Qualitas Controladora SAB de CV

BMV:Q

Earnings Call Transcript 2019-Q3

[Operator]

Good morning, and welcome to Qualitas third quarter results webcast. Qualitas team will review third quarter and 9 months financial performance, the landscape impacting the insurance sector, perspective on the business and answer any questions that you may have. 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 are 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.

Qualitas undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.

[Operator Instructions] I would now like to hand the call over to Bernardo Risoul. Sir, please proceed.

[Bernardo Salas, executive]

Thank you, Philippa, and good morning, everyone. Thank you for joining us once again to review our third quarter results.

In today's session, we will focus on our third quarter and 9 months financial performance, and we will touch on the landscape that is impacting the insurance sector. In addition, Jose Antonio Correa, our CEO, will share some additional perspective on the business and our actions taken to become a world-class organization. As always, at the end, we will open up the line for questions.

So let me start by saying that we are very pleased with the third quarter performance in which we excelled across all key metrics, building on a very strong first half to post record figures. Our strategy is working. We continue to grow in terms of insured units, and we're able to do so in a profitable way.

Year-to-date results reflect our efforts not only in recent months but over the past years regarding cost control, excellence in service and technological innovation to reduce claims and make operation more efficient. Once again, we proved our ability to create value for our agents, employees and shareholders.

Starting with the top line. Our written premiums grew 11.5%. This is our highest growth in 10 quarters, taking our year-to-date to a positive ground with a 2.3% growth and more than compensating for the soft start at the beginning of the year. Earned premiums grew 11.8% for the quarter for a cumulative growth of 9.4%, which is at the high end of our guidance range. Premium growth was driven by the continued momentum of our traditional business, once again growing double digits, and the regain of growth in financial institutions, which reverted first half trends. I will elaborate on this point later on.

Underwriting results for the third quarter reached MXN 1,118 million, which represents more than 4x of what we delivered during the same period a year ago. These results were driven by the second lowest ratio since 2016 and a consistently low operating and acquisition cost. Cumulative underwriting results now stand at MXN 3,230 million, which is more than 3x or MXN 2,287 million above the same period a year ago.

The comprehensive financial income delivered MXN 739 million for the quarter, which is around 50% higher than last year's, taking our year-to-date performance to MXN 2040 million or 29% above year ago. This represents a cumulative ROI of 7.4%. This result was driven by a good performance of our equity portfolio, partially recovering of a softer semester. And it also reflects, to a lower extent, the strategy to locking some of our fixed-income investments.

The resulting net income for the quarter stands at MXN 1,324 million, more than twice of third quarter 2018. Cumulative net income stands at MXN 3,823 million, setting a new watermark for Qualitas and setting the path for 2019 record year despite macroeconomical challenges in Mexico.

The cumulative income per share stands at MXN 9 that compares to MXN 4 last year's, reflecting the strong bottom line performance in addition to the effect of our share repurchase program.

All in all, our net margin for the period was 15.4%. That compares to 7.1% reported in third quarter 2018 and resulting in an extraordinary 12-month return on equity of 43.5%.

Before we dive into premiums and cost metric specifics, I would like to touch on the overall landscape. During the first 9 months of the year, events not entirely under our control have impacted the insurance sector and hence our company. I would like to summarize the 4 most relevant ones.

First, as you are all aware, new car sales have been declining for the past 28 months, and they were down 10% during this quarter, September posting the sharpest decline with 12%. Cumulatively speaking, new car sales are down 7.4% during the year. This has been a headwind for the entire industry regarding written premiums, especially through financial institutions, which make up for around 60% of new car sales.

Next, on car theft, I'm happy to share that we continue to see a positive trend with the industry reporting a decrease of 9% year-to-date. For Qualitas, this reduction is higher, down 19% or twice as much the reduction of the industry.

While we cannot fully reconcile actions leading to the industry robbery decrease, I can tell you that Qualitas results were driven by the effects in technology, innovation to increase recovery, car inspections and the service we provide to our policyholders on risk prevention. As we have talked before, it is through scale, specialization and experience that we made of -- this challenging topic a competitive advantage.

