Qualitas Controladra Sab

Thank you for standing by. This is the conference operator. Good morning and welcome to Qualitas' second quarter 2022 earnings results webcast. The conference will begin now. It is my pleasure to turn the call over to Ms. Andrea Gonzalez, Qualitas' IR manager.

Good morning and thank you for joining Qualitas' second quarter and first half 2022 earnings goals. I am Andrea Gonzalez, Qualitas' IR manager. Joining us today are our CEO, Jose Antonio Correa, and our CFO and international CEO, Bernardo Rizou, to walk you through our results and performance. As a reminder, information discussed on today's call may include forward-looking statements regarding qualitative results and prospects, which are subject to risk and uncertainty. Actual results may differ materially from what is discussed here today, and the company cautions you not to place undue reliance on these forward-looking statements. Qualitas Under takes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. Let's turn it over to Jose Antonio, our CEO, for his remarks.

Thank you, Andrea. Good morning, everyone. Great to be with you all again. Well, I cannot think of a better way to illustrate the meaning of the VUCA, V-U-C-A word, than this first half of the year. It has been certainly volatile, uncertain, complex, and ambiguous. And this has been across many fronts. In this challenging environment, I feel good about the results we deliver growing within premiums and insured units while being profitable both in our underwriting and in our financial income. Our quarterly performance is within the range of our expectations, recognizing the high inflation, a continuous restricted supply of new car sales, and mobility above the pandemic levels, have impacted the industry and our own results, thus comparison versus strength past years, should not be taken as conclusive. The inflation we have seen in recent months has put higher pressure in our cost structure. While we continue to look for efficiencies, trying to not fully pass through to consumers, at least not immediately, we have been adjusting our targets. We did it in the first half, and we will do so again in the second. As I mentioned the last quarter, some of our competitors have lagged behind, using it as an opportunity to gain some volume at the expense of margin. This was confirmed on first quarter industry report, where small market share changes came along important increases on combined indexes, with some companies even above 100. We will remain competitive, but financially disciplined, and this is very important, as we strongly believe it's in the best interest of the industry and the investors. Let me mention again that underwriting results for Qualitas and for the industry follow a cyclical trend. We saw it after the 2008 crisis, the strong growth periods from 2010 to 2012. And we saw again a few years ago. Qualitas has navigated different stages of the cycle during 28 years of history. And while the nature of the crisis might be different, we know what to do. We will stay focused on service. and cost control, discipline on service adjustments, flexible and agile to react to consumer needs and market changes, and all decisions will consider short and long-term implications. I can assure you that by doing so, we will once again come out stronger. Managing this year's turmoil is not coming at the expense of our long-term plans and executing on our three-pillar strategy. On that regard, I am pleased to share new and relevant updates for our health and medical operation, where we expect to write our first premium in this third quarter. It is a major step for our company, but one that has been carefully planned and crafted. It is not intended to make the difference in the parent company results in the short term, but it will certainly in the next five years. Before I expand on the how, let me touch on the what. because the potential is huge. Data shows it. Our agents and people have voiced it. Mexican private health and medical insurance penetration is less than 10 percent, and Kualita Salud will become a great opportunity for a non-attended population segment, which we have estimated around 60 million people. Second, while we recognize health and health are quite different lines, We know that high-quality service, a unique value proposition, and a company they can trust is relevant and is what Qualita Salud will bring. And the third, the maturity level in the Mexican auto insurance industry and the evolution of it with new trends such as autonomous vehicles, shared mobility, et cetera, has made us pursue a business diversification. And to be clear, We are not expecting a disruption in the auto insurance in the next decade, but we are responsible to set Qualitas for generations to come. With those compelling facts, let me briefly comment on some relevant points on the product and strategy for Qualitas Salud. As we mentioned during our Qualitas Day with investors and analysts, we decided to launch Qualitas Salud in an organic way and under humble approach. We will launch learn, adjust, and then we will expand. Our entry will also be phased geographically, starting in Mexico City and the metropolitan area. As I said, written premiums and capital recovery over the first couple of years are not expected to significantly affect our holding company results. The target market of Qualitas Salud will be the C and C-minus segment of populations. We will focus on compensatory products for individuals, which will enable us to have a limited responsibility and well-defined risk . At this stage, we are not going after the people that already have premium private health insurance, nor after the large corporate accounts. Qualita Salud is a new company that will seek to specialize in health. We will not jeopardize the specialization in . This is very, very important. Small team of people that we have with NICS members with health insurance background, a few that come from Qualitas auto team, is fully in place. Back office operation will be shared to benefit from scale, and our commission network will help boost expansion. Perhaps the most important thing about this entry is that Qualitas DNA will remain unchanged, and we will be passionate to provide unique service, quick and unbiased to honor our commitments to agents and policyholders, and obsessed with cost control. If we do this, we will provide a unique value proposition to all stakeholders, and we will once again disrupt the market. And before I hand it over to Bernardo, let me reiterate that I am pleased on how we are moving along with execution on our strategy. We understand low ends of the cycle are never fun, but they bring along an opportunity for reinvention and to further stand out. And I am certain of our ability to overcome it and optimistic about the future. And without, let me hand this over to Bernardo so he shares the financial details of the results for the second quarter. Bernardo, please.

