Qualitas Controladora SAB de CV

BMV:Q

Earnings Call Transcript 2019-Q1

[Operator]

Good morning, and welcome to Quálitas first quarter results webcast. Quálitas' team will review the company's corporate structure, the

[Audio Gap]

financial performance for the quarter, provide a summary of recent events and answer any questions that you might have. If you have trouble visualizing the presentation, you could also find this document in the Quálitas IR website. If you continue with such trouble, please contact Violeta Ruiz. Her contact information is being currently displayed.

Information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which is subject to risks and uncertainty. Actual results may differ materially from what is discussed here today. The company cautions not to place undue reliance on these forward-looking statements. Quálitas undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.

The conference will now begin. The hosts for today are Bernardo Risoul, the CFO; and Jose Antonio Correa, the CEO. Please proceed, Jose Antonio.

[Jose Correa Etchegaray, executive]

Thank you very much. Good morning, and thank you, everyone, for joining us today to review our 2019 first quarter results. On the screen right now, we are displaying Violeta Ruiz' contact. So if you were to have any trouble, she can assist you. In today's session, we will talk about recent changes in our corporate structure, our first quarter financial results, our strategies moving forward, and as always, we will go into the Q&A session.

Let me start by sharing some exciting news regarding Quálitas' presence internationally. Last year, we announced our intention to buy an insurance company in Peru, and since then, we have been telling you via our press releases the status of this transaction. Well, today, we are happy to share that Quálitas Peru is now formally part of our structure and now depends directly from Quálitas Controladora, the holding company. We are excited to join a market of over 32 million people and we firmly believe that our business model, experience and team will soon gain the preference of the local agents, consumers, making as their insurer of choice. It is worth to reassure everyone that the journey outside of Mexico is an important one, but we will not come at the expense of losing focus on our core nor should imply major capital investments and the profit impacts.

We are committed to provide the best service to our policyholders, and to do so, we partner with the best, and when it makes sense, we integrate vertically. This had led us to have a few non-insurance companies as part of our corporate structure, both fully and partially owned. Last year, we bought back shares from Outlet de Refacciones that were not yet ours. As a reminder, Outlet de Refacciones is a spare parts company, a key lead in their industry and a major expense in our cost structure and we now have 99.99% of the shares.

To further expand on this, I just wanted to remind everyone of Quálitas' horizontal and vertical footprint. During the first quarter, we opened 2 service offices and 2 new development offices, what we call the ODQs in Mexico, expanding our network throughout the country. Geographically, while Mexico represents 95% of our written premiums, Quálitas now operates in 5 markets where we already have things in place and where we expect they would soon become engine of growth. For reference, U.S. premiums represents almost 3% of Quálitas' premiums, Central America subsidiaries represent around 2%, and Peru site is marginal, but as said, with high potential.

As I mentioned in the previous slide, improving the quality and cost of our operations is vital for us, reason why we're also vertically integrated. The branches of our non-insurance companies are Easy Car Glass, to be able to substitute windows and windshields more efficiently and cost effective; spare parts companies where we manage both used and generic pieces; and salvage companies that manage recovered vehicles that have already been paid to policyholder as total losses.

Now before we move into the first quarter financials, I want to take a minute to commemorate a big milestone in our history. On March 22, we celebrated Quálitas' 25th anniversary. While many things have changed since, our pillars, the ones that took us from nothing to market leaders in just 12 years, remain true and more relevant than ever: first, a relentless focus on service; second, a culture of cost control and discipline; and third, being close to our agents, financial institutions, customers and investors.

As we now move towards creating the path for another 25 years of success, we must acknowledge we are living in times of uncertainties and volatilities. Our Mexican economy is expected to slow down this year. Consumer purchases power will be restricted, and unemployment may increase as we saw in March. Despite all of this, I am confident and very confident about our ability to continue strengthening and growing our business while providing attractive returns to our investors. Our business model really works.

We enjoy a business with a healthy financial structure with our MXN 30 billion of float that benefits from high interest rates. We have 0 debt leverage collection as we cancel any policy that is not paid within 14 days, and we have a brand for the past 7 years, has been the preferred option to protect vehicle assets. We are investing for the future with technologies that lead the industry, becoming more nimble in our operation and diversifying our footprint to capitalize our car experience in other markets. I am certain that Quálitas' best years are yet to come.

And with that, I will shift to Bernardo, our CFO, to take you through our first quarter financial figures and highlights. Bernardo, please.