Third, during the first 9 months of this year, we have had 29 meteorologic events such as hurricanes, hailstorms and other natural disasters. This represents 6.5% less than those reported during the same period a year ago. And beyond the absolute number of events, their impact has been milder.

Finally, during this quarter, Mexico's central bank decreased 50 basis points the benchmark interest rate, although the second reduction happened late in the quarter. These reductions were consistent to our expectations, and we continue to assess adjustment to our investment portfolio to maximize profitability.

I will now go back to the financials to provide some additional color on the top line and key cost metrics. Regarding written premiums, and as I said before, we posted JAS growth of 11.5% with all sub-segments posting positive growth and where I would highlight a stabilization of the financial institution segment.

Let me expand on the latter. As you'll recall, during the first 6 months of this year, a key part of the business was down 22% due to several factors, including weak car sales as well as Qualitas' decision to adjust prices as a mean to improve profitability while reducing exposure embedded in their multiannual nature. During JAS, the team was able to regain growth at this healthier pricing base, closing the quarter with a positive 7%. Change of trend is explained by the stabilization of new pricing and the strengthening of the commercial relation to ensure Qualitas service and proposals are properly considered when making the decision. While there is still work to be done, we are happy on how this has evolved.

On the other piece of the business, our traditional segment, it was up 12.9% for the quarter and 12.3% year-to-date with individual segments leading the growth with a stellar 25% growth in JAS. To note, consistent to our pricing philosophy of adjusting every 4 months and due to lower claim ratio seen in the past quarters, during this quarter the net of all changes was a decrease of tariffs of around 4%. We expect this adjustment to continue helping our top line momentum.

Another key highlight for the quarter was that Qualitas agreed and negotiated with a global insurance company to take on their existing Mexican car insurance business sold through agents. Qualitas signed an agreement to welcome around 1,000 agents that work with this company so they can offer Qualitas policies and renew their portfolio with us. I am confident that we will continue to establish a close relationship with these agents as we have done with our more than 13,000 agents in the past.

Regarding annual and multiannual policies, our portfolio continues to reflect the actions we have taken. To date, we have 81% annual and 19% multiannual. That compares to 65% and 35%, respectively, during the same period 2 years ago. As I mentioned before, this mix lowers our risk by providing more flexibility to adjust tariffs, which we find much more convenient during volatile times.

Now moving to cost. We're posting another quarter where combined ratio was well below our long-term goal, closing at 87.8%, which is 929 basis points that of last year's and taking the cumulative combined ratio to 87.6%.

The adjusted combined ratio, which is the ratio that meets international standards, ended this period in 87.2%. That gave us a very strong underwriting margin of 15.4%. This positive result was mainly led by a loss ratio that closed at 59.5% for the quarter, which compares to 72% of last year's. As I mentioned at the beginning of the call, some aspects that are not fully under our control, such as the decrease in robberies and meteorological events, helped us deliver these results. But they are also the outcome of a more than a decade efforts in innovation, risk prevention, finding operational efficiencies and our discipline on pricing. In addition, we are implementing a strong strategy to reduce fraud and deceit by increasing car inspections before insuring any units. This has helped us reduce this ratio as well.

Moving to acquisition cost. We closed the quarter at 21.8%, which represents an increase of 72 basis points versus same period a year ago. The increase is explained by a 15% increase in commissions paid to agents and the regain of growth through financial institutions, which carry a higher acquisition cost.

Finally, on operating cost, we closed at 6.4% for the quarter, which is 244 basis points higher than we reported in the same period a year ago. This is explained mostly by 2 reasons. First, the increase on the employee profit sharing, which is PT -- PTU in Spanish, which will continue to increase as profit in Mexico subsidiary increases. And second, a lower comparable period as in third quarter 2018, operating cost reflected MXN 130 million reserve release that was moved into the comprehensive financial income. Excluding these items, operating cost would basically be flat versus year ago.

It is important to highlight that among these great results in JAS, we reflected a onetime benefit of around MXN 50 million related to a tax relief due to the fiscal recognition of our 2018 financial loss.

Geographic subsidiaries. As we have talked before, Qualitas includes operations in the U.S., Central America and Peru as well as some vertically integrated businesses. While accounting for around 5% of our business, they play an important role in our portfolio as there is an important offset that we expect to capitalize while accelerating growth in the next years.

