Qualitas Controladora SAB de CV

BMV:Q

Earnings Call Transcript 2020-Q3

[Operator]

Thank you for standing by. This is the conference operator. Good morning and welcome to Quálitas Third Quarter Results Webcast. Quálitas' team will review third quarter and 9 months financial performance, the landscape impacting the insurance sector, perspective on the business, the strategy for this year and answer any questions that you might have.

Information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. 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.

If you have trouble visualizing the presentation, you can 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. This conference will now begin.

[Jose Correa Etchegaray, executive]

Thank you, operator. Good morning, everyone, and thank you for joining us today. As we continue to live challenging and unprecedented times across the world because of the pandemic, we want to start by thanking all of those working towards finding a cure and those supporting the affected ones. We express our solidarity to those directly impacted in one way or another.

As we mentioned during the last quarter, in Quálitas, we have operated uninterrupted, providing continued best-in-class service to our agents, business partners and policyholders. To do so, we are taking care of our people, complying and exceeding with safety measures and supporting the communities around us. We have learned along the way, and we are ready to continue adapting as the situation evolves. Our flexibility and proximity with our agents and our capacity to quickly adapt to the environment has become one of our most important competitive advantages.

Our strong third quarter results demonstrate that the actions implemented have been successful. Despite top line headwinds, our growth remains above industry. This is particularly important due to the economic decline during the second quarter and the expected one for the third quarter in Mexico and in the countries where we operate, with double-digit reductions in GDP and the major impact in businesses in general. We continue to demonstrate that thanks to our business model, focused on our key strategies of services and costs, being flexible and agile will help us to continue to thrive despite the environment. Certainly, we continue to benefit from a lower-than-average loss ratio that directly benefit our underwriting results.

We, once again, delivered double-digit net profit growth, generated substantial capital above requirements and earnings per share well ahead of the market. Bernardo will elaborate on the details, but let me just say that we are very pleased with our performance in a very volatile environment.

As we continue to ensure we deliver strong quarterly performance, we are also investing time on the future. After last quarter, our strategy is working, and we will double on it. In Mexico, we will continue to have competitive clarification levels, excelling in service, leverage technology and maintaining our leadership in the Mexican market in a profitable way. Our geographical subsidiaries are growing high double digits, gaining market share and consolidating our operations in other countries.

And finally, as we have mentioned before, we continue assessing business opportunities to make sure we use our excess capital in the best way by exploring opportunities that will allow us to continue expanding in a sustainable way. We will maintain you, investors and analysts, updated when we have more news on this regard.

As someone once said, there are decades where nothing happens and there are weeks where decades happen, and we acknowledge many things have quickly changed and will likely never go back to what they were pre-COVID. From home office, to deliver the conferences that replace the traveling, to driving avid changes and exponential growth of digital tools, we have seen changes that will stay and impact our industry permanently. We embrace these changes and are adapting our business to ensure we cope with them. We have pioneered innovation in the car insurance business, and we will continue to do so, ensuring that with every step taken, there is the right to win and value creation. Rest assured that we will continue to be faithful to our successful business model.

And with that, I'll hand it over to Bernardo to talk about our P&L and specific numbers. Bernardo, please.

[Bernardo Salas, executive]

Thank you, Jose Antonio, and good morning, everyone. Our third quarter demonstrates that in a volatile environment, the actions we have taken are working, and we are delivering results that are, once again, on the high end of our expectations.

Starting with our top line. Written premiums closed at $8,656 million, which represents a growth of 0.5% during the quarter. Year-to-date written premiums stand at $25,356 million or 0.4% above same period a year ago.

In an environment where GDP is projected to be down double digits, new car sales are down around 30%, and first half car insurance underwriting in Mexico is down 9.4%. These results are certainly worth celebrating.

Earned premium stands at MXN 8,977 million, which represents a 2.7% increase driven by multi-annual premium effects as well as the releases in reserves due to mix and lower loss ratio. Year-to-date, earned premium stands at MXN 27,030 million, which represents a 6.3% increase year-on-year.

