year. In Mexico, the traditional segment accounted for approximately 62.7% of total written premiums, decreasing 3.7% in the quarter and improving 2.8% for the full year. From this segment, the individual business decreased 0.2% in the quarter with growth of 7.7% for the full year, while the fleet business decreased 7.2% and 3.2%, respectively.

This performance reflects our deliberate pricing downwards adjustments prior VAT resolution, while supporting our long-term profitability, which were partially offset by the continued growth in the insured units as customers continue to choose Quálitas for our differentiated service offering amid pricing pressure.

Moving to the financial institution segment. This represented approximately 33% of total written premiums. Growing 29.4% in the quarter and 24.6% for the full year. This strong performance was achieved despite the slowdown in new vehicle sales across the industry. Growth was supported by continued shift in customer preference toward larger vehicles, such as SUVs and pickups, which carried higher average premium, as well as higher mix of multi-annual policies and increased market share with key financial institutions.

As reported, our international subsidiaries contributed 5% of the total written premiums full year. Across Latin America, subsidiaries posted a strong growth, with 16.6% in the quarter and 31.2% for the full year. Each quarter, we continue to reach important milestones across our international footprint. In Peru, written premiums grew 28.1% in the quarter and 34.1% for the full year, reaching a market share of 7.5% and continuing to outperform the competition.

In Colombia, our newest subsidiary, as Bernardo already highlighted, we exceeded our first year business target objectives. Laying a strong foundation for a scalable and sustainable long-term growth. In the U.S., as expected from our strategy to reshape our business, premiums decreased by 15.2% in 2025. The new strategic partnership for our cross-border business will help us deliver a healthier financial business into our U.S. operation, while providing Quálitas policyholders with the highest standard of service.

Overall, insured units closed the quarter at 6.1 million, representing a 5.8% year-over-year volume growth. Back to our financials. Earned premiums increased 8.5% in the quarter and 13.1% for the full year, more in line with our expectations, reflecting the effect of research movement in accordance with a more stable top line growth pace.

During the quarter, we constituted reserves of MXN 4.2 billion, basically in line with the same period a year ago. Full year reserves constitution totaled MXN 6.4 billion. As a reminder, technical research constitution is based on approved regulatory models and it speaks to the corresponding premiums growth, consistent with our expectations earned premiums are growing at a faster rate than written premiums being able to capitalize accelerated growth from past periods, as well as the benefit from lower claims costs.

Moving down to our costs. Our loss ratio stood at 77% in the quarter, reflecting the full year onetime VAT impact recognized in the period. Excluding this effect, the loss ratio would have been at 63.6%. Still, on a full year basis, the loss ratio closed at 65.7%, improving by 40 basis points year-over-year. highlighting the effectiveness of our cost discipline and a business model, even under recent regulatory changes. Excluding the VAT effect, the loss ratio would have been 62.2% for the year.

In Mexico, the loss ratio was 77.8% for the quarter and 64.5% for the full year, up 14.6 percentage points and 10 basis points, respectively. Again, the quarterly increase primarily reflects the full recognition of the 2025 VAT impact.

On thefts, full year cases decreased 11% for Quálitas, despite having more insured units becoming an important building block for our claims cost performance. These results follow the historic annual seasonality where the first year of administration, we see reductions of thefts and are coupled with internal efforts on theft provision and recovery. On the latter, Quálitas recovery rate stands at 43.6%, 100 basis points above the rest of the industry and improving versus last year. We continue enhancing our technology tools and coordination with suppliers and authorities to reduce costs and improve our efficiency.

Frequency on a 12-month basis stood at 27.4%, an improvement of 80 basis points compared to the prior year. On a quarterly basis, frequency decreased by 30 basis points versus fourth quarter '24, reflecting the continuing improvements in risk prevention and driving behavior. The acquisition ratio stood at 22% in the quarter and 23.1% full year, about 70 basis points and 120 basis points higher than last year, respectively, driven by the stronger growth in the financial institution segment, which carries higher commissions.

The operating ratio was 3.6% for the quarter and 5.3% full year, including profit sharing, given the positive performance of our company. As a result, we also had an increase in fees paid to service offices and corporate bonuses that are linked as well to their successful performance during the period, aligning productivity and cost control efficiencies towards the positive results of Quálitas.

If we were to exclude employees profit sharing from this provision, that by law must be incorporated, our operating expense ratio would have stood at 4.4% full year. Altogether, this resulted in a combined ratio of 102.6% in the quarter and 94.1% for the full year. Excluding the onetime VAT impact, the normalized combined ratio would have been 89.3% for the quarter and 90.6% for the full year, fully delivering on our commitment and confirming the discipline of our business strategy.

On the financial side of the business, comprehensive financial income decreased by 21.3% in the quarter, while growing 3.6% on the full year basis, highlighting how resilient our investment strategy is even amid lower interest rate throughout the year.

Our portfolio totaling MXN 53.2 billion remains 86.5% in fixed income with an average duration of 2.3 years and a yield to maturity of 8.4%. For the Mexican subsidiary, the yield stands at 9%. The rest of our portfolio allocated in equity has remained resilient from the market performance during the full year. For example, the S&P 500 stumbled in the first quarter of the year, still, a 16.4% return was observed in 2025, setting a positive tone as markets head into 2026.

All our investment assets are classified as available for sale, meaning their unrealized gains or losses are reflected in the balance sheet until realized. Our investment strategy has not had any relevant changes in 2025. We have strived to bring our fixed income duration slightly higher than 2 years as our reference rates remain in the mid- to high single digits in Mexico. Following the guidelines, advisory and a strategy decided by our investment committee as part of our institutionalized corporate coverage. Total comprehensive financial income was MXN 1.2 billion in the quarter, and MXN 5.1 billion full year, delivering 8.1% and 8.7% ROI, respectively. Total unrealized gains are in the magnitude of MXN 2 billion, including FX, considering a 14% peso valuation during the year.

These unrealized gains reflect both mark-to-market revaluation of our fixed income portfolio as rates began to ease, as well as gains in equities. When considering all mark-to-market positions, ROI would be 7.2% for the quarter and 10.9% for the year. This reinforces the importance of our available for sale accounting treatment in which valuation effects remain on the balance sheet until realized, but the expanded cushion of our capital base and highlight the embedded value within our portfolio.

As interest rates continue their downward trajectory. These gains are likely to remain a relevant driver of our financial results. Approximately 22% of our portfolio is invested in U.S. dollars, given our international presence. For every peso that appreciate or depreciates, the estimated annual impact is around MXN 675 million, service as a natural hedge. Our effective tax rate for the quarter was distorted by the full year VAT impact in the period, while for the full year, the effective tax rate was 31%, in line with our historical trends. Net income closed at a loss of MXN 190 million in the quarter and MXN 5.1 billion net income for the full year with a net margin of 6.7% full year.

As anticipated by Bernardo, our 12-month ROE despite VAT impact stands at 20.2%, in line with our long-term target of 20% to 25%. Our regulatory capital stood at MXN 6.1 billion with a solvency margin of MXN 16.1 billion, equivalent to a solvency ratio of 362%. Our 12-month earned premium to capital ratio is 2.7x. We maintain a strong capital position that allow us to invest strategically to continue improving customer service and experience through innovation and technology, while reinforcing our core capabilities.

Our approach remains disciplined and selective, always with the goal of delivering long-term sustainable value to our shareholders. Dividend distribution will remain a core element of our capital allocation framework. While the final decisions rest with the AGM from a management perspective, we expect the upcoming dividend to fall within our policy range of 40% to 90%.

In summary, we had a solid 2025, and we're very pleased with our underlying business performance. As the industry moves through the claims cycle and competition remains intense, our disciplined execution and resilient operating model continued to set Quálitas apart.

Looking ahead, our priorities for 2026 are clear. We will focus on restoring our combined ratio in Mexico to our target ranges through disciplined pricing and cost initiatives, strengthening claims and service capabilities to further differentiate our value proposition, accelerating innovation, digital transformation and new product development as well as reinforcing our culture and organizational discipline to sustain productivity and execution.

We're taking the needed decisions to deliver short-term results, but never at the expense of long-term value. We believe these priorities will allow us to further strengthen our competitive position. enhanced profitability and continue creating long-term value for our shareholders, customers and employees. We are excited about what lies ahead and remain fully committed to disciplined execution and sustainable growth.

Now before moving to the Q&A session, let me provide you with some color on what we could expect for next year's performance. reiterating that since a few years back, we do not disclose a formal guidance or targets, but rather some overall expectations.

Top line growth momentum is expected to be at a slower pace, following the projections the new car sales growth from the Mexican Association of Auto distributors, AMDA, which is forecasted to be between 0.2% and 2%, Written premiums are expected to continue to grow in the high single digits to low double with earned premiums growing a few points ahead. Regarding the loss ratio, we expect results to be in the higher end or slightly above our technical range objective of 62% to 65% and to normalize over the course of the year, as we continue making progress toward absorbing the VAT impact.

We do expect first quarter and even half of the year to be above target given the impact of both 2026 claims at a higher cost and those incurred in 2025, not yet paid, with pricing and cost-saving plans to partially mitigate due to its annual nature. The acquisition ratio and operating ratio should continue within its historical levels with no major changes. The above metrics should lead to a combined ratio at the upper end of our long-term target range of 92% to 94% or slightly higher.

Finally, we expect our financial performance to be consistent to the results posted in 2025 given our fixed income duration strategy. Discipline in execution and a culture of service excellence remains the foundation of Quálitas. These strengths enable us to navigate a 2025 regulatory changes with clarity and effectiveness.

Throughout the year, Quálitas led the industry, both operationally and financially, while consistently delivering best-in-class service to our policyholders and agents. This disciplined execution reinforces the strength of our operating model and our ability to perform across cycles. We invite you to be part of our long-term vision, grounded in the resilience of the company that has demonstrated across multiple cycles and environments over the past 31 years.

I am highly optimistic about what lies ahead for Quálitas and our customers. And I'm confident that our focused strategy will continue to drive meaningful value creation for our shareholders in the years to come.

And now operator, please open the line for questions.

[Operator Instructions] Our first question comes from Tiago Binsfeld from Goldman Sachs.

I just wanted to double click on the financial income expectations. You're coming off a pretty good quarter, pretty good year as well, very resilient despite lower rates. When you look forward and your message on consistent year-over-year growth, does that mean that you can deliver the same nominal level of results in 2026? And to get there, would you need to realize any portion of your unrealized gains that you currently have in your balance sheet? Or just the rollover of the fixed income portfolio would get you there?

Tiago, thank you for your question and always good to have you joining this call. Let me just highlight that from an investment standpoint, our strategy has not changed. We will continue to focus on fixed investments, which should account somewhere in the 80% to 85% and the balance will continue to be invested in equities, mostly ETFs that stand outside of Mexico.

With that consideration and recognizing that interest rates have gone down significantly, when we say consistent, it's about consistency in the way we invest, not necessarily the amount we expect. We should expect that absolute returns on the portfolio can be lower than 2025, but we will continue to stay ahead reference rates.

And the reason why is, again, that we increased the duration of our portfolio, fixed rate, and it currently stands on around 2.3 years. And that is giving us the benefit of extending the rates, the yield to maturity, which currently stands at 8.4% relative to Mexico set that are now to 7%. So specifically to your question, financial income will likely be below in absolute terms, but will continue to be outstanding or above reference rates.

Our next question comes from Pablo Ordóñez at GBM.

On your expectations for 2026, I was wondering if you can help us to give us more color on the top line outlook by segment. What do you expect in terms of the traditional business? We saw some deceleration in the quarter. Financial institutions remain solid and banks continue to guide towards mid-teens level growth in terms of that side of the business. And the fleets, how do you see the competitive environment evolving?

And the second question related to this is how should this affect the acquisition ratio? Something that surprised us in the quarter is that the acquisition ratio was 22%, and we have seen higher levels in the previous 2 quarters, driven by the higher growth in financial institutions.

And finally, it seems that despite 2026 being a transition year, ROE could remain at 20%. Would you agree with this view? That would be my questions.

Thank you, Pablo. And let me take a piece of your question and then hand it over to Roberto. And I'll give you a broader answer on 2026 expectations. You all know Quálitas, it is never easy to come up with an exact forward-looking figures, so we'll not spend a lot of time on that. But we always have some guidance and color.

And especially at current times, we saw high degree of uncertainty across so many angles, tariffs, exchange rate, it is hard to be able to come up with some exact numbers. So please take it as directionally. And as it was broadly said, top line should be in the high single to low double digits. And to your question on how do we break it down? I think individual will continue to be the broad and stronghold of the company. We want to continue building a portfolio of individual policies, which historically have been more resilient, easier to change prices given their annual nature.

Now second line of business, which relates to fleets. We had a good year in terms of number of units, but a decrease in terms of premiums because of their positive results on claim cost which ended up being renewed at a lower premium levels. We do expect fleets to come up with a strong growth, but we also expect fleets to be highly influenced by pricing given the nature of its business.

And when it comes to financial institutions, we were all flatly surprised by the outcome of this niche. We will continue to grow, but expect it to be on a more moderate pace compared to 2025, mainly driven by average premium price increases and again, following last year's strong expansions.

Now let me just take this opportunity to continue building on some perspective of 2026. Our combined indexes, as I said, should be in the upper range or slightly above our ongoing targets and the financial portfolio we've already addressed. ROEs could be a 20% or slightly below. And we also want to highlight that the behavior on a quarterly basis will come up different to prior years. First quarter combined indexes will be stressed by the impact of the VAT on new claims in addition to the payments made of prior claims, specifically last quarter of 2025. And all that with the impact of pricing and savings that are already implemented but will take time to fully reflect.

Do we have a shot of ROEs or at 20%? We certainly do. I think that will continue to be our goal. And there's a lot of things that can go better. Industry recovery can go faster. Industrial investment can pick up. It all depends on GDP and our ability as a country to come up with new terms on the U.S. agreements. The peso strength that has surprised us is expected to have a benefit of spare part cost, but we are still yet to see on how fast that happens.

It could be also a result of responsible competitor behavior, the performance on non-Mexico auto subsidiaries or faster benefit of our already implemented saving plans. So there's a lot of things in the pipeline that can lead us to have another year of strong performance, top and bottom line, but I think it's fair to recognize that we're dealing with unprecedented challenges, probably the biggest one we have had as an industry.