During the first 9 months of the year, our subsidiaries posted results in line with expectations with premiums up 13.8% and a positive bottom line, delivering MXN 46.8 million, which is a major improvement versus last year low profitability.

Now moving to our stock performance. We are very happy to see Qualitas at the top of all charts with an outstanding performance this year. Stock appreciated 31.5% during the quarter for a cumulative growth of 71.4%. This result outperforms all financial institutions and sets Qualitas as a second best performer of the entire Mexican market. Equally important in terms of stock liquidity is that we moved from place #44 in the second quarter of last year to #35 in the market stability index with a daily average traded volume of around $3 million, which represents an increase of 82% versus the second quarter of this year. We continue to engage with local and international investors, sharing our business model or culture, our competitive advantage. And with the increase of liquidity, we open up opportunities for new funds investment.

Regarding our financial results, earnings per share stands at 3.1% -- sorry, $3.10, which reflects a 149 increase year-to-date. Price-to-earnings stands at 6.7, below our historic averages.

Now we will review the capital requirements and the consolidated solvency margin. The regulatory capital requirement totaled MXN 2.5 billion at the end of September and the solvency margin was MXN 8.8 billion. That represents a percentage of solvency margin of 449%. The significant reduction of MXN 1 billion compared to last quarter on the regulatory capital requirements comes mainly behind a decision to migrate all our equity portfolio from Qualitas Compañia de Seguros, our Mexican insurance subsidiary, to Qualitas Controladora, our parent company. This change resulted in a portfolio in our insurance company much more liquid and less riskier that based on the model and regulation requires significant less capital. The solvency margin will be allocated to fund our historic 50% safety margin target as well as to cover needed investments in our businesses that will support future growth. In line with our company policy, dividend distribution will be discussed early next year.

And with that, I will now hand it over to Jose Antonio, our CEO, for his closing remarks.

[Jose Correa Etchegaray, executive]

Thank you, Bernardo. As Bernardo has pointed out well, JAS performance and our 2019 year-to-date is really outstanding. And while I'm very happy and we are all very happy, we are not satisfied. We know there are opportunities out there to make things better for our operation, excel in service and become more productive. It is, as you well know, a journey that never ends.

We are staying true to our strategy. We are strengthening our core, which has been and will continue to be, cars in Mexico. During this quarter, we opened 12 new locations across the country for a total of 179 service offices and 243 development offices. We continue working hand-in-hand with our regional directors and agents, being close to them and to our policyholders. And this is embedded in our philosophy and a key point of difference amongst our peers.

We are working on reshaping our IT area to be able to integrate new technology to make more efficient both our agents' and employees' daily operations regarding written premiums, inspections and data analysis. We must ensure to have the best-in-class technological tools to improve the service we provide, reduce our operating costs and continue working to seek ways to hold our loss ratio down, which, as you are well aware, has driven outstanding results during this year.

We are also investing to accelerate growth in our subsidiaries, both at the geographic and vertical levels. For reference, Qualitas Insurance Company, our U.S.A. subsidiary, we are growing double digit and we are doing so profitably. This is a business that addresses border insurance needs, including those cars, trucks and buses that cross the border frequently, and where they need someone they can rely on to protect them on both sides of the border. We are happy with the performance of the business and its potential where we are investing the needed capital to accelerate growth.

In line with these efforts, we have recently acquired a new office building in San Diego and expect to open a -- new service offices in Texas by the end of the year with a purpose of expanding our network and service in the border states. We are certain of the potential of our portfolio diversification. We are encouraged in the progress made in Peru and in the vertical integrated subsidiaries, and we will talk more in the next quarters.

Before we open up for questions, let me touch on another key topic for us. As you have heard me say, being the best is not only about delivering great service to our agents and policyholders nor delivering attractive returns to our investors. It is also about impacting our employees and the communities where we are. Qualitas is committed to expand an outstanding social responsibility effort. And as such, this quarter, we launched a campaign as part of our 25th anniversary. The campaign is called Nos vemos en la esquina -- in English, we will see you at the corner -- and aims to raise awareness among drivers to reduce accidents as 87% of them happen at the corner or a street intersection. This campaign is now running and will continue until next year and will cover main cities in Mexico and cascade to the whole country digitally. We are confident the efforts like this actively collaborate to the welfare of society, promoting cultural respect, tolerance and cordiality that has its purposes to improve road mobility, optimize safety and achieve a better social coexistence between motorists, cyclists, pedestrians, future citizens, which is the key, trucks, passenger and school buses and will continue to position Qualitas in the minds and hearts of people.

To wrap it up, let me leave reinforce what you have already heard today. Our results demonstrate Qualitas' flexibility and ability to create value to its agents, business partners, policyholders, shareholders and employees despite the economy and in any business environment. I want to thank those that have trusted us and the 5,000 employees working at Qualitas who are faithful to our business fundamentals and have worked towards making the next 25 years even more successful. Certainly, I am excited about the future of our company.

And with that, we conclude our remarks, and I would like to open the line now for the Q&A session. We will begin with the questions via telephone and then we will pass it over to the ones sent via chat.

Operator, could you please open the line now.

[Operator]

[Operator Instructions]

[Bernardo Salas, executive]

So lets start off with one question that came through the web. It comes from [ Paul Nave ]. "Given the high level of liquidity, can you update on dividend policy please? Can you update your own expansion plans?" So let me take the first one, okay?

We understand we're sitting in quite an excess of capital. I would say there is no urgency to make any rash decision. We're making the needed investments, those that are with -- in line with our strategy and that we know in the long run will drive profitable growth. We continue to fund our share repurchase program, and we're assessing as well new business opportunities.

Regarding dividend, we know that -- or as you know, that Qualitas is a company that has consistently paid dividends, and we will assess that in due times. While we are not planning any extraordinary dividend, I can anticipate the dividend will certainly increase next year. Having said so, I would like to also acknowledge that macro economically, we know we're facing certain challenges, so we also need to be acting very responsible.

[Jose Correa Etchegaray, executive]

Let me take the second one, which is by Martin Lara, who says "Congratulations for the strong results. I have 2 questions. One, are you changing your guidance for the year? And two, do you think that the current loss ratio is sustainable going forward?"

Well, let me -- the first one, which is the guidance, no, we're not changing. Certainly, we anticipate that the year is going to be a good year. Obviously, we have 75% of the year gone. And we don't see any clouds in the horizon, so it should be a good year. But no, we are not changing basically the guidance.

And on the second one, which is if our current loss ratio is sustainable, well, let me take that one. We have been saying that the loss ratio and the combined ratio targets have been around the 93%, 97%, and that's how typically we have said. But clearly, we have had, I mean, the good start running into the good actions that we have taken in the company. And we are debating internally to what extent we can maintain a loss ratio that is low. Certainly, we are not so sure, but we believe that there are reasons that tell us that we might be below the 93%, 97% combined ratio going forward because we have been able to -- from a competitive standpoint, we have been able to gain cost advantages that are structural. So with that, I think that we are going to be able to be probably below the one that we have been saying. And while not being to the extent in which it right now is at a -- very low historically, I think that there -- we have the idea that yes, we can improve to what we have been talking recently regarding the combined ratio. I hope that this answer the question, Martin.

[Bernardo Salas, executive]

Next question comes from [ Franco Galvez ], and I think Jose Antonio already alluded to that. "How could we think about the claim ratio going forward?"

So as we said, we're -- we acknowledge that we've enjoyed a very low claim ratio this year, around 60% versus our guidance of 68% to 69%. We're working towards improving sustainably over the next year and was -- of course, Antonio already mentioned.

[Jose Correa Etchegaray, executive]

The second question -- I mean, the third question says, "You were worried about the competitive environment in the last call. Could you please comment on that?"