Underwriting results in the third quarter reached MXN 1,766 million, up 58% versus same period a year ago, posting another outstanding quarter. On a year-to-date, we're up 90%. These results were driven by a loss ratio that reflects a sequential and partial recovery of mobility but still below those incorporated in our model as well as our continuous efforts to reduce fraud and costs. In addition to this, we maintained a stable below-industry-average operating and acquisition cost. I will expand on the specifics later on.

The comprehensive financial income for the quarter was $544 million -- MXN 544 million, a 26.4% decrease versus same period a year ago, mostly explained by the 75 basis point reference rate reduction during the quarter. For this third quarter, our ROE -- ROI was 5.4%.

Our year-to-date results stands at MXN 1,262 million, down 38% versus a year ago and with a cumulative return on investments on -- of 3.9%. As mentioned before, we anticipated this financial -- the financial income for the year was going to be below 2019 due to the significant reduction on interest rates, which now stands at 4.25% versus 7.75% at the end of the third quarter of 2019. Our year-to-date performance is also reflecting the first quarter Mexican equity drop, which has not yet fully recovered.

On the investment side, while we continue to maintain a conservative position, we acknowledge that low interest rates are likely to continue throughout 2021, demanding us to assess shift toward higher-return options. At the end of the third quarter, our variable position, including equities, stands at 11.6% of our portfolio, which is amongst the lowest in the past years but slightly higher than the last quarter.

Moving forward, we expect this to sequentially increase as we take new carefully assessed positions and increased offerings in debt and loans. We have continued to strengthen our investment team, and our expectation towards the next year is to deliver between 100 and 200 basis points above reference rate, something we have been shy on obtaining in the past 3 years.

The strong underwriting performance, together with the financial returns, resulted in a net income for the quarter of MXN 1,657 million, up 25% versus same period a year ago. Our year-to-date net income stands at MXN 5,334 million, up 40% or MXN 1,510 million versus last year. Our year-to-date net profit set a new record in our history and are almost the same delivered during 2019 full year.

Regarding our cumulative financial ratios, earnings per share stands at MXN 16.6. That compares to MXN 15.8 last quarter. If we take a longer view, earnings per share are almost 7x what they were 3 years ago for a compounded annual growth rate of 50%. The discipline and the consistency reaffirms Quálitas' ability to navigate across different challenges and environments and consistently create value.

Our net margin stands at 19% for the quarter and 21% year-to-date. That compares to 15% and 15.1% from 2019. Price to earnings stands at 5%, and price-to-book value stands at 1.93%. Our 12 months return on equity was 45.7%, well ahead of our long-term goal and the overall market performance. When compared against global markets and particularly other insurance businesses, Quálitas' financial ratio stands out and speak to valuation upside potential. While we recognize our industry has been less impacted than others, we applaud the ability of our organization to react and adapt quickly. In current time, setting new watermarks across so many metrics is not common. And our current financial strength makes us feel excited about the opportunities in the future for Quálitas.

Now going back to our P&L, I will provide a few more details on our top line and key cost metrics. Regarding written premiums, and as mentioned before, they increased 0.5% during the quarter. Being north of 0 means we have successfully implemented and executed against the priorities we set back in March, which was to maintain existing businesses and accounts.

Top line is better understood when broken by segments where traditional one is up 1.3%, and the financial institutions channel, which correlates directly with new car sales, was down percent -- was down 10%, sorry. For the third quarter, new car sales decreased 27.7%, slowly recovering from the 55% drop during the second quarter but far from what we had projected at the beginning of the year. The total number of insured cars stands at 4.2 million, which is almost flat versus beginning of the year position and a good example of the effectiveness of our strategy to maintain our clients and policyholders.

Regarding our underwriting, in our geographic subsidiaries and despite all economies struggling, we continued to see broad-based growth, up 54.5% all in or 36.3% in local currencies. Jose Antonio has already talked about the potential of these businesses. We call them out in our 3-pillar strategy. We are investing, and we're certainly encouraged by their results. And let me just give you a couple of examples to illustrate.

First, our United States subsidiary growth in written premiums was over 50% driven by the new bus program. And we also opened the first offices in Texas, expanding our network and coverage in that country.

Second example would be on Costa Rica. PCR ratