Qualitas Controladra Sab

Good morning and welcome to Qualitas' third quarter 2025 earning results webcast. The conference will begin now. It is my pleasure to turn the call over to Jorge Perez, Qualitas' IRO.

Thank you, Jorge. Thank you. Thank you. Thank you.

Good morning and thank you for joining Qualitas' third quarter and nine months 2025 earnings call. I'm Jorge Perez, Qualitas IRO. Joining me today are José 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 result 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 José 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 nine 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 a VAT charged 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 non-creditable, 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. Fortuner 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 one-time 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 the specifics And second, an increase to our ongoing claim costs 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 percent for the first nine months with a sustainable loss ratio resulting in a combined ratio of 91.3 percent, which is better than our long-term target of 92 to 94 percent. On the investment side, we posted strong financial income even as interest rates continue easing at a faster rate than expected pace. Thus, Qualitas 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, Qualitas 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 non-exclusive 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 quality 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 Rizul will take on the CEO role for the Qualitas Controladora while I will remain as Executive President. As you well know, Bernardo has been deputy CEO for the past three years, and prior to that, he held both the CFO and international CEO roles. His experience prior and at Qualitas, his passionate leadership, strong capacity, and unique fit with the Qualitas DNA makes him the right person for the role. I am extremely pleased and confident that it is this 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, José Antonio, and good morning, everyone. Our third quarter and nine-month results reflect the strength of our strategy and our ability to deliver value despite the economic environment. We'll continue 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 Qualitas as their insurance company despite pricing pressures. Moving to the financial institution 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 quality as 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 a 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 binational products, premiums declined 30.6% in the quarter and 24% year-to-date. As José 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 quality 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 five 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 meteorological 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 ninth of the year, representing seven 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 qualitas despite having more insured units becoming an important building block for our claimed 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, Qualitas' 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 previous 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 Qualitas. 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 52.4 billion pesos, 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 nine 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 two 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 nine months of the year are in the magnitude of $1.2 billion, including the FX effects. and reflects both mark-to-market revaluations 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 $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 $1.7 billion in the quarter and $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 6 billion pesos with a solvency margin of 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 allows 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 one-time 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.

Thank you. We will now begin the question and answer session. To join the question queue, you may... the raise your hand button located at the bottom of your screen, and we will open the mic for you. Or you can also send any questions through the chat. To withdraw your question, please press the button again. We will pause for a moment as callers join the queue. Thank you. Our first question comes from Ernesto Gabilondo at Bank of America.

Thank you. Hi, good morning, Jose Antonio and Roberto, and thanks for the opportunity to ask questions. My first question will be on premiums. We have been to the field. We have explored different auto agencies. And everyone is given bonuses to buy a car, free interest for two years if 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. Thank you.

Good morning, Ernesto, and 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 expected this year our growth to be along the A to 12%. And I think we will continue on that basis. Clearly, we are in the cycle of the insurance cycle, 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 Qualitas 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 is below last year. I mean, you see the AMDAS 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, you know, big increase also in 23 and 24 because of technology. So I think that the prices will continue for cars 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 8% for this year. As Roberto indicated, we're going to be around the 10% growth or something like that. As you know, our first nine months is almost 11%, which is very good for our performance. Now, we still need to see and talk to... 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 tariffs and stuff like that, that we still need to be seeing what is going to happen in the market, clearly we are going to have to absorb, meaning 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 Qualitas has always been very flexible. And 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.

Oh, excellent. Thank you so much, José Antonio. 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 if 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. Now, we saw at the beginning of October important floods in the country, five states. You are the leader in the auto insurance industry. Should we expect some impact in the last quarter because of these floods?

So good morning, Ernesto. Thank you for joining us today. So let me take the first one on the research side and there in premium. So as you pointed out, Q3, we saw the release of the research, but we also highlighted in Q2 the constitution and that actually dropped there in 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 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 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 Qualitas 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 a frequency lower than last year and actually significantly better. So with a 7.1 versus 7.3, versus last year's same quarter. We're also seeing some of the improvement on thefts. We also pointed out in my remarks that following the natural environment after the first year of administration, we will see some of those thefts going down. And let's keep in mind, I think that we're still having 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 deaths in our balance. So a combination of those factors are playing into our loss ratio, but also playing into the reserves moving forward. Hope that answers your question.