And it is now clear that competition is still very mild. Well, we were not worried. We are always looking at what the market is doing, our competitors are doing. That's why we were not worried. We're saying that there is competition, and we expect competition and we like competition. Let me tell you what -- I don't see right now pricing pressure, and I remind all of you guys that I travel across the country very, very, very frequently all the time, and I don't see any pricing pressure regarding our individual businesses, which is the strength. I mean we are geographically well covering the whole country, and this pricing pressure I do not see. And as Bernardo said during the remarks, we are even taking some adjustments down to our pricing to make sure that we remain competitive. Having said that, while we have seen some more competition regarding our competitors, it's really on the flip side. The flip side, we have seen some companies which are starting to be strong against Qualitas. We have been able to retain big businesses. But yes, we see some additional competition in the fleets, one which I want to remind you that we are by far the number one, and our share in that area is more than the next probably 8 or so combined. So yes, we're not worried. I mean we take care of them and we like competition, but we need to be -- we do not need to be complacent to make sure that we continue improving our operations to make sure that we are competitive going forward.

[Bernardo Salas, executive]

The next question comes from [ Franco Galvez ]. "Regarding your combined ratio, you have been the company with the most stable combined ratio. However, we see a strong decrease in recent quarters. Do you still have an internal cap of 94%? For 2020, what could we expect?"

I think, we've touched on that one. We will provide, as we always do, some guidance at the beginning of 2020, where we hope we will be at the low end of what we have historically been saying.

"Does the move on the equity portfolio to the Controladora level show any indication to increase its size? Should we expect portfolio mix to change going forward?"

[Jose Correa Etchegaray, executive]

Well, I mean, Bernardo can answer that one, but let me take -- just say, no, this is to make it more efficient, the way and how we distribute our financial assets. Clearly, it is because of, as Bernardo indicated earlier also, it's more efficient on a capital basis and also on a tax basis. So those are the things that are driving then the decision. But certainly, we continue to manage responsibly to make sure that we continue to be, going forward, very, very reasonable in the way how we manage that.

[Bernardo Salas, executive]

The next question comes from [ Franco Galvez ]. "Are you planning on any new vertical integrations to continue decreasing your claim ratio?"

I would say that not necessarily anything new, but rather strengthen -- strengthening what we currently have. As a reminder, we acquired 100% of the equity on the car glass and windshields companies earlier this year, and we also acquired 100% of the equity of the spare part companies. Those, we truly believe, are linked to our business not only to provide better costs but also to provide better service. And we are very encouraged, too, what we have seen in the progress in the next -- in the first few months, although the full potential will materialize in 2020 and beyond.

[Jose Correa Etchegaray, executive]

Another question. "I was wondering if you could walk us through your intention to expand to the U.S. despite having lower ROE. Please walk us through your strategy. And also curious if that is an indication that you don't see as much growth in Mexico. Secondly, there are also discussions that you are expanding to health insurance. Please help us understand the strategy there? How, I mean,....

[Bernardo Salas, executive]

I can take the first one, Jose Antonio. So let me just remind everyone of our U.S. insurance company. This is already around -- there's a $100 million of capital there. Around -- we sell close to $60 million in written premiums. And what we have identified is there's a niche of a business, an increasing need of individuals and businesses that consistently go back and forth through borders. And for those companies, for those individuals, you need an insurance company on Mexico side and an insurance company in the U.S. side. It is not something that large -- insurance companies in the U.S. are addressing because it creates quite a lot of complexity, but we like complexity because this -- that gives us a right to win. And we've seen this increasing need of providing a full service and a reliable service to those individuals and businesses that, for personal reasons or professional reasons, travel frequently to the U.S. or Mexico. And therefore, having one single company that provides a solution on both states -- on both countries is something that we have seen great attraction for. And we're doing so profitable, yes. It is a fact that U.S. insurance companies have ROE lower, but I also believe that's part of our diversification in terms of businesses. We -- as I said, we believe this business can grow profitable, but in no way we believe that that's going to be the size of the Mexican.

[Jose Correa Etchegaray, executive]

And regarding what you see as much growth in Mexico, well, I can tell you that in the car business in -- car insurance market in Mexico, clearly with the type of share that we have, our growth is limited to some extent. But that's why we have the geographic diversification. And as you all know, that we have gone into Peru earlier this year and we are starting there and we see encouraging signs there. We are putting in place the operation that will allow us to compete in that market. So there are opportunities on a geographical -- additionally to that.