And Quálitas once again is set to prove its agility and resilience. I did give you a longer perspective on your question, but I think it was worth to use this opportunity to give you a broader perspective on the expectation and the things that can go better to once again outstand. Roberto, why don't you take the second piece on the question on the acquisition ratio expectations.

Yes. Thank you, Pablo. Thank you for joining us. On particularly on 2025, you're right. I think the big driver of the increase on acquisition cost is mainly by mix. As Bernardo alluded, we are increasing double digits on the financial institutions. So that has a higher commission rate. And when we think about the expectations for 2026, as long as that mix continues and depending on how that mix that Bernardo just mentioned, that will continue to be stable or actually improving the mix depending on how it comes up in 2026. So I hope that answers your question.

Our next question comes from Guilherme Grespan at JPMorgan.

My question is also a follow-up on financial results and investments. Just want to confirm, you have roughly 15% of the portfolio in equities. I want to confirm if it's basically TF on S&P on U.S. equities. And you also have international bonds, I think, another 15%.

I want to confirm if it's U.S. or ex U.S. And then the main point of the question is actually on the balance sheet. Just want to confirm a few as well. How you book the USD changes. There is a -- there was a big movement on translation effect in the equity. I imagine this is related to the FX conversion of those investments, but I'm not sure if it's booked on this translation line or if it's on the valuation purposes of the investments? So just the moving parts on the FX and how this is going to impact either the P&L or balance sheet on the financial results side.

Hello Guilherme. Let me take the first question, the first part of your question regarding the investment portfolio. Yes, it's around 15% on equities. That includes both ETFs that are U.S. mostly based, but they do have some participation of global equities. We can share later on the split between global equities, ETFs and U.S.-based ETFs.

I think that part of the strategy that has worked, and it was lined up that way from the investment committee is to have a more diversified portfolio, and that is one of the reasons why we have decided not to fully have placed the ETFs on U.S. business only. That portion of the 15% includes as well FIBRA, which is the only thing that we have when it comes to Mexico exposure equities.

Now we do not expect to increase significantly that. We've always moved it between the 15% to 20% equities. So depending on how the market is perceived, we could see some shifts, but not necessarily intentionally to drive up that percentage. Roberto, do you want to take up the question on FX?

On the translation effect, you're right, it has to do with the U.S. and what we see is in the [indiscernible] effect on quick. It also has been reflected on that portion. So we can actually go offline and take it a little bit deeper when we have some time to go through the details. But yes, it has to do with what you have mentioned.

Just to give you the exact 2/3 of our ETFs are global ETFs and 1/3 is directly S&P 500.

Our next question comes from Thiago Paura. Please state your company name and then ask your question.

Just a few ones on my side, if I may. And the first one is a bit of a follow-up on the -- on some of the latest questions. Just to clarify, is there still any VAT impact from 2025 to be booked in 2026? Because I'm just trying to understand why in your soft guidance, you expect the combined ratio for this year to be at or even above the top end of the range. And in this case, potentially higher than the combined ratio of 2025 despite the repricing initiatives planned for this year.

Because in theory, the way I see is that 2025 absorb all full year cost pressure in Q4 with somewhat limited price pass-through and you still was able to deliver a 94% combined ratio. So I tend to believe that 2026 should be structurally better, right? Because there is some kind of reprice initiatives that goes throughout the year just to try to be more clear here, understanding these dynamics for this year to come. And also to assess if you plan to do any other initiatives on top of repricing to help to offset this higher cost pressure going forward?

Thank you, Thiago. This is Jose Antonio. Just let me -- before Roberto answers, just let me tell you that, yes, we have taken the full impact of the 2025 VAT as indicated by the regulation. But there's something that you need to acknowledge, and that is the way how pricing is really built over a period of time. It is not immediate. I mean, we immediately change whatever we have to change in terms of tariffs, which includes inflation and many variables, including part of the VAT.

But some of the underwriting that had already taken place in 2025, which will be effective in 2026, will not be able to get a benefit of the increases in price. It will gradually be that. So we expect that in the first half of the year, it will probably will be a little bit higher the amount of the all the combined index and the loss ratio because of that. It takes time.

As you know, a lot of our portfolio includes for all the individual businesses is really on a year. So everything that has already been written in 2025 that will have an impact in 2026. But that's why there's going to be a delay impact, which is naturally in our business on the price increases that we are having.

This is important to say. Clearly, the VAT, let me tell you also that this VAT thing, which is an industry-wide stock, really provides clarity and certainty on some topic that for the whole industry and in Quálitas in particular, potentially had a significant impact. So that's already solved. Now for the second part of your question, let me Roberto answer that part, Thiago.

Thiago, thanks for the question. Just to complement on what Jose Antonio was mentioning, I think there are 2 phases, right? So what we did recognize in 2025 is what it was determined and paid during 2025 for those claims.

So those -- that credited that should not be credited, that's the recognition in 2025. For those that have occurred in 2025, but have not been finalized, determined or paid, that's the impact that Jose Antonio was alluding in 2026. So that -- there is a still a second piece of that portion of it. On top of that, when you think about how we are accruing and reserving for those -- given that, that VAT is no longer credited, there is an additional portion that it will be impact on the new claims that are originating on 2026.

So that double hit is what we are going to be experiencing particularly on the early quarters of the year. And as we are taking actions, that will be starting to mitigate throughout the year of the -- given the annual nature of our policies. So that's going to be phasing out through the year. That's why early in 2026, we should expect to be even slightly higher or higher than our targets in loss ratios, but over the course of the year, we'll be getting back and closer to our ranges. That's a little bit more details on how we are thinking about it.

And again, think about the -- also the multi-annual business, right? So given the rates and the tariffs that were prior to the VAT regulation that will stick. So it will take some time to digest that. Now that's the reality of our business. The good news, I'm going back to what we've been communicating is that we now have a clarity and confidence on how the rules are being established.

And now we already had a very clear strategy on how to go about different tactics or strategies to mitigate those. And some of those examples is by leveraging, obviously, certainly pricing on average premium pricing. But there are other components to that equation. We've been mentioning our vertical integration capabilities. Some of those efficiencies, obviously, the work that we continuously do on risk prevention programs, that's -- all of those will help us on really absorbing that and not necessarily passing that through to our customers, but rather to really digesting and ensuring that we have a long sustainable business over time.

And Thiago, we have a long list. Just last Monday, we had a full-day session multifunctionally to review the priorities for the year, to review all the projects that would help us offset the cost impact. But one thing that is important is that we will not jeopardize service experience and value creation for short-term savings. We're managing this business for the long run. We've done so over the past 30 years, and we will continue to do so. So we need to ensure that the benefits of any decision outweighs the service impact.

Our next question comes from Carlos Gomez-Lopez at HSBC.

The first one refers to pricing. And again, we go back to the same thing. If we understand correctly, you have to take on the cost of the VAT. That is what is making your claims ratio higher and you do not expect to compensate for that. Initially, you expect to do it over the year. We understand that. But in addition to that, what is the competitive environment right now? I mean, in the past, you have said that in some lines, you are starting to see pricing go down. After this agreement with VAT, are you still seeing competition? Or has that eased? And then slightly -- taxes, could you confirm expected tax rate, I think you said 30%, 31%. Finally, you are talking about an ROE that could be up to 20%. When I look at the consensus right now, they are close to MXN 6.5 billion. So probably that sounds too high compared to what you are saying.