[Bernardo Salas, executive]

Thank you, Jose Antonio, and good morning, everyone. I will now cover the first quarter performance, which shows the company's ability to create value consistency.

Overall, we posted a quarter of mixed results with written premiums below year ago but with a very strong bottom line with net income more than doubling versus the same period a year ago. Specifically, written premiums closed at MXN 8.4 billion, which is a 7.3% decline when compared to the first quarter of 2018. Nevertheless, they show increase of almost 10% on a compounded annual growth rate since 2016. I will further expand on the specifics of this quarter premiums performance in the following slide.

Earned premiums continued to grow above underwriting, mainly explained by the issuance of multi-annual policies in past periods, posting a first quarter growth of 4.8%, closing at MXN 8.0 billion.

The underwriting result of this quarter was outstanding, closing at MXN 955 million, a statement to our commitment to cost control with the 3 main cost metrics decreasing during this period; helped also by a couple of one-timer tailwinds, which I will elaborate later on.

The comprehensive financial income delivered MXN 681 million, an increase of 39% when compared to same period of last year, capitalizing high interest rates and the recovery wave after a stop last quarter.

Both pillars, operation and financial, delivered a very sound growth which resulted in a net income of MXN 1,197 million, more than double compared to what we reported the same period last year, and that is almost half of what we posted for the whole 2018. Of course, as Jose Antonio mentioned, we're aware of the -- we're aware and conscious of the macroeconomic challenges and volatility towards the balance of the year. And while we were pleased with the results, we will strengthen our efforts towards providing various service and continue lowering cost. Now more than ever, we will stay true to our winning strategies.

Moving to the next slide. We will now discuss on the cost ratios at a high level as we will go deeper into the details of each one of them in the following slides. As anticipated, we managed to decrease our cost significantly across all metrics. The most important decrease is observed in the loss ratio, which stands at 60.9% for the first quarter. Strong performance results from both our efforts and discipline in cost control and [ average ] reduction as well as some external nonrecurring factors, such as the shortage of fuel across large cities in Mexico during the month of January. This lower ratio, in addition to reductions as well on acquisition and operating ratios, resulted in a combined ratio of 87.1%, well below our target of 93% to 97% and below year ago as well. The adjusted combined ratio, which is the ratio that meets international standards, ended this period in 88.2%. That equals to a very strong underwriting margin of 11.9%. The net margin for the period was 14.9% that compared to 7.7% reported in the first quarter of 2018. And finally, we posted a 33% last month (sic) [ last 12 month ] return on equity, well ahead of our target.

In this slide, you can see written premiums by segment for the traditional segment. That is the individual and fleets combined increased by almost 6% during the quarter. The financial institutions posted a more pronounced slowdown, ending with the quarter at MXN 2.6 billion or a 26% decrease versus same period year ago. In the next slide, I will go into more details of this segment.

The total underwriting of Quálitas Controladora was almost MXN 8.4 billion, and while decreasing in value, it is important to state that we continue to increase our number of units, reaching 3.97 million or a 2% growth versus the same period a year ago. This is a key metric for us in terms of our ability of reaching more people, a key objective since Quálitas has started 25 years ago. During this quarter, the mix of underwriting by duration continues to shift towards annual policies, which provides lower risk and more flexibility to adjust tariffs. This is particularly relevant in times of macroeconomic volatility.

As I mentioned on the previous slides, our written premiums in financial institutions continue to slow down. And while these are taking a toll in our overall results, we understand root causes and we're managing accordingly. First reason for the decline is the well-known car sales in Mexico, which continue to show negative results, with a first quarter decline of minus 1.6%. And it is almost 5%, the level of the first quarter of 2016 in terms of units. Used car sales in Mexico have declined in 22 of the previous 24 months.

Additionally, and as we have alluded in prior occasions, we have increased prices in some of these businesses to make them profitable. They were, for many years, businesses where the combined ratio was well above 100%. We're being diligent in reviewing each account to ensure we offer the best possible price in a sustainable way that works for us. As a reference, total combined ratio for financial institutions is between 15 and 20 percentage points higher than the traditional business. Therefore, the decline of the former represents a positive mix impact to our overall results. Important to mention is that while we have increased in some tariffs of financial institutions, we have also revisit some tariffs on the traditional business segment downward with a cumulative decrease of 4.5%. This is another example on how we're staying true to our principles and ensuring we provide the best value to our agents and policyholders.

One last thing impacting underwriting, specifically fleet segment, is that some key government accounts shifted their renewal period to the second quarter because of the new administration transition. Several of these businesses are confirmed for a renewal and were short in our second quarter's underwriting results. This reconciles for approximately 1/3 of the decline.

Moving to the next slide. I'm talking about acquisition cost. First quarter ratio stands at 22.1%, which is 70 basis points below same period a year ago. This was mostly driven by the previously mentioned mix effect among segments where financial institutions fees are higher than the balance of the business. When compared against the industry, and here we're using latest figures, which are 2018 full year, we can see that Quálitas' acquisition cost has consistently remained below competition.

Before entering with more detail into the claim cost, I would like to take a look at the theft and the theft recovery. As you remember, for the past 2 years, vehicle thefts were increasing significantly. However, during this quarter, we're seeing a turnaround of the trend with a 6.9% decrease when compared to the same period of 2018. Moreover, in this first quarter, Quálitas robbery declined 15%, more than twice the market average. Additionally, the recovery increased 2.5% for the industry and 8% for Quálitas. These results that are well ahead of the market speak to the efforts and measures taken and is another major building block in our profitability.

Moving to the next slide. Our loss ratio closed at 60.9%, well below historic rate and our estimate for the year. This low ratio was heavily influenced by the mentioned declines in robbery as well as fuel scarcity situation at the beginning of the year across most of the country. Relative to the industry, and once again, this is a 2018 full year comparison, we have consistently been at or below industry average loss ratios.

Next, talking about the operation cost. We closed our first quarter at 4.1% ratio, which is well below our last year's actual of 4.6%. This result reflects a onetime benefit of MXN 185 million due to an adjustment on the IBNR, incurred but not reported reserve. This benefit was partially offset by employee profit sharing accrual and higher agent fees. Relative to the industry and despite having a significant amount of the profit sharing accounts, our operating ratio is well below that of the industry, a statement to our commitment to continue being a low-cost operation.

Now let's move to the profitability slide, where we can see a breakdown for our portfolio by risk and type of issuer. Quálitas' strategy continues to be of low-risk investment with only 18% of our portfolio invested in variable income, all of which is invested in instruments and companies that generate long-term value. Together with the Investment Committee, we are continuing to assess changes to our portfolio to better capitalize opportunities while complying with the defined guidelines. During the first quarter, our float assets were MXN 30.6 billion, which represents an increase of MXN 2.3 billion versus the same period year ago. As shown on right bottom graph, the return was 7.7%, ahead the 5.6% (sic) [ 4.6% ] in the first quarter of 2018.

If we now move to the next slide. Two days ago, we celebrated our General Shareholders' Meeting. You can consult the approved proposal in our web page, but I would like to highlight 3 things: First, we will cancel 10 million shares that were acquired by the share buyback program and that were right now in the company's treasury. Second, we will pay a cash dividend of MXN 0.85 per share payable on May 10, 2019; and third, to restitute the share buyback program with MXN 650 million, which may reach up to MXN 700 million considering the surplus generated by its own operation.

Next, Quálitas continues to provide value to its shareholders with a dividend policy through both cash and share repurchase. We would like to emphasize the importance of our cash generation. So we will present you the cash per share and the book value. Cash per share is MXN 70.32 and book value is MXN 23.7. Both show a composite annual growth rate of around 19%. In the table below, we wanted you to take a look at the effects of reducing the capital stock.

Next, we will provide a view of other key indicators. It's the trend over the past 4 years and expected impact after the cancellation of the 10 million shares mentioned. This clearly shows the ability of Quálitas to create value to its shareholders, consistently improving across all metrics. Moreover, across all key indicators, such as earnings per share, price-to-earnings and price-to-book value, we are standing at the most attractive we have had, which give us confidence that there is a lot of upside potential to the price of our stock. Our last month -- our 12 last months return on equity stands at a very significant 33% and ahead of our ongoing goal of 18% to 20% range.

Now we will review the capital requirements on consolidated solvency margin. The regulatory capital requirements totaled MXN 2.8 billion at the end of March and the solvency margin was MXN 6.6 billion. That represented a percentage of solvency of 333%. Important to note that these figures reflect the recently announced changes by the Comisión Nacional de Seguros y Fianzas. We will fund the approved dividends and stock repurchase program from this margin while investing as well on fueling some of our businesses for future growth.

With that, I will now switch to -- back to Jose Antonio to discuss about the promising future for Quálitas.