Good morning, everyone. As mentioned by Jose Antonio, in a year with several headwinds and macroeconomic volatility not seen in decades, our results continue to demonstrate quality of ability to adjust, react, and create value. Top line is up 6.9% for the quarter and 3.8% for the semester. To highlight the strong performance on individual segments that is up 12% year-to-date, and the international operation growing above 14%. Our international subsidiaries now represent 10% of the total business, aligned with our strategy of boosting businesses outside the quarter. We expect that non-Mexico car insurance should make up for around 20% of our business in the next three to four years. As you know, new car sales are the largest source of new policies in the industry, thus They have historically correlated to insurance market behavior. New car sales have stabilized and are now slightly above 2021, but still 14% below 2019. To further illustrate, first half of this year has been the lowest car sales in eight years, of course, excluding the pandemic period. Top-line impact of this slowdown, considering quality of market share, is equivalent to 4% of points. On the positive, there are early signs of recovery, and we expect sequential improvements towards a strong 2023. In terms of insured units, once again, we posted a record highest ever with 4.7 million insured units. an increase of 239,000 units versus the same period a year ago. Growth is broadly. We're growing number of units in each of the countries and segments where we play. Our portfolio composition is now comprised of 78% annual policies and the remaining 22% in multi-annual. This compares to a 74% and 26% respectively of last year, confirming the shift towards a more annual portfolio. This effect, mostly driven by the mentioned new car sales slowdown, reduces exposure on gear sales, something that in light of current volatility is certainly welcome. Earned premiums posted a 7.7 increase, drawing slightly ahead of recent premiums as a result of technical research models and the mix of businesses. As a reminder, while not precise, we have historically constituted research during the first and fourth quarter while releasing during the second and third quarter. For the balance of the year, we expect to maintain low-to-mid single-digit top-line growth, resulting from a mix of volume and price. On the latter, let me expand a bit on what José Antonio mentioned and what is clearly a relevant topic considering the inflationary environment we're living. Local inflation in Mexico, our key market, stands at 8%. while the industry inflation is around two points higher. Over the past quarters, we have adjusted tariffs across all sub-segments for a point-to-point increase of 12% versus 2021, but that is still a few points short relative to pre-pandemic levels on realtors. As a reminder, we decreased prices as a means to help consumers bridge through 2020 and early 2021. We will continue to assess data and adjust accordingly, seeking that balance between restoring profitability while staying competitive in the market. Moving into our cost and indexes, our claim ratio for the quarter was 68.1%, taking first half of the year to 67%, with Qualitas Mexico, our main subsidiary, very much in line with 66.7%. differences versus last year, an ongoing target range results from the combination of the mentioned higher cost as well as an increase in mobility. On this regard, private transportation is around 50% higher than 2019 levels. Based on Google mobility stats, visits to the supermarket, shopping malls, and the road in general have returned to normality. Also, latest numbers of of real estate companies have published occupancy rates almost in the same levels of 2019. Thus, at least in Mexico, people are pretty much back in the office. The increase in mobility is impacting frequency. The number of debt calls during the quarter was up 52% when comparing against last year's first half. Addressing the higher cost reality will not solely rely on pricing. Our initiatives are placed on several fronts. For example, we have restricted the interest-free monthly installment payments. And most importantly, we are leveraging our scale and vertical integration, competitive advantages that help us to be better positioned against balance of the market. We are expanding the lines managed by our own subsidiaries and how they are now no longer a supplier with better service and cost for quality insurance business, but they are also a source of growth and profit for the prime company. As a final example, we continue to see the prices of salvages, those paid total losses, at an unprecedented high level, being able to recover 48.5% the second quarter, which is up 6% of points above the same period of last year. Due to the nature of our business, where we have policies solved at pre-price increases, the shifting trend is expected to be sequential and not immediate. Despite the taking actions