Carlos. Let me take a few of those comments and questions. So on the competitive environment, I think what we have 2 realities, but that doesn't necessarily going to be changing in the future. So one is prior VAT and then the post-VAT. What we've been communicating over the course of 2025 is that we did experience pricing pressures, particularly on the fleet segments, and as well as we're starting to see that in the individual business.

Now that the new regulation kicked in, when we've been discussing and goes back to your first point on pricing is the dynamic will start moving on a different dynamic just because of everything that we've been talking on the loss ratio dynamics on the VAT credit. So what we should experience is a more intense competition, but in a higher level.

Hopefully, that will bring a little bit of the average premium going up, but still, there are going to be some competition depending on how all the different players see their efficiencies and being able to compete for the customers and the policies.

On the taxes front, we did close the year on 31%. We do expect for 2026 to start going slightly lower than that tax rate, that's on a historical levels. Just because we will be able to be -- able to apply many of those provisions, and that will hopefully get those deductibility on the corporate tax. So that should be a good expectation to 2026. With that, let me get back to Jose Antonio so that he can complement as well.

Well, thank you, Carlos. Let me tell you first regarding the competitive environment. As Roberto indicated, it continues to be tough. Now let me tell you that we are now entering into -- it has been accelerated. This VAT situation has accelerated the change in the cycle of the insurance cycle. As we have had increasingly better loss ratios and combined ratios for -- not only for Quálitas who was leading, but for the industry as a whole.

The VAT changes that and now it changes and goes back to the standard cycle that we have had 3 or 4 cycles over the past 15 or 16 years. So this will change, and we will need to see what happens with the reactions of all the competition in here. But clearly, it is a change in that.

Now regarding the ROE, it is important, and Bernardo also mentioned that, that we don't manage the company on a quarter-by-quarter basis. We manage for -- and we do the things for the long-term. And that's because we want to create sustainable value, and that is on a long-term basis. So while we might have some changes. And as Roberto indicated, in the first half of the year, we will be pressured in terms of the loss ratio and consequently into the combined ratio.

Clearly, in the end, that will have an impact into the ROE for the year. But still, we aim to get into this 20%, which we have been able to achieve in the past. And we don't forecast exactly what it's going to be, but we are going to be close probably, and we are aiming to do that. And it will depend on how fast we get into some of the savings and the structural costs that we are taking to compensate also for this VAT impact. I hope Carlos, this answers your question.

And to wrap it up, Carlos, ROE continues and will continue to be a key performance metric for management. We're not walking away from our long-term 20% plus on ROE desirable target. But again, we recognize that 2026 will be another transition year. So even if we're not there at the 20%, we should be close to it. And long-term, we will strive for it.

That's very clear. Now related to the ROE, if I may add, your capital -- your solvency ratio declined slightly to 350. Should we expect a reversal to the 400 that you have posted in the past?

Carlos, obviously, the reduction of that for MXN 401 million to MXN 362 million has to do with the recognition of the VAT liability. So that actually, I just want to mention that, that continues to be a strong capital structure that just highlights what we are talking about. But we do believe, depending on the results of how those movements are and also how the dividend policy and the final dividend comes in the next year, that will play out and how the margin will remain.

We have time for one last question today. We will hand it over to Ernesto Gabilondo at Bank of America.

My first question will be on your policy pricing strategy. So during the quarter, we saw year-over-year contractions in the traditional business and fleets.

Also, we have been going into different auto agencies, and there are a lot of promotions, discounts, reflecting what you were saying from the AMDA expectations that there will be low activity in the sale of new cars. And on top of that, last December, the Mexican government increased tariffs into autos and auto parts.

So this, together with the VAT impact would have an impact in the demand of premiums. And I remember that around 20% of your total policies are multiannual. So I just wanted to like to pick up your brains and understand how do you want to mitigate those headwinds? Of course, one will come from pricing. How much pricing can we expect or higher prices in 2026 to mitigate that impact?

And also, what will be the strategy to return the traditional and fleet businesses into year-over-year growth within a context in which we are seeing probably more competition? And also, if you can give us like some color if this competition could come from large players or small players willing to sacrifice profitability to take market share?

And then just a last question on your guidance. So we put everything together, your double-digit earned premium, a combined ratio of 92%, 94% and consistent financial results. This is putting us into practically no recurring earnings growth considering that the VAT of 2025 was only onetime. So I just wanted to double check if that is a reasonable assumption.

I'll take out the first related to pricing. And let me just stand a little bit back and say everything starts with our combined ratio target, which aims to be at the 92% to 94% -- from there on, we look at saving opportunities. Obviously, we also look at pricing. And in terms of policy pricing, what we are expecting, and we have already taken some steps regarding increases is to rate increase around 6% to 8%.

Now that will -- that is going to come on top of decreases that we have made during 2025 as a result of combined ratio performance.

Therefore, if you're renewing as an individual policyholder, your policy in the next months, your net increase could be close to local inflation, let's say, anywhere between 3% and 5% -- now pricing, that's an average, but it depends on multifactors, as we have said in the past, and that continues to be one of the strongholds of Quálitas -- that's the way we do prices because we incorporate not only car value and type of usage, ZIP codes and several other factors that will come into the pricing decision. But I think just to move along, pricing will continue to be a key item on our commitment to deliver that combined ratio between 92% and 94%, but not as a stand-alone item.

And we will take the lead on that one as we have always done.

Ernesto, on how the competition is playing in terms of large business or key players, I would probably say, again, it goes back to in a case-by-case basis, right? So the way that we play and the way that we go through on pricing, we looked at every fleet, every case, whether it's small, medium or large, and we will go and look at their profitability, and we're targeting on our combined ratio accordingly.

That's our underwriting discipline. Certainly, the big businesses and the large players will go after those, and we have seen this in 2025. And we will continue to see this in 2026.

So that will continue to be a rule of the game. And what we have seen is where we see some space and align to our long-term profitability, we will certainly address whether we need to increase, maintain or decrease our pricing.

On the second piece of your -- or the last piece of your question on the guidance, yes, I think that is a fair assumption to continue on keeping it at that same level given the transition that we've been talking about and looking at how 2026, but more importantly, how the long-term of those earnings will come back as we go through this transition and absorb the VAT regulation in 2026.

No, that's very helpful. Just a follow-up in terms of the pricing. You were saying it could be between already 6% to 8%, but in the new renewals, it could be around inflation, 3% to 5%. But what about, for example, the increase in tariffs that happened in December? Is that also already incorporated in the higher pricing that you're expecting for the year? Or is something that you will be evaluating depending on how you see the picture in the first, second quarter of this year?

Those effects are being considered together with some other, which include exchange rate. So I think when you put everything together, the 6% to 8%, which we have already taken should help us navigate through most of the impact. Again, only when you're talking about the pricing.

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

Thank you for standing by. This is the conference operator. Good morning, and welcome to Quálitas' Third Quarter 2025 Earnings Results Webcast. The conference will begin now. It is my pleasure to turn the call over to Jorge Pérez, Quálitas' IRO.