[Jose Correa Etchegaray, executive]

Thank you, Bernardo. As you will have stated and the numbers reaffirm, Quálitas has consistently proven it's a company that creates value, value for -- to its agents, business partners, policyholders, shareholders and employees. It has done it over the past 25 years, and it will continue doing it in the future.

Going back to what I mentioned at the beginning of the call, current times will require us to be even more precise in our actions and in choices, and we are doing so, staying true to our DNA and having clear priorities where we are focusing our resources and energy.

The first and foremost priority is to strengthen the core, and this means first, cost control by leveraging automation. We're looking at our processes to see how we can make them better, faster, cheaper and ensuring that cost control stays embedded as part of our culture through programs and reward systems.

Second, technology and innovation, where we'll continue to lead the industry in technology that help us not only to reduce cost but also improve services. Whether it is at our call center, our claims department, our consumer applications or too, through our agents, we are committed to reapply best practices from across the globe and innovate in those that are specific to our market needs. We have incorporated robots and artificial intelligence in some of our processes. We've partnered with leading tech company to develop solutions, and we have also built internal capabilities to identify and create tailor-made solutions.

Let me also touch on our sustainability effort as part of our culture and commitment. This quarter, we started the transition of our car fleet to hybrid cars, an investment that will turn later into an important reduction in fuel consumption. I am glad to share that as of today, we have 92 hybrid cars, and this is just the first step towards a full transition in major cities over the course of the next quarters.

Third, explore business opportunities. Today, we have a brand that is close to Mexican consumers, a network over 13,000 agents. We have 430 offices and ODQs in operation and over 5,000 employees. We will continue to assess opportunities to better leverage our capabilities and competitive advantages in serving our key stakeholders.

And fourth and finally, we are strengthening our subsidiaries with more support from our central offices. We expect this business to start growing ahead of our Mexican core business and to do so in a profitable way. This diversification is key to our future.

We are well aware of the challenges and we are prepared to overcome them by capitalizing opportunities that always come with these turbulent periods. We will not lose sight of our mission and values. They are fundamental to take us to where we want to be and be certain that Quálitas will continue to outstand as well as for its ability to create value to all stakeholders.

Thank you for listening, and we are now going to open for the Q&A session. Operator, could you please open the line for questions?

[Operator]

[Operator Instructions] The first question comes from the line of Ernesto Gabilondo.

[Ernesto María Gabilondo Márquez, analyst]

Congrats on your bottom line result. So the net income of the quarter of MXN 1.2 million was almost half of what you generated in all 2018. So clearly, strong results on lower claims and commission cost and a strong financial income performance. So all of those offset the weak premiums. So we believe these trends will not be sustainable in the rest of the quarters but at least this should make you more comfortable for the rest of the year. So I just want to hear from you what are your expectations in terms of premiums, in terms of costs and the financial income for the rest of the year. The ROE, as you mentioned, stood at 49%, and you were guiding an ROE between 15% to 20%. So do you think after this strong quarter, is there room to expect a net earnings growth above 10% year-over-year and a long-term ROE more in the top end of your guidance range? And also after this strong quarter, any chance to evaluate to distribute a special dividend in the second half?

[Jose Correa Etchegaray, executive]

Ernesto, thank you for your questions and thank you for listening in us. Let me tell you first that we are very happy with the results of the first quarter. And before letting Bernardo say -- if he has any comments on this one, let me tell you one thing. Yes, the results are very, very strong. You need to be aware, as I'm sure you are, that there is also seasonality throughout the year in our business. And usually, the loss ratio usually is the lowest in the year. So yes, we will expect that we will probably -- it will be higher. It will increase in the -- particularly around the third quarter, the last of the second quarter and the beginning of the third quarter. So yes, we are very happy. We are doing everything we can to maintain very good results.

And regarding the type of the premium, the premium, as Bernardo indicated during his talk, he was indicating that part of this has to do with the financial institutions. And that is not necessarily a bad story. It is really the fact that we are targeting to make all of our businesses profitable. And the effort that we have developed for the financial institutions essentially takes us to this reduction in written premium but for a healthier business. So we are happy with that. Having said that, my expectation is that we start leveling off those businesses, meaning these reductions in financial institutions that at some point in time, we stop reducing those businesses. And by the way, they are going to be in a more profitable manner.