Regarding the one that -- to the -- to expansion into health insurance, let me tell you that at this time, we're still in the process of analyzing this, and we are [indiscernible] what is the best way that it would go into this area. And the way we see that -- and if and when we decide, and we -- obviously, we will communicate to the market once we have something that we can deal with, and we will share with you, we will let you know. But in any event, what we're trying to do here is that considering the fact that the studies that I have seen indicate that worldwide, the car insurance market is going to contract as a result of new technologies, and we need to prepare to the second wave, which -- it is one of the megatrends, as you know also, in the world, which is the health one. So yes, we are interesting on that. And once we have a good case for that, we will make the decision and we'll present to the Board to make sure -- if it makes sense. In any event, we don't expect that to be a full-blown initial startup, if you will. It is -- certainly, we will learn about it. And the ways we have been thinking of that if we go is that we will start small and we'll learn before we expand. And certainly, one important thing is that we will not be doing what the rest of the market is doing. We are going to be -- if and when we decide that, we're going to be doing in a way that plays to Qualitas' strengths.

[Bernardo Salas, executive]

Next question comes from Rodriguez Ortega from BBVA. "Can you give us an update on your M&A plan?" And the second piece of the question was related to health insurance that was already talked by Jose Antonio.

There is no major M&A in the works, no, and we've been transparent about saying this. As always, Qualitas has consistently offered opportunities, but at this time, there is nothing in the works and certainly nothing that would materialize in 2019, okay?

"Are there any updates on what to expect from CNSF on capital requirements and when these updates are expected?" This is a question from [ Benjamin Hart ].

On CNSF what we've heard is that there will not be any new changes impacting the model in 2019. They have anticipated that 2020, they will perform certain adjustments. We do not know what they will be, but what we have been confirmed is that for 2019, we are not expecting any new changes regarding capital requirements model.

[Jose Correa Etchegaray, executive]

Now the other one is -- the following question is "As we approach the end of 2019, could you please provide us with an overview of the scenario envisioned by Qualitas for 2020?"

Well, that's a $64,000 question. And let me tell you that, as you know, the country has not been growing to the levels that we have in the prior years, and there are certain economic clouds over the horizon in Mexico for this year. For 2020, the indications that I have seen is probably a slight improvement but nothing of significance. So really, at this point in time, we are going to be working towards what we are going to be seeing in 2020. But for me, the important thing is to make sure that Qualitas has been very successful because of the model that we have. The model has been very successful. We devote our efforts to the basics, and the basics being close to the agents, it's being -- having good service, having focus on costs and be very flexible. The structure that we have in the company allows us to be very, very flexible and will allow us to be in whatever is the business environment and the economic environment, but that's something that we still will need to be working in the next -- in the following months. So we're not concerned. But certainly, we need to be prudent, and we need to be prudent considering that the situation not only in Mexico, but the -- as you know, the international environment with the trade wars and all that, that is developing as we speak. We simply will remain flexible, true to our business model to make sure that we continue to be successful whatever is the environment, both inside or outside the country.

[Bernardo Salas, executive]

So next question comes from [ Eduardo Lopez Reporma ]. "Regarding recent reductions in interest rates and expectations of an easing cycle, what is your expectation for investment income?"

So as I alluded to in my remarks, we kind of anticipated this reduction, 50 basis points, in the third quarter. We do anticipate that depending on the Fed's move downside, which could happen as early as in October, November, we could see that decrease being followed by Mexico. So what we have done is first and foremost to be transparent. Our guidance in terms of financial returns is to always be slightly ahead of the reference rate, you know? So we talk kind of 0.25 point. And with that conservative approach that we followed, we have locked a little bit longer positions so we could benefit in the case they were to go down. Now that slightly longer position doesn't takes us away from our principle of trying to match our liabilities. So let me say we kind of move from 12 months to 14 months in the direction of our investments, but we're within that range. I hope that answers your questions.

[Jose Correa Etchegaray, executive]

The following one is "You mentioned that the theft has gone down during the year. Can you elaborate on which regions are showing more improvement than other? Is there any regional concern?