Good morning, and thank you for joining Quálitas' Third Quarter and 9 Months 2025 Earnings Call. I'm Jorge Pérez, Quálitas IRO. Joining me today are Jose Antonio Correa, our CEO and Chairman of the Board; as well as Roberto Araujo, our CFO.

Before we begin, 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. Quálitas 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 Jose Antonio, our CEO, for his remarks.

Thank you, Jorge, and good morning, everyone. It's great to be with you once again. We have a lot of new and important information to share, and I would like to start by extending my appreciation to our agents, policyholders and employees for delivering a strong first 9 months of the year, especially considering a challenging macro environment.

Before I touch on some of these results, I want to address developments in the Mexican Congress regarding the VAT topic. Following various meetings between the Mexican Association of Insurance Institutions and the Authorities, on October 17, a legal reserve to the 2026 Economic Package was submitted to the Mexican Congress, introducing an amendment to the revenue annual law concerning insurance institutions. This amendment has already been approved by the Chamber of Deputies and is pending approval by the Senate, which is expected to occur in the next weeks.

In this submission, a new article clarifies that the value-added tax charged to insurers by their claims suppliers is not creditable. In connection with this clarification, a transitional article is established in the law to set forth the following, first, any potential liabilities for insurance companies, whether arising from notified tax assessments or from current or future audits related to the inability to create the VAT charge on claims up to 2024 will be eliminated. In addition, any active administrative or legal actions on this matter will be closed with no further obligations or consequences for either party.

For practical purposes, any type of contingency for 2024 and prior years could be eliminated. A correction is required from insurance companies for fiscal year 2025, in which VAT paid to claims suppliers must be treated as noncreditable, which will result in an amount payable to the tax authorities. And beginning in 2026, the VAT charged by claims suppliers will not be creditable and will only be deductible for income tax purposes. This measure has consequences for existing insurance products, for which claims occur as of 2026.

All of the above will imply bringing to closure to this key matter, which we believe is very -- and let me stress, very positive. Having said so, the Board of Directors has approved the above proposal leading to two major implications for our business.

First, a onetime impact that will hit our 2025 results and where the exact amount will be available once the new loss approval process has been concluded, stating all specifics. And second, an increase to our ongoing claim cost by no longer being able to create the VAT. This effect will result in the need to compensate the extra cost via cost savings or other measures.

More to come on this matter. But given the relevance of the matter, I thought important to make it the first topic of today's call. Again, and to be clear, while we would have hoped for a different outcome, we now have a clear path to putting this topic behind and the basis for us to plan the future.

So going back to our quarterly performance, we are pleased to share strong third quarter and year-to-date results. Top line growth was within our expectations, reaching a 10.7% for the first 9 months with a sustainable loss ratio resulting in a combined ratio of 91.3%, which is better than our long-term target of 92% to 94%.

On the investment side, we posted strong financial income even as interest rates continue easing at a faster rate than expected pace. Thus, Quálitas delivered a 51.4% net income growth in this quarter and 40.3% year-to-date with a 12-month ROE of 26.7%, well above our long-term objective. Celebration comes beyond financial metrics as in September, Quálitas Mexico was honored for the sixth consecutive year as La Aseguradora Ideal for agents in Mexico or the ideal insurance company, which is particularly relevant considering our focus and commitment to exceed the expectations of our 25,000 nonexclusive agents.

Among several things to highlight in the quarter, I would like to call out an important step in our U.S. business, where we just formalized a commercial partnership with NH Seguros, the market leader in the cross-border business. This agreement will allow us to continue offering our commercial trucking customers a binational coverage with a strong value proposition, but under a model that reduces risk to Quálitas and allows us to focus on other businesses where we see stronger growth and ROE potential.

And before I hand it to Roberto, there is one key topic I want to share and that makes me very proud. In line with our commitment to continue strengthening our corporate governance and developing our organization, I have recommended to the Board of Directors that the President and CEO roles be separated. As such, I am happy to announce that effective January 1, 2026, Bernardo Risoul will take on the CEO role for the Quálitas Controladora, while I will remain as Executive President.

As you well know, Bernardo has been Deputy CEO for the past 3 years. And prior to that, he held both the CFO and International CEO roles. His experience prior and at Quálitas, his passionate leadership, strong capacity and unique fit with the Quálitas DNA makes him the right person for the role. I am extremely pleased and confident that this is a step that further strengthens quality ability to continue creating value for all stakeholders for many years to come.

And with that, I will hand it over to Roberto for a deeper dive into our quarter and year-to-date financial performance. Roberto, please.

Thank you, Jose Antonio, and good morning, everyone. Our third quarter and 9-month results reflect the strength of our strategy and our ability to deliver value despite the economic environment, while continued to deliver solid top line performance, disciplined underwriting, a resilient investment portfolio and a combined ratio well within our long-term target range.

Let me walk you through the details. Starting with top line performance. Written premiums grew 7.3% in the quarter and 10.7% year-to-date. In Mexico, the traditional segment accounted for approximately 62% of total written premiums, growing 2.7% in the quarter and 5.7% year-to-date. From this segment, the individual business increased 7.2% in the quarter and 10.8% year-to-date, while the fleet business decreased 3.6% and 1.2%, respectively. This performance mainly reflects the effect of adjusting pricing downward to be more in line with our ongoing long-term profitability objectives, being partially offset by the increase in units insured, by capitalizing on our service offering, ensuring customers continue to choose Quálitas as their insurance company despite pricing pressures.

Moving to the financial institutions segment. This represented approximately 33% of the total written premiums, growing 17.6% in the quarter and 22.4% year-to-date. This strong performance came despite the slowdown in new vehicle sales across the industry, including both light and heavy units. The growth continues to reflect the shift in consumer preference towards larger vehicles, mainly SUVs and pickups, which translate into higher average premiums as well as the increased effect from multi-annual versus annual policy mix and the increase of Quálitas market share with key financial institutions.

As reported, our international subsidiaries contributed 5% of total written premiums year-to-date. Across Latin America, subsidiaries posted a strong growth with 29.7% in the quarter and 37.5% year-to-date. Each quarter, we continue to achieve key milestones.

For example, Peru, written premiums grew 26.9% for the quarter and 36.6% year-to-date, involving a market share of 7.5% and continues to outperform the competition. Or Colombia, our most recent subsidiary in which we have already achieved our goal of opening the 14 offices we had estimated for the end of 2025 and continue our openings, while rapidly building scale and working with over 900-plus agents, laying the groundwork for sustainable expansion.

In the U.S., as expected, from our strategy to exit domestic business and focus on cross-border and the national products, premiums declined 30.6% in the quarter and 24% year-to-date. As Jose Antonio alluded earlier, the new strategic partnership for our cross-border business will help us deliver a healthier financial business into our operation, while providing Quálitas policyholders with the highest standard of service.

Altogether, insurance units closed the quarter at 6.1 million, a new record high with over 110,000 additional units versus the previous quarter and with over 450,000 net additions versus the same period of last year, a 7.9% unit growth, maintaining a solid compound annual growth trend of 10.1% over the last 5 years.