and those upcoming, we anticipate the second half of the year to still have a high claim cost, especially considering the seasonality of the rain season. We expect to get back to the 62-65% claim index only in 2023. Our acquisition ratio was 23%, in line with the historical average, with a lower mix of financial institutions, which carry higher acquisition costs. Commissions for agents remain at the same level as prior years, helping us to have a sound ratio. Our operating ratio stood at 4.2% for the quarter, 31 basis points below the same period year ago. mainly explained by a 66% decrease of the employee profit sharing, referred to as PTU in Spanish, and by our revised vertical accounting consolidation as well. All of the above resulted in a combined ratio of 96.3% for the quarter and 94.4% for the year, being slightly north of our 90 to 94% ongoing target. But not surprisingly, as we breached through the adjustment quarters of peak inflation, high competition, and mobility. Moving now to the financial income, second quarter delivered $232 million for a cumulative year-to-date ROI of 2.6%. Software portfolio performance can be explained by the two main items. First, global and Mexican stock market correction of double digits with key sectors such as such as technology and financials down 39% and 25% respectively in the second quarter. Relative to the overall stock market, our equity portfolio has performed slightly better. And secondly, the duration of our fixed income portfolio, which now stands at 0.8 years and therefore hasn't yet benefited from the increase in rates. Relative to other insurance and financial institutions, duration is quite short, Thus, we're in a very favorable position. We will start capitalizing higher rates in the upcoming months, and towards 2023, we're expecting this to be a tailwind in our results. Together with the Investment Committee, we're assessing choices. At this time, we do not expect important or abrupt changes in our equity position, as we should expect to progressively increase the duration of our portfolio, even beyond our one-year liability duration. As a reference, last quarter portfolio duration was 0.7 years and is now 0.8, so we have been taking slightly longer positions. Altogether, we posted a 656 million net income for the quarter and 1,391 million for the first half, representing a 7% net margin. Regarding our financial ratio, our 12-month ROE stands at 16.7, reflecting our strong capital position. 12-month earnings per share stands at 7.8 pesos. Price to earnings stands at 11.9, and finally, price to book at 2.0. While key results are below year-ago, considering the evolution of external factors, we feel positive about them and how we're also setting the business for the future. Going into our regulatory capital requirement, it's good at 3.7 million at the end of the second quarter with a solvency margin of 14.9 billion pesos, equivalent to 508%. Regarding capital allocation, we have concluded a thorough corporate development plan for the next five years. We have identified concrete avenues of growth when we will continue to create value. This key pillar of our strategy is an ongoing effort that starts this quarter with our entry into the health and medical sector, and we'll continue with new geographies, new business lines, and vertical integration. While we cannot provide specific categories, market, or lines, let me share that all of them are within the insurance ecosystem, and they can yield a strong ROE, and the quality of DNA and strengths will provide acceleration. The amount to be invested in this strategy is yet to be determined, or it will never jeopardize solvency nor dividends. We continue to be committed to shareholder dividend payment as we have done it in the past six years. As a reminder, this year we're paying a total of 6.5 pesos per share, which is 2.5 pesos, of which 2.5 pesos are yet to be paid in November. This represents a 60% increase versus last year, and a yield of around 7% at current stock prices. In addition to cash dividends, we have also been canceling shares at the $6 million approved in April that will represent 1.5% of share cancellations. We will continue to assess ways to maximize return to our shareholders while ensuring to remain a liquid stock. In other news, as part of our never-ending efforts towards sustainability, I'm glad to share that at the beginning of this month, Qualitas was included as part of the new S&P Volta Mecana Valores Total Mexico ESG Index Composition, proving that our sustainable strategy and awareness is promoted from senior management throughout the company. To wrap it up, our commitment to you remains unchanged. We face a challenging environment but one that brings the best in each of the Qualitas people. We know what to do. We're working on the actions to ensure we continue creating value to policyholders, agents, and stakeholders. Now operator, please open up the line for questions.

