Qualitas Controladra Sab

Thank you for standing by. This is the conference operator. Good morning and welcome to Qualitas' first quarter 2025 earnings results webcast. The conference will begin now. It is my pleasure to turn the call over to Andrea Gonzalez, Qualitas' IR manager.

Good morning and thank you for joining Qualitas' first quarter 2025 earnings call. I am Andrea Gonzalez, Qualitas' IR manager. Our CEO and chairman of the board is joining us today, Jose Antonio Correa. as well as our CFO, Roberto Araujo. As a reminder, information discussed on today's call may include forward-looking statements. These statements are based on management 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 NRK undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. Let's give it over to Jose Antonio, our CEO, for his remarks.

Thank you, Andrea. Good morning, everyone. It's great to be with you all again. I would like to begin with a brief overview of the company's performance and key achievements of the quarter. Qualitas posted a healthy start to 2025 with a premium growth of 12%, which by the way, is in line with the anticipated normalization from the growth trend experience from the past two years. Claim ratio came better than expected, considering a lower seasonal frequency during the quarter, as well as a significant improvement in our heavy equipment ratio, proving the effectiveness of our risk prevention efforts resulting in an 88.2% combined ratio lower than our long-term target. And furthermore, our investment portfolio posted a strong financial income despite interest rates at an easing cycle. According to the latest industry figures, Qualitas has reached a new record high in terms of market share. with 34.1% of the total market, and importantly, 47% in the heavy equipment segment, a noteworthy milestone for Qualitas, despite not being part of our KPIs as we aim to be the best, not the largest, not targeting to a certain market share. Furthermore, our market share in terms of earned premium during 2024 was even higher at 35.8%. So we continue to be leaders, not only market share, but most importantly, in terms of profitability. 2024 full year industry statistics show that Qualitas Mexico with a combined ratio 630 basis points better than the ratio of the top five companies and 720 basis points better than the total industry when excluding Qualitas. Before Roberto dives into our financial results, I want to address some of the challenges we're currently facing, including market volatility and the ongoing worldwide target increase discussions. These issues will most likely have an impact on our industry. However, Qualitas is well positioned for ongoing healthy growth with a clear strategy and corporate plan to mitigate this risk and remain committed to delivering value to our stakeholders. We believe in our ability to adapt and thrive in this dynamic environment. We have driven down this road before. By way of illustration, during 2008, a year marked by a global decline in private consumption, Mexico's GDP fell from 3.3% in 2007 to 1.3%. And despite this economic contraction, the insurance industry in Mexico posted a growth of 3.7%. And Qualitas' resilience stood out with an underwriting growth of 7.9% during this period. The insurance industry truly has an ability to maintain stability, even in volatile environments. So I remarked Qualitas' capability to withstand economic downturns and uncertainty. Our three-pillar strategy deployed a couple of years ago represents a clear opportunity for Qualitas to grow further and diversify our business in the mid and long term. We strive to continue winning in our core business, Mexico Auto Insurance, which continues to be the main driver of our growth, making it our foremost focus. Qualitas Senior Management and I have been very busy this quarter, engaging in numerous meetings with over 1,600 agents across major Mexican cities. We firmly believe Mexico is our key growth engine, and in these volatile times, it is essential to continue strengthening our leadership position. We must never take this subsidiary for granted and always ensure it receives the attention and care it deserves. Additionally, we have a portfolio of businesses that share the responsibility of value creation. On that regard, we celebrate multiple achievements such as, first in Colombia, we have successfully begun underwriting auto insurance policies. This achievement marks a pivotal expansion into dynamic market, broadening our market presence by replicating Qualitas DNA in a regional footprint. Our vertical integration is more robust than prior years. Our technology company, which specializes in telematics, business intelligence and information technologies, has begun to generate gradual efficiencies within our Mexican operations. particularly in our heavy equipment units. Additionally, the recent acquisition of a spare parts and glass distribution company is expected to further strengthen our operational capabilities, aiming to reduce costs, improve response times and bring greater specialization to our claims handling processes. It is important to note that this vertical integration is a gradual process and the benefits will materialize over time. And finally, Qualitas Salud Business with greater capabilities to provide excellence in service and to accelerate its growth. Although its size is still not relevant for the total holding company, underwriting from the first quarter of 2025 was almost three times the amount of same period last year. We are on the right path to continue progressing in this segment. Sorry. Notwithstanding, new car sales, including light vehicles and heavy equipment, had almost a flat growth of 1.2% during the first quarter of 25. As a point of reference, last year's growth, this time of the year, stood at 12%. Specifically, heavy equipment, vehicles over 3.5 tons, decreased sales by 27.7%. We believe economic uncertainty has made business more cautious about investing in new heavy equipment and the Mexican peso volatility has also increased costs for important machinery, further discouraging purchases. According to AMDA, the expectations for coming quarters in new car sales will continue to accelerate in line with the economic downturn and international volatility, possibly supply chain issues with ongoing tariff uncertainties and above all macro uncertainties. Despite this expected slowdown, we closed the quarter with 5.9 million insured units, with over 336,000 additional units versus same period of last year, equivalent to 6.6% unit growth. Proving Qualitas Vision Center an excellence in service is our most unique competitive advantage to navigate through volatile times. While acknowledging the difficulties, we are confident in Quality's ability to navigate these obstacles and continue to seek healthy growth. Still, we are prudent and continue to believe that the top-line growth for the full year will land at high single digits to low teens, along with the expected ratios well within our target ranges. Therefore, I am pleased to report that our first quarter results prove that we have started the year on the right foot. reflecting the hard work and dedication of our team. While we are encouraged, we remain vigilant and aware of the macroeconomic volatility that 2025 may bring. We understand the challenges posed by the market fluctuations and other external factors, and we are prepared to navigate this uncertainty, center on excellence in service and cost control as our longtime success recipe. Consequently, our key priorities for 2025 include proactive approach in the areas within our control to mitigate these risks, such as we will continue to focus on service, improving customer experience, decreasing claims repairment timings, and starting to create value for our customers when they need us the most. We will keep focusing on improving our satisfaction rates for all processes, And also, we will also continue nurturing our future success by implementing the business opportunities currently in our hands, such as capitalizing our most recent company's acquisitions, seeking synergies with our existing vertical integrations, as well as investing heavily in our newest business expansion in Colombia, while improving the productivity of our employees, along with our ongoing cost-saving measures, as already mentioned. Our 2025 priorities also consider the turnaround of our U.S. operation, getting back to profitable levels by next year, as well as addressing timely and properly any value added tax inquiries from tax authorities working alongside with insurance industry and being close to the authorities and regulators looking forward to reaching a favorable resolution. our commitment to customer satisfaction and operational excellence positions as well to continue delivering value to our shareholders. We will continue to build on our successes and face the future with confidence and resilience. And with that, let's move on to the financial details and take a deeper dive into the quarter results. So Roberto, please go ahead.