Well, let me add just to what Roberto said, and this is important, the units growth. The units growth is in the market that it is declining for the sale of new cars. It's important that we have had, you know, like a component 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.

Thank you so much, Roberto and José Antonio. And just any impact on the recent floods, something that we should expect for the last quarter?

Just let me tell you that, yeah, I mean, we have a significant impact for the, particularly for the Veracruz and Costa Rica and all that stuff. But clearly, that 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.

Perfect. Thank you so much, José Antonio and Roberto.

Thank you. Our next question comes from Pablo Ordonez at GBM.

Hi, good morning, Antonio, Bernardo, Roberto, Jorge. Congratulations on the results. 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 for Mexico. And in your press release, you have also stressed out the improvement in the loss for Mexico. for the fleet's 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. Thank you, Pablo. Good morning. Thanks for joining us. I think going back to the previous question, if there's nothing really technical into it, I think it's the 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 cycle 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. Hope that answers your question, Pablo.

Thank you, Roberto. 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 in this would also be very helpful. Thank you.

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 2020, I think as long as the mix will continue on this growth trend, 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.

Yeah, 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, you know, as you are well aware, you know, there's a lot of uncertainty in the world in particular, but in Mexico in particular, from an economic standpoint, and the crisis as I indicated earlier. But I don't see a major change on that one.

Perfect. Thank you very much for your answers.

Thank you. Our next question comes from Carlos Gomez Lopez at HSBC.

Hello, good morning, and 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 if we could get some rough idea about what type of one, of course, you might have. I mean, we did some and we came to a maximum of perhaps as much as 700 million pesos. Again, that's a maximum. But, I mean, we would like to have an order of magnitude. We're talking about 100 to 200. We're talking about 300 to 500. 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 this change. 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? Thank you so much.

Hi, 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, will 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 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, no? But the criteria really, as you are probably aware, it really settles any litigation and any past potential claims before 2025. Now, regarding the amounts, 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 a $20 billion kind of 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 2 billion to 2.3 billion pesos 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 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 gonna happen, but we will have to, you know, we will have to deal with several elements of cost in terms of ensuring that we have our regular programs. I think we would 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 Qualitas 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 for the latest figures from the industry that are available as of June of this year, it is important to note, Carlos, that Qualitas 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 some room in there to make sure that we recover 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 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, we are 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 perhaps being 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 where 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 the variables for the right on the writing 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.

Thank you so much.

Thank you. Our next question comes from Daniel Miranda at Santander.

Good morning, everyone. Antonio, Roberto, thank you for taking my question. I have just a quick follow-up on Carlos' question. I mean, you've been prioritizing multi-annual policies, which should take longer to reprise, right? So if you were to pass the entire VAT pressures completely to clients through pricing, how long could it take till we no longer see pressures of decent results? I mean, how fast can you reprioritize your whole premiums portfolio.

I think it's important, Daniel, good morning. Thanks for joining us. Important to highlight that, again, we're still in the process on getting all to the details, right? So the approval is still way to the Senate. We need to understand exactly how their 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, Daniel, We will continue looking into one of the things that, as you know, which are our pillars for Qualitas is excellence in service and cost control. Now we will have to focus more in the cost control side of the equation to be able to accommodate all these changes once they are enacted.

Perfect.

Thank you. Thank you. Our next question comes from Pedro Fabregat at Inca Investments.

Hi, guys. Good morning. Thanks for taking my questions and 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? Thank you.

Let me take the Colombian one. The Colombian one, we are just starting 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 It will not be a big part of our business in Mexico in the next probably three to five 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 will not want to be any meaningful that it is not going to it's not going to be heavy on our capital demands for Qualitas Controladora. Now, what's your other question?

Yeah, regarding the VAT impact and the mitigation, I know we've 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, as you mentioned, are options. But 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... 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 we need to give some more certainty to this one.

And Pedro, good morning. 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 qualitas. When you think about our results from 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 hurricanes. We've been able to manage through that complexity, being very flexible to deliver on our commitment. So we want to stay on that course. And as we see the winds coming on our end, we'll see and take advantage of all our available options to look and deliver on our results.

Thank you very much, guys. And again, congratulations on the results.

Thank you. Once again, if there are any further questions, please raise your hand using the button below your screen or send it through the chat. We will pause once more for questions.