Thank you. We will now begin a question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. Webcast participants may type in your questions via the ask a question box at the bottom right of the webcast. We will pause for a moment as callers join the queue. The first question is from Ernesto Gadilondo of Bank of America. Please go ahead.

Good morning, Jose Antonio and Bernardo, and good morning, everyone. Thank you for your presentation. I have three questions from my side. So, on the first one, what could be the implications for three-inch growth and pain cuts if we go to a potential economic recession in Mexico, here while considering a potential GDP contraction of 1% next year? Then my second question is on claims costs. We continue to see high inflation levels despite the higher rates. So how do you see the pressure on claims costs related to inflation? And also considering the seasonality of the claims costs in the second half related to other impacts like floods and hurricanes, how do you see the evolution of the claims cost ratio? And then finally, my last question is on your investments portfolio. We have seen two consecutive quarters with results affected by a volatility in the equities portfolio. I know that you have been making actions and we have been reducing the duration of the portfolio. But given that the first half has been low of expectations because, again, we're headed to 2021, happening to the volatility in the market, how comfortable do you feel to comply with your guidance? Thank you.

Okay, thank you Ernesto for being with us today. Let me take the first one and then I'll let Bernardo take the other ones. But the first one that says the implications of a potential recession in Mexico. the slowdown in the world, and let me tell you that that's something that we have experienced in the past. For this, it would be very, very important to understand that we have the healthiest balance sheet that we have had in the history of Qualitas. We have very healthy margins, and we continue with our programs to have a strict cost control. better prepared for this potential slowdown. It's also important to note that we have been making money and we have been finding new niche markets to keep growing. We are in that. I also would like to say that insurance is typically an anti-cyclical industry. It is important to note that in the past we have fared well in situations like this. So certainly it will have some impact, but clearly we are well prepared to take this situation. You know, there's a lot of uncertainty in the world. It's a lot of uncertainty. The impact in Mexico is uncertain on how, you know, now the latest news on the free trade agreement that we have. So we have some headwinds that we have, but we are best prepared in the past. And it is an industry that is typically anti-city.

And to that first question, let me just add that we should eventually see in 2023 the year in which new car sales stabilize and turn around. So I think the potential recession will come along to that supply that is now unrestricted and can satisfy demand. As I mentioned in my remarks, just if we were to see... new car sales in line with 2019, our first share of qualitative volume would have represented four additional points of premium stroke. So, that's something that we're expecting. Now, let me move to the claim piece. As you well refer, high inflation has taken a toll together with higher mobility. For the first half, above our long-term goal of being at 65%, that is the 62% to 65%, the technical range, And considering not only the trend that we have seen, but also the digestion of new furs and prices takes time. So this is a sequential and we should not expect that we will see a second half below 65%. So I think that's yet to be something that we return on that range until 2023 and for the next half, Unless something radical happens, what we anticipate is that we will still, again, be above the 65%. But on that, let me also highlight that in our combined ratio, we're still a target. So we've been able to rebalance acquisition and operational costs to be very close to the 95%, which is the high end of our 92 to 95 on combined ratio. So we're not yet to that point. we're seeing above 100% combined ratio, as we are seeing in many auto industries, insurance industries, in Mexico and elsewhere. The seasonality of the second half is a reality. We're starting already at a high rainy season in some parts of Mexico. Some others are suffering from drought. But we know that will come. That's a fact. And we're ready to serve our consumers. And what we also expect is that it will take us out of third quarter claim ratio as it has historically done. Now, let me move to the third part of your question, which is an investment portfolio. And yes, I think there is no way to downplay the fact that the performance on our portfolio has not met expectations. I think it would be very unlikely to deliver the 100 to 100 basis points that we, 100 to 150 basis points that we set as a target at the beginning of the year. I think we will see sequential improvement, and I think what you say has been a headwind over the past quarters, because we've not even met the set-test rate, will start turning and becoming a tailwind. So we should expect the financial return to be something that helps the ROE and that helps the overall profitability of the company sequentially starting on the second half, but most importantly in next year. We're not taking any abrupt decisions in our equity portfolio. We're holding most of the positions. While they have been hammered in line with the market, we believe their fundamentals are strong and they should eventually start picking up. And in terms of portfolio duration, which is one of the biggest conversations, let me reemphasize what I mentioned. We have a portfolio that was 0.7 in the last quarter. We're starting to take higher duration, 12 months basically, and that has already started to move to 0.8 years. So we have liabilities slightly above a year, and we should expect when the time comes that we will take position and our portfolio duration could go beyond one year. And I think, again, that goes hand-in-hand to what I mentioned about portfolio returns being a tailwind and something that gives us different news in the next quarters and certainly in the next years.