Now regarding the return on equity, which is also we are very happy, what we would like to have is really more of a sustainable return on equity. Even though it has been good for the last year and this year, too, we know that our business requires good managing with relatively low margins, if you will. And even we are making some changes to our pricing or to our tariffs and even we have been reducing prices in some states of Mexico, where it is required. Again, being profitable, we need to pass some of these good results also to the consumer because that's the way that in the end, we will continue to grow. We are very happy that we are growing in the traditional segment. Obviously, the individual segment is growing double digit, and we need to continue strengthening that. So the ROE of 32% or 33%, it is really a good one. But we are convinced that on a more sustainable way would be 18% to 24% even though if this year, we exceed that level. I'm not sure if, Bernardo, you want to provide any perspective.

[Bernardo Salas, executive]

Let me answer your second question, Ernesto, related to dividends. We're honoring our policy in terms of maintaining an equity of 1.5, the regulatory capital requirement, and around between 50% and 90% of the surplus to direct at either to dividends, share buyback or to fund projects for the future. This quarter, we ended up with quite a higher excess rate, and that is behind the changes on the regulatory environment, which turned out to be a positive of around MXN 800 million. Having said that, we also anticipate that there is going to be more changes coming along the next quarters and that could have an effect in different -- in the opposite direction. Therefore, before we even consider a future dividend, we want to pause and analyze what new changes may affect us. And therefore, we are not, in the short time, assessing a second dividend. But again, that wouldn't be off the table as we see the new regulatory laws coming out and we see its impact to our cash and margins.

[Jose Correa Etchegaray, executive]

Let me add to what Bernardo is saying at this point in time because we had a discussion at the Board of the AMIS, the industry association, because they are aware in talking to the regulator that yes, the model that they released for use in this quarter provided this release of additional capital. However, they have been in touch with them and say that we -- companies, we need to be very cautious on that because as Bernardo indicated, chances are that they will make some changes to those again. And I think that we might lose some of the benefit that we have. So we need to wait and see what's happening before considering further dividends.

[Ernesto María Gabilondo Márquez, analyst]

Just a follow-up in terms of premiums. Any color on fleets? I think you were not able to renovate them in this quarter but they were renovated recently. So any color on this segment will be appreciated. And after this quarter, do you expect to change your written premiums guidance between 5% and 7%?

[Bernardo Salas, executive]

So Ernesto, addressing your first question, yes, fleet was down in the mid-single digits. If -- had the government businesses renewed when they should first quarter, this number would have been positive, around mid-single digit. We now have confirmation that those policies are being renewed. They're going to be issued in the second quarter. And more or less, that should account for around MXN 250 million, okay. So overall, that would swing from negative on the quarter on fleets to a positive mid-single digit.

On the second question, for the year, we are expecting that first quarter results and the environment that Jose Antonio mentioned, we could be a couple points down versus the previously discussed guidance on the top line.

[Ernesto María Gabilondo Márquez, analyst]

Okay. But then this could be offset or compensated by lower claims and commissions, right?

[Bernardo Salas, executive]

Yes.

[Jose Correa Etchegaray, executive]

Absolutely.

[Bernardo Salas, executive]

To the second -- to the bottom line, we should expect our bottom line to be even stronger potentially a couple points more than what we were previously expecting.

[Operator]

[Operator Instructions] We have no further questions.

[Jose Correa Etchegaray, executive]

Okay. We have a question on the screen and that is, what percentage of the MXN 8 billion earned premiums comes from multi-annual policies issued in previous years? Do you have the number, Bernardo? I think...

[Bernardo Salas, executive]

Yes. For the first quarter, our multi-annual premiums are -- stands at 16.5%. This is a major drop or decrease versus what we were last year that they represented around 29%. Now we continue to see a migration from multi-annual to annual. And as I alluded in the presentation, this is something that we foresee as positive given that we buy flexibility to increase tariffs much more frequently with annual premiums versus with multi-annual. So I hope this answers your question, but if not, we're happy to go deeper.

[Jose Correa Etchegaray, executive]

We have another question from [ Luis Orchico ]. Hi, Luis. And the question is the following: Congratulations for your question -- for your first quarter results. Could you please give us more color on what sort of actions you are planning to do with the MXN 5 billion excess capital as of today on the top of the dividends and buybacks? Are you thinking more on organic or nonorganic actions?

Well, let me take this one and this is very simple. As I mentioned, and as Ernesto also asked, what we know is that part of this is going to be reduced because of the regulatory capital model that will change over the next several quarters. Having said that, I would say that from what we had in our plans for this calendar year, what we have is we have the needs of capital already setting. So we still need to see how this evolves in terms of the capital model that the regulator unveils in the following quarters and then we will review. At this point in time, we are not thinking of additional to the buyback that we have already announced and the dividends that will be paid in May.