Back to our financials. Earned premium increased 16.2% in the quarter and 14.8% year-to-date, more in line with our expectations, reflecting the effect of reserves movements in accordance with a more stable top line growth pace.

During the quarter, we released reserves for $460 million compared to a constitution of $814 million in the same period last year, also benefited by the loss ratio improvement observed throughout the year. Year-to-date, reserve constitution totaled $2.2 billion. As a reminder, technical reserves constitution is based on approved regulatory models and speaks to the corresponding premiums growth. And consistent with our expectations, earned premiums are growing at a faster rate than written premiums being able to capitalize accelerated growth from past periods as well as the benefits from lower claims costs.

Moving down to our costs. Our loss ratio stood at 62.4% in the quarter, improving 6.8 percentage points versus previous year. Furthermore, on a year-to-date basis, our loss ratio closed at 61.8%, improving by 4.6 percentage points compared to last year. Although historically, the third quarter is the highest of the year due to the methodological event season, the company maintained the loss ratio well within our long-term target.

In Mexico, the loss ratio was 60.6% in the quarter and 59.8% for the first 9 [ months ] of the year, representing 7 percentage points and 5.1 percentage points improvement compared to the same period last year, respectively, exceeding our expectations. It is worth highlighting that the heavy equipment portfolio showed an improvement of 6.3 percentage points in its loss ratio versus the third quarter of 2024.

On thefts, year-to-date cases decreased 8.7% for Quálitas despite having more insured units becoming an important building block for our claim cost performance. These results follow the historical annual seasonality where the first year of administration, we see reductions of thefts and are coupled with internal efforts on theft prevention and recovery.

On the latter, Quálitas recovery rate stands at 43.1%, 40 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. Frequency on a 12-month basis stood at 26.8%, an improvement of 122 basis points compared to the prior year. On a quarterly basis, frequency decreased by 21 basis points versus the third quarter of 2024, reflecting continued improvement in risk prevention and driving behavior.

The acquisition ratio stood at 24.5% in the quarter and 23.6% year-to-date, about 1.8 percentage points and 1.3 percentage points higher than last year, respectively, driven by the stronger growth in the financial institution segment, which carries higher commissions. The operating ratio was 6% for the quarter and year-to-date, including employee profit sharing given the positive performance of our company.

As a result, we also had an increase in fees paid to service offices and corporate bonuses that are linked as well to their successful performance during the period, aligning productivity and cost control efficiencies towards the positive results of Quálitas. If we were to exclude employees' profit sharing from this provision that by law must be incorporated, our operating ratio would have stood at 5% in the quarter and 4.7% year-to-date.

Altogether, this resulted in a combined ratio of 93% in the quarter and 91.3% year-to-date, fully delivering on our commitments, confirming our business strategy discipline.

On the financial side of our business, comprehensive financial income declined by 4.3% in the quarter, while growing 15.1% on a year-to-date basis. Our portfolio totaling MXN 52.4 billion remains 86.4% in fixed income with an average duration of 2.3 years and a yield to maturity of 8.6%. For the Mexican subsidiary, yield stands at 9.3%. The rest of our portfolio allocated in equities has remained resilient from the market performance during the first 9 months of the year.

For example, the S&P 500 stumbled in the first quarter of the year, still a 13.7% return was observed on a year-to-date basis, setting a positive tone as markets headed into the last quarter of 2025. All our investments are classified as available for sale, meaning their unrealized gains or losses are reflected in the balance sheet until realized.

Our investment strategy has not had any relevant changes in 2025. We have strived to bring our fixed income duration up to 2 years as reference rates remain in the mid- to high single digits in Mexico, following the guidelines, advisory and the strategy decided by our investment committee as part of our institutionalized corporate governance.

Total comprehensive financial income was $1.1 billion in the quarter and $3.9 billion year-to-date, delivering 7.6% and 8.9% ROI, respectively. Unrealized gains for the first 9 months of the year are in the magnitude of $1.2 billion, including the FX effects and reflects both mark-to-market revaluation of our fixed income portfolio as rates began to ease as well as gains in equities.

When considering all mark-to-market positions, ROI would be 13.2% for the quarter and 12.2% for the year. This reinforces the importance of our available-for-sales accounting treatment in which valuation effects remain on the balance sheet until realized, but they expand the cushion of our capital base and highlight the embedded value within our portfolio. As interest rates continue their downward trajectory, these gains are likely to remain a relevant driver of our financial results.

Approximately 22% of our portfolio is invested in U.S. dollars, given our international presence. For every peso that appreciates or depreciates, the estimated annual impact is around MXN 650 million, serving as a natural hedge. Our effective tax rate was about 31% in the quarter and year-to-date, in line with our historical trends.

Net income reached MXN 1.7 billion in the quarter and MXN 5.3 billion year-to-date with net margins of 10% and 9.9%, respectively. Our 12-month ROE stands at 26.7%, above our long-term target of 20% to 25%.

Our regulatory capital stood at MXN 6 billion with a solvency margin of MXN 18 billion, equivalent to a solvency ratio of 401%. Our 12-month earned premium to capital ratio is 2.6x. We maintain a strong capital position that allow us to invest strategically to continue improving customer service and experience through innovation and technology, while reinforcing our core capabilities. Our approach remains to be disciplined and selective, always with the goal of delivering long-term sustainable value to our shareholders.

In summary, 2025 is poised to become one of our best years across most metrics. And while we need to understand the onetime impact of the VAT matter, widely discussed by Jose Antonio, we are proud of the business performance year-to-date. We recognize that competition is strong, resulting from the claims industry cycle, but we're well prepared for that. We reaffirm our full year top line growth to be in the high single digits to low teens with key performance indicators remaining within our target ranges.

And now operator, please open the line for questions. Thank you.

[Operator Instructions]

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

My first question will be on premiums. We have been to the field. We have explored different auto agencies and everyone is giving bonuses to buy a car, free interest for 2 years, is making a down payment of 50%. Interest rates are as low as 4.4%. But regardless of all these initiatives of the auto sector, we continue to see a drop in the sales of new cars.

In the last quarters, you were saying that you started to lower prices, not for everyone, but case by case. So having said that, how should we expect premium growth for next year, especially within the context of potential higher tariffs for autos and spare parts, the recent floods in five states, which could result into higher claims costs and potentially higher taxes for the sector. I would say at first glance, probably the sector will increase prices to compensate those issues. But don't you think the risk is that individuals might sacrifice service for getting a lower price? I would like to hear your thoughts.

Ernesto, thank you for being with us. Well, clearly, the premiums is something that we had expected this year. As you know, we had a very strong premium growth in 2023 and 2024. Now we expect that this year our growth to be along the 8% to 12%. And I think we will continue on that basis.

Clearly, we are in the cycle of the -- insurance cycle and the car insurance cycle in which most companies are already with combined indexes below 100, and that puts pricing pressure. We have seen the pricing pressure in the case of Quálitas most in the fleets, in the big fleets, in the heavy equipment. And that's why we have seen some reduction in pricing and in premiums now.

I don't see that in the future for 2026, and it is still too early to say what's going to happen in 2026. But certainly, one of the things is that the growth rate of the car sales in Mexico, I think this year is below -- I mean, it's below last year. I mean you see the AMDA's statistics through September, they are 3.5% below a year ago. And if you take into consideration some changes that they made to the reporting of the Chinese brands, it's about 2% negative. So that I think it will continue to be on those levels for the next 12 or so months, and it will be kind of flat.