Well, it is throughout the country really, and the situation is broad-based, the reduction in theft versus a year ago. And I think that one important thing also there, as I think Bernardo mentioned also in the remarks, is that this is -- this has been -- or we have seen this for all the sector. And -- however, we are much better than the rest of the sector. And this plays out to the technology that we have. We are currently testing new technologies to help fleets, and we have very good alliances with leading-edge providers on this one. So we are happy that technology is working. We are fighting against fraud. Fraud is important in this business, and we are having this [Foreign Language]...

[Bernardo Salas, executive]

Inspections.

[Jose Correa Etchegaray, executive]

Inspections, car inspections. And we receive a lot of complaints from our agents that they don't want to do the inspections, but these complaints "are not important." The important thing here is that doing the right thing is better, and we have proven that it is important that we do that and it reduces really the fraud on this area. So within technology and internal processes, that's the way in which we are dealing with the theft problem.

[Bernardo Salas, executive]

Just to add a word to quantify it, I would say that it's 50-50. So around -- of the total 19% of the decrease we've seen in Qualitas, half of that is attributed to the efforts that are being done on an industry basis, and that is true for the whole industry. And then the other 50% would be what Jose Antonio just touched, which is technology and the actions that we are taking as Qualitas on its own.

[Jose Correa Etchegaray, executive]

I know there have been...

[Operator]

Sorry to interrupt.

[Jose Correa Etchegaray, executive]

Sorry?

[Operator]

Sorry, we have a call on the audio -- a question on the audio line. Would you like to take the call?

[Jose Correa Etchegaray, executive]

Yes, please.

[Operator]

Okay. The question comes from [ Christian Juarez ].

[Unknown Analyst]

Yes. sure. Just given the current market conditions, you have historically talked about the sustainable ROE of the 20% to 25%, but we have seen a better performance of theft and growth. So would you be considering to change your long-term target for ROE something close to maybe 30% or something that it's more close to reality?

[Bernardo Salas, executive]

Although we managed to report above our expectations in the past couple of years, actually 3 years, we consider our ROE guidance -- long-term guidance of 18% to 24% certainly more sustainable in the mid to long term, especially in the uncertain times such as the current ones, the ones that already Jose Antonio build upon. We do believe that our recent performance, the strengthening in our processes and technology and the solid position could suggest that we can perform in the upper range of our guidance. So I think that's something that we're working and that we will share as we approach our 2020 guidance.

Are there any other questions? I believe we've addressed every question that we got through the web as well. So thank you very much for joining.

[Operator]

Sorry. Sorry, we have one further question.

[Jose Correa Etchegaray, executive]

[indiscernible]

[Operator]

It's okay?

[Jose Correa Etchegaray, executive]

Yes.

[Bernardo Salas, executive]

Yes.

[Operator]

Okay. From [ Daniel Roga ].

[Unknown Analyst]

Hello. Can you hear me?

[Operator]

Yes, we can hear you. Please.

[Jose Correa Etchegaray, executive]

Yes. Yes.

[Unknown Analyst]

A lot has been asked and you've been very clear. My question is regarding something that might have been missed by others in terms of opportunities in mobility, the Cabifys, the Ubers of the world. Is there anything -- is this sector something you might attack in the future? Is there an opportunity there? Or is it something that you are not interested in?

[Jose Correa Etchegaray, executive]

Yes. Well, we have been there in that, and there has been ups and downs in that, in the mobility one. Certainly, we are there and we will continue to be there as long as we have the right tariffs and the right pricing on that one. We have seen that initially, the loss ratio was 3x the normal loss ratio in other businesses, and we certainly increased tariffs back then. Some of the friends didn't like that. But we have been with the ups and downs, and we will continue to insure them as long as they are willing to pay the risks that we are undertaking.

[Unknown Analyst]

But do you have already the [ tiered ] pricing for these type of vehicles or not?

[Bernardo Salas, executive]

Yes. We couldn't manage and insure these vehicles and our current. But as I -- as Jose Antonio mentioned, it is a specific and different pricing method given the risks implied in those apps transportations.

[Operator]

Okay. We have no further questions.

[Bernardo Salas, executive]

Thank you very much, and have a great day, everyone.

[Operator]

Thank you, everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining and have a very good day.