Just to reinforce what Bernardo is saying, yes, we are not happy with the returns that we have had, but we all understand what has happened to the financial markets overall. So the important thing is that we are as we said, with companies in the equity side and AAA companies, et cetera. So they are strong companies, as Bernardo indicated. So we should see that being a good thing for our portfolio going forward. And the part of the duration of the portfolio is very, very, very important because I guess we have been at one of the lowest points in the history of Qualitas with this duration. So we are going to be able to capitalize a lot on the rates increase, which are expected to increase still in Mexico, and then we are going to be in a very good position to be for a strong 2023. Perfect.

Now, super helpful. Thank you very much, Jose Antonio and Bernardo. Just a follow-up on the premium growth. So, just again, considering a potential recession, I'm not likely next year How should we think about the premium growth? Would that be same as of this year, or do you think it could be more at the low single digits?

Well, typically, as I mentioned before, Ernesto, typically, this is an anticyclical business. Usually, when there is this situation, people tend to be making sure that they are well insured. We don't see that as necessarily a negative. Certainly, we are not going to be growing in the terms that we would like, but the insurance sector as a whole has proven resilient to these cyclical points where there is this cooling of the economy, if you will. So in that regard, if we look backwards into what has happened in previous periods, and we will, I'm sure that we have always been ahead of that. Typically, you know, the insurance sector grows about two to three times the growth of the economy, so it should be able to sustain our low single-digit target for next year.

Very, very understood. So maybe the impact could be more related to claims, no? If we have a recession, maybe there's some robbery in terms of vehicles or cars, maybe the impact could be there instead of the claims, right?

Yeah, I think it would be just speculation at this point. I think robberies, they make up for 12%. We have seen a decrease over the past three years and they're now stabilizing. That's where technology comes in and that's where being a specialized auto insurance company allow us to really work on those things to prevent them and if they happen to recover them. Historically, we're well ahead of the market on those two fronts. what we can control and the rest will play it as we see it fit and we will continue to be agile to adjust and react.

Thank you very much. The next question is from Jorge Henderson from Santander. Please go ahead.

Jorge Henderson Thank you. Hi, I'm Antonio. Hi, Bernardo. Thanks a lot for the presentation. I have two questions. My first question is regarding the income tax line. We've seen that you have posted a very low effective tax rate in the last two or three quarters. Could you give us some color on the reasons behind this? And also, do you see this effective tax ratio sustainable ahead? And my second question is on your excess capital. Do you still plan on M&A, something on M&A? And if you do, do you have a time frame? And what would be like the average rate size of the deals you would be taking. Thanks.

Thank you, Jorge, and good morning. Let me take the first one on the effective tax rate. For the second quarter, it was 14.6. As you well remember, that is below our historical rate. We understand the why. The lower rate is related mostly to the inflationary adjustments, as we saw And we have been seeing the local inflation has been high, and that pays in favor for the taxable income. So this adjustment is done on revaluation of our assets. There's no specific plan. We're not engaged in any tax planning. This is just how things turn out. And again, the one thing behind it could be the high inflation which has been by far over the past two decades and therefore the effective tax rates are most different. We don't expect this to be the ongoing tax rates. I think we should sequentially, as we see inflation stabilize, going back to that 20% to 23%, which has been the third historically. That, of course, excludes the , which is something totally different.

Okay, let me take Jorge the second one, which is related to the excess capital. Certainly, we have been active in M&As. I mean, probably you started following Qualitas just about six months ago, so probably you didn't have a chance to know, but clearly it's important for us that we use the excess capital in the right way. We have been returning dividends quite significantly to our shareholders. Now having said that, let me tell you that we are always looking for business opportunities, and we are looking for opportunities that should contribute to our ROE objectives in the low 20s. Innovation has been always a priority for us, so we do not discard to make investments in this regard. But it is important for you also to know that in the past, we tried recently, relatively recently, about one or two years ago, we assessed two significant M&A opportunities, but those were not successful for several reasons, but one of those was valuation. So we have always seen that we need to be very careful with using the excess capital that we have. And we know that no deal is better than a bad deal. So these deals, unfortunately, did not come through. But we continue looking for things. Now, I would like to add to this one. And let me tell you that acquisitions could come essentially three different data, different fronts, if you will. Certainly, the first one would be where we play currently, and that would be to expand our position and size. That is one of the elements where we could do this type of M&A. The second one is that we have been doing, we entered three years ago in Peru, and we are considering entering new Latin countries and markets. And clearly, the third one would be in expanding our vertical integration. It's something that could help us to increase either our competitive advantages, cost, or service. a set of, let me tell you, of opportunities that we are looking at, and certainly we will inform if any of these come through, but we are clear that we have this success capital position, and we plan on using that in a wise way.

Thank you all for the complete answer.

Thank you. So now we will take you to the send written questions through our system. First, we have Carlos Legarreta from GBM. First, can you discuss pricing dynamics in the different segments in Mexico? Particularly, has the fleet segment seen more rational competition lately? And second, it caught our attention that the test ride is increasing for quality while it is declining for the industry. What do you think explains this dynamic?

Carlos, good morning. Let me take the second question first. It is a fact that Qualitas has seen a higher tax rate, or that is true in this second quarter, and there are two things that explain it. One, we have been growing consistently in number of insured units, so on that front, we're ahead of the market, and therefore, we should expect that as we maintain or increase number of units, The delta, on absolute terms, is placed against us relative to last year's. The second, we have high percentages of higher risk units, including close to 47% on heavy equipment, which is now something that gets a lot of attention from the robbers. The combination of scarcity of auto parts and spare parts, and the higher price of those usually correlate to higher theft. As I mentioned to when Ernesto asked, we are taking actions in that regard. We will continue to leverage our technology and the partnership with some companies that are specialized in those fronts. We will also take that into consideration when pricing. Remember that Qualitas is one of the only companies that consider not only car type and model and value, but also zip code. And a lot of that correlates with staff chances, and we're taking that into consideration. Now, let me be also clear that up to now, we have not yet seen a major shift on robbery strength. They still represent close to 12% of our total claim cost. It's moving in decimals. So not something that we should be very concerned, but always conscious of preventing it.

Carlos, let me tell you the first part of your question, where you ask, can you discuss pricing dynamics on the different segments in Mexico? Particularly, has the flip segment seen more rational competition lately? I guess the key word there is lately. And let me tell you what has been the dynamics, Carlos, a bit. As a leader of the industry and considering how the claims ratio and combined ratio have behaved over the past 18 months or so, we have been very responsible to make sure that in addition to cost control that we lead in pricing. We lead because we need to make sure that we are financially disciplined in quality as we have always been and we will continue to be. Having said that, let me tell you that I can see early indications in the past couple of months that some companies in the industry start seeing that it would be a good idea to make sure that we recover some of the cost increases, inflation increases, et cetera. So there are early indications that they will start somehow following. In the part specifically for fleets where we saw a major, major, major increase competitors trying to get that part of the market. They were doing, let me put it this way, stupid things, and that is not my word. That is what some agents have told me, and that is agents that are non-exclusive for Qualitas, for sure, are doing that. And some of those companies have already realized that this is not an easy thing, and they have backtracked. So in that, I see that certainly the margin that we have in the fleet segment has been reduced because of the situation. But I can see that they have become more rational right now as the reality catches up with them. So we have their indications and they are encouraging that this will turn, and I hope that it will turn out in the months ahead.

Next question comes from Javier Lozua. Could you explain the low return on the investment portfolio given first, increasing SETA rates, and second, better relative performance in Mexican equity markets?

Thank you, Javier. I think we've already touched on this briefly, but let me just expand a bit more. We will not see the benefit of the interest rates increases immediately. It's going to be sequentially due to the portfolio duration, but as I mentioned, we are expecting sequential progression towards better portfolio returns in the second half and mostly in 2023. Now, when it comes to the equity performance, let's take into consideration that the Mexican index was down 11%. The S&P is down 20%. So there was no way that we could isolate our 15% portfolio position that is an equity from this effect. On the positive, our equity is slightly better than the average IPT. It's down close to 9%. And we are expecting that the nature of our investment, the equity positions that we have, should rebound at a higher or faster pace. So not sure if you want to add something else that would

And the next question comes from Daniel Gladys from BLT Ava Fund. Who will be your target market for health insurance, please? Individuals, groups, corporations, unions, government organizations?

Daniel? Certainly, Daniel. Let me tell you that the target market, as we have indicated in the earlier remarks, is in the segments of C minus of the population. What we want to do here is really to play to some of the quality strengths. One is the distribution part that we have, and the other one is in the cost control. So that's what we really plan to really focus. Initially, it's going to be more for individuals, certainly, than for corporations, as we indicated as well. But it is going to be that we are going to be learning. And the most what we have said is that we are going to launch, learn, Learn and expand. We are going to be taking this in a very rational way and in no rush. We don't have any rush. As we said, we are going to be only targeting the first part, which is the geographic places we're going to be in the metropolitan area. Once we tune up everything on our operation, and how the market takes it, we are going to be expanding further. So it's going to be something that we are going to go little by little. We have a lot to learn and we want to do it right in order to be able to successfully expand.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.