Also, the prices -- the car prices have remained somehow flat after big increases also in '23 and '24 because of technology. So I think that the prices will continue -- forecast will continue to be on that regard. And as such, I don't see a big increase or that the market will push higher the premiums on that side. That's why we will be seeing -- probably we maintain our forecast of being around 8% to 12% for this year.

As Roberto indicated, we are going to be around the 10% growth or something like that. As you know, our first 9 months is almost 11%, which is very good for our performance. Now we still need to see and talk to the AMDA to see what they expect for next year. But I don't see that this is going to change very much.

Now regarding the pricing, clearly, as we have done in the past, the cycle has made us to be vigilant on pricing and not being increasing prices rather making the adjustments. And clearly, the changes that have, particularly in tariffs and stuff like that, that we still need to be seeing what is going to happen in the market. Clear, we are going to have to absorb via pricing, some of the changes of the tariffs. So all in all, I continue to see that claims cost probably will go up, and we will have to compensate that to make sure that our pricing is right.

But let me tell you one thing, Ernesto. You know us very, very well. And Quálitas has always been very flexible. And it is -- that is very important because we tend to react very quickly to the situations in the environment. And frankly, the results that we have shown today or that we published yesterday to the market, I am very happy with that with the double-digit growth and with the bottom line ahead of expectations. So we will continue to be operating in a good way, and we will be taking pricing as appropriate to make sure that we remain into our long-term objectives.

Excellent. And just a follow-up in terms of the premiums growth. In this quarter, you released technical reserves and premiums earned were higher than expected because of that. So just wondering if we should continue to have lower technical reserves or do you think it was only something that happened during this quarter? And this is especially in this context that I was mentioning that probably you can have higher tariffs and probably that could imply to have higher technical reserves?

And then also related to this is on the claims costs. We saw at the beginning of October, important slots in the country, five states. You have -- you are the leader in the auto insurance industry. Should we expect some impact in the last quarter because of these slots?

Ernesto, thank you for joining us today. So let me take the first one on the reserve side on the earned premium. So as you pointed out, Q3, we saw the release of the reserves, but we also highlighted in Q2, the constitution and that actually dropped the earned premium. I think it's a couple of factors involved. I think one point to point out is the mix, right? So we talked in Q2 about the mix on financial institutions. We talked about the mix on the multi-annual versus the annual and the outgrowth pace of financial institutions versus the rest. But also, when you look at Q3, we also saw that mix, but we also expected and we knew that Q3 normally is a higher loss ratio. So we're seeing some of that benefit in Q3 when we still look at the reserves.

So to answer the question as to is this going to be consistent over time, it will have to depend on how the mix plays, how the growth will play out also in the second half of the year and going forward, but also how our loss ratio maintains because those are some of the factors that takes into account. Now let's also keep in mind that this is based on technical models, and this is all based on regulatory. So we'll have to see how that evolves over time.

As you pointed out, Q3 -- even Q3, we saw a higher rainy season earlier than expected. But still, Quálitas was able to keep loss ratio in line with our target. And this is also driven by a couple of factors as well. We saw frequency lower than last year and actually significantly better. So with [ 7.1 versus 7.3 ] versus last year same quarter. We're also seeing some of the improvement on tax. We also pointed out in my remarks that following the natural environment after the first year of administration, we will see some of those tax going down.

And let's keep in mind, I think that we're still adding units, right? So we're growing units every quarter on a year-to-date basis. So the total amount of vehicles being insured, it's increasing. And still, we're seeing less [ tests ] in our balance. So a combination of those factors are playing into our loss ratio, but also playing into the reserves moving forward. I hope that answers your question.

Well, let me add just to what Roberto said, and this is important, the unit growth. The unit growth is in the market that it is declining for the sale of new cars. It's important that we have had like a compounded annual growth rate of around 10% in units. So that means that our model continues to be very, very valid for the market and will continue to be so. So just to add on that one for Roberto.

And just any impact on the recent floods, something that we should expect for the last quarter?

Just let me tell you that, yes, I mean, we have a significant impact for the -- particularly for the Veracruz and Costa Rica and all that stuff. But that's clearly within what our normal business does. So we are not concerned on that one. It's simply -- I mean, we are concerned about the people that lost their houses and their cars, et cetera. But clearly, we are prepared to handle that in the normal course of business.

Our next question comes from Pablo Ordóñez at GBM.

My question is also on the reserve releases. Is there something more structural here? Because through the year, we have seen better numbers on your loss from Mexico. And in your press release, you have also stressed out the improvement in the loss for the fleets business. So are we seeing something more structural related to your investments in technology and something related to this? That's my first question.

Thank you, Pablo. Thanks for joining us. I think to going back to the previous question, if there's nothing really technical into it, I think it's a link of how our loss ratio performance is driving the reserves. Obviously, there are multiple factors, as I explained, helping us. On one end is our loss ratio. The second one is the mix on how the different segments are playing, but also how the other pieces on telematics, infrastructure, technology are helping us to drive it as well as just the economic environment and the fact that the cyclical of the administration the following year after the President took over. So some of those are playing in our favor on how the losses also are helping us. I hope that answers your question, Pablo.

And going to the acquisition ratio, it remains above 24%. Of course, this reflects the mix. So what are you thinking on the mix for next year? Should we continue to see a strong contribution from financial institutions and acquisition around 24%? Any color on this would also be very helpful.

Thank you, Pablo. As you pointed out, we are seeing a higher acquisition ratio, and we pointed out in my remarks as well. And as you also mentioned, it's driven by the financial institutions mix, which carries a normal higher commissions versus the agents. So when we see the future or when we think about the future in 2023 as long as the mix will continue on this growth then we will continue to see some of these levels. However, if we see how that either fleets or individual plays out in the next couple of quarters, that will start reducing and getting back to the normal 22% to 23% range of mix in acquisition ratio, Pablo?

Yes. At this point, Pablo, we don't see necessarily growth on this one, but it has been a good year for that, and we will continue to deal with that, but not major changes on that. I remind you that for the next year, we haven't yet prepared our estimates. We are currently working on it. And as you are well aware, there's a lot of uncertainty in the world, but in Mexico, in particular, from an economic standpoint and the car sales, as I indicated earlier. But I don't see a major change on that one.

Our next question comes from Carlos Gomez-Lopez at HSBC.

Congratulations on a very good result. My questions are regarding the agreement from last Friday for the industry. And I understand that you don't have the final calculations. However, we would appreciate that we couldn't get some rough idea about what type of one-off cost you might have. I mean we did some calculations and we came to a maximum of perhaps as much as MXN 700 million. Again, that's a maximum. But I mean, we would like to have an order of magnitude. Are we talking about MXN 100 million to MXN 200 million? Are we talking about MXN 300 million to MXN 500 million? Where would that land?

Second, regarding the new pricing that you're going to have to implement given that VAT is going to be charged essentially twice. What order of magnitude are we talking about for the industry? Again, we have calculated something in the middle single digits. But again, we could be wrong. So we would like to know how much more expensive insurance will become as a consequence of the result.