Also, we have another question that says, "Good morning to all. Do you believe the guided level of claims ratio of 68% to 69% to be reached during the next quarter?"

[Bernardo Salas, executive]

Certainly, Q1 was well below that target. Our ongoing business model accounts for a claim ratio to be in that 68% to 69%. And we achieved that through both balancing claims and pricing on tariffs. Therefore, we should expect that Q2 and the balance of the year should be more in that higher 68% to 69% range. Obviously, we assume we were towards delivering lower but it's not something we want to account for at this point in time.

[Jose Correa Etchegaray, executive]

We'll just give one more minute to see if more questions come up the screen. Yes. It is [ Luis Orchico ] again. Can you comment a little bit on how competition is behaving in terms of pricing?

Well, they are usually -- yes, yes, I can briefly say regarding pricing. Competition is being more aggressive now. You know that we have a big share in terms of the heavy equipment business in Mexico. We have almost 1/2 of the business in Mexico and we have been very, very successful there. Our share of the market there is close to the next 11 insurance combined, and we see that there are some of them that they want a piece of this business, too. And like -- we see that there has been some activity getting there into getting into pricing.

Now regarding the rate, you know that we as the leader, we set usually the pricing and our competition usually follows. So competition, that's something, as I've traveled throughout the country, and I've been in many offices in many cities in the country, usually, when you have an issue in pricing, you very rapidly listen through our agents. I have seen none, non-issue regarding pricing. So that gives us the confidence that there are non-issues regarding how we deal with pricing in our -- of our policies in Mexico. I hope that answers your question.

And there's another one that says, could you expect no further reductions on asset premiums will be written in the next quarter?

Well, I can also relate to that. We have still not yet seen the bottom line, but we expect a reduction in the rate at which these financial institutions are reduced. So I'd say probably not in the next quarter, but in the second half of the year, we should be at least leveling off.

Another question regarding -- could you give us an insight on the Peru company, the size of the market, et cetera?

Let me try to take that one and let's say the market is more than the core Central American market combined. The population in Peru is around 33 million people. And the market, the insurance market, the car market is around -- similar to Mexico, around 30% to 33%, 34%. So there are opportunities for growth there. In there, what I can tell you is that the company is really, really, really small at this point in time but we have all the element from day 1 there. We have already a Mexican that has been there for a couple of months in Peru. And he's going to be running -- actually is running the company now and with everything that we have in Mexico, which is all the systems and everything. So even though we start from a very, very, very low base, we expect that we will see in the future years, I would say, a growth there. And we are going to be transferring, if you will, the Quálitas model to the Peruvian in a very fast pace. So we are very confident that it's going to be gradual. It's going to be small but it would be a good opportunity for expanding the Quálitas model into Peru.

[Bernardo Salas, executive]

Last questions come from Ernesto. Analyst consensus point for a potential current interest rate in the second half of the year. How is your strategy for investment portfolio in a lower interest rate environment? And is there implied yield target?

So I would echo to what you just laid out in your question. We do believe this could happen. And therefore, we're -- overall would say we're making 2 changes in our investment strategy, none of which would change -- or will require changes to the framework that we have laid out. One, we're -- the question in moving from variable investment on equities to fixed cost to capitalize the nice rates, I think this is something we've mentioned before and you actually suggested as well. And second, we are very exposed to short term. Most of our investment, close to 50%, would be short term. And we're sequentially also trying to balance that short term to a little bit more of the mid- and longer term. I think this would put us in a better position. Right now, we continue to discuss with the committee how fast we want to do so and to what size we want to do so. But this is something that we are executing as we speak, and you should see those -- no changes in our company.

[Jose Correa Etchegaray, executive]

Yes. In addition to what Bernardo is saying, I just want to assure Ernesto that our Investment Committee is very well aware of all this. And as Bernardo said, we are going to be repositioning for the mid- and longer term of our portfolio to capture value from existing rates at this point.

[Bernardo Salas, executive]

I think we no longer have any questions. So with that said, we want to thank you again, and remain open for any follow-ups, as always, with our Investor Relation team. Thank you very much, and have a good day.

[Jose Correa Etchegaray, executive]

Thank you all for joining us, and have a good day. Bye now.

[Operator]

Thank you. Ladies and gentlemen, that concludes the conference call for today. You may now disconnect. Thank you for joining, and have a good day.