And finally, has this, to some extent, been anticipated in the pricing that we have seen already in 2025? Or will this have to be implemented in full in 2026?

Carlos, thank you for your question. Let me tell you that what was published within the economic package in the law last Friday, really is clarifying some of the situations regarding the creditable VAT. And this tax incentive that has been granted for insurance companies prior to 2024, but says that we now for the companies that want to abide by this one, we have to make the payment for the current fiscal year 2025.

Let me tell you, first and foremost, that this proposal still remains a proposal. It has not been 100% validated. It has gone to the -- to Congress, but right now, it is in the Senate. So we cannot really know exactly what is going to happen, and we need to wait to see it should be done by the end of October, clearly. But the criteria really, as you are probably aware, it really settles any litigation and any past potential claims before 2025.

Now regarding the amount, it is very difficult. We do not know and we do not have the reports from the industry. You have seen the press, they are talking [ 20 billion ] kind of that. But we are going to be able only to determine the exact figure, as I mentioned, once the specifics are approved and are well defined.

Now it is important for now that we are seeing the estimate in the case of qualities around the MXN 2 billion to MXN 2.3 billion in net income, and this is important. There are some issues still that we need to address as a sector, and we are working with authorities to make sure with the regulator to understand how this is going to be accounted for. Obviously, it's going to be a one-timer, but there are a number of technical things that need to still to be defined in order to handle that.

And regarding your question on how we are planning to recoup that, clearly, we need to -- as I mentioned, we need to see what is going to happen. But we will have to deal with several elements of cost in terms of ensuring that we have our regular programs. I think we will have to accelerate some of our cost savings programs to make sure that we somehow cover part of this potential cost.

That's what I would have to say. But I would like to remind you, and as I think I mentioned earlier, that in Quálitas, we have been very flexible in terms of reacting to these situations in the environment. Also, by the way, I would like to point out that the latest figures from the industry that are available as of June of this year, it is important to note, Carlos, that Quálitas has operating results, which are better than the sum of the five next car insurance companies combined. And the same is true for the net result. We are ahead of the five next combined results. So in the end, we are going to be somehow trying to, as always we have done, to recoup this part.

And an important thing is that our loss ratio and our combined ratio are below our long-term target. So we have some room in there to make sure that we recoup part of this change. I don't know if there's anything that you want to add, Roberto.

Maybe just to reinforce what you just highlighted. We've seen this -- the industry cycle. We've seen the prices obviously being aggressive going down, and we've been able to react. Proof of that is our performance year-to-date. We've been adapting with adding units. So we will -- with this news, we will adapt accordingly. We will look into our cost structure. We'll look at whatever measures we need to address so that we can keep on delivering on our long-term targets and deliver on our commitments.

And in terms of the pricing that has been anticipated into 2025, would that be a correct assumption? Or do you think it's still to come for the industry as a whole and for you?

I think as I mentioned, I think we're living on a pricing pressure environment. So prices actually are going down. But I think it depends on when you look at by segment, right? So as you've seen in the different segments, in some of those like fleets, we've seen much more aggressive pricing. So how much of that will have to be taken into account and taking all of the variables for the right underwriting for 2026, we'll have to wait and see. So a portion of that might be taken into account. And then the remaining portion will have to be adjusted depending on how each of the lines will be able to deliver on the long-term target.

Our next question comes from [ Danielle ] [indiscernible]

I have just a quick follow-up on Carlos' question. I mean you've been prioritizing multiannual policies, which should take longer to reprice, right? So if you were to pass the entire VAT pressures completely to clients through pricing, how long could it take until we no longer see pressures of these results? I mean how fast can you price your whole premiums portfolio?

I think it's important, Danielle, good morning. Thanks for joining us. Important to highlight that, again, we're still in the process on getting on to the details, right? So the approval is still wait to the Senate. We need to understand exactly how the technical and accounting will work. And based on that, based on how do we go by segment and how do we go and really look into all the efficiencies we can make so that we can deliver on our target. So that is going to play out on a different segment, on different conditions. How would that play into 2026, we'll have to wait and see on the details and how do we position the best possible offer to our customers so that we can deliver on the best service and on our priority for delivering our objectives.

But in addition to what Roberto is saying, Danielle, we will continue looking into one of the things that, as you know, which are our pillars for Quálitas' excellence in service and cost control. Now we will have to focus more on the cost control side of the equation to be able to accommodate all these changes once they are enacted.

Our next question comes from Pedro Fabregat at INCA Investments.

Congratulations on the good results. I have two really quick questions. The first one is regarding Colombia. How meaningful could that opportunity be in terms of capital deployment? And what kind of strategic upside do you see in that market?

And the second one is regarding the VAT reform. I know we talked about pricing adjustments or cost controls, but have you also talked about mitigating the effect by modifying the way the claims are settled, for example, reimbursing the customers directly instead of paying a third-party provider?

Let me take the Columbian one. The Colombian one, we are just started in Colombia. It is very important to know that, by the way, we have been a very good start in Colombia. This is very good for us. I mean this has been a very good year in Colombia, considering that we're just starting. We are close to 1,000 agents already in Colombia. We have more than 12 offices in Colombia right now open to it. So we are doing very well.

Now everything is ahead of plan, but let me tell you that we do not expect that this subsidiary will be any -- it will not be a big part of our business in Mexico in the next probably 3 to 5 years. Clearly, currently, the access is over 17 million units. And it's important to know that this is a country where we have about double the amount of Peru, for instance. So we are in a good situation there. But it is very early to tell at this point in time. We are very encouraged by the early results. We are doing very well there, and we simply will continue doing what we know, continue working with the excellence in service and ensure the coverage in Colombia. In terms of capital, there were not going to be any meaningful that it is not going to be heavy on our capital demands for Quálitas Controladora. Now what's your other question?

Yes. Regarding the VAT impact and the mitigation, I know we talked about pricing or cost controls. But have you also discussed mitigating the impact by modifying the way the claims are settled, for example, reimbursing the customers directly instead of paying the third parties like you would do in a total loss or in a stolen vehicle.

Clearly, all of the above that you mentioned are options, clearly. But we are still -- it's too early to tell. Clearly, we will have to do that. But I would like to simply say, as I alluded before, that we will remain -- we have always been very flexible on that one. And this is going to be one of those instances in which we will do a combination of the items that you mentioned. So we will be ready there to somehow compensate once the law is enacted. In the meantime, we will be looking at those options, obviously, in the next couple of months. That's all I can say at this point, Pedro, because there's -- we need to give some more certainty to this one.

And Pedro, maybe to complement as well is we're looking at all potential leverages, right? So when you think about cost controls or cost leverages, we're also looking at our verticals. That will certainly help us.

And that is a good example going back to the flexibility on Quálitas. When you think about our results on 2025, we've been able to manage all the different complexities, whether it's the peso depreciation, whether it's the rainy season, whether it's hurricane, we've been able to manage through that complexity, being very flexible to deliver on our commitments. So we want to stay on that course, and we will -- as we see the wins coming on our end, we'll see and take advantage of all our available options to look and deliver on our results.

[Operator Instructions]

There are no further questions in the queue. So that concludes today's conference call. Thank you for participating, and have a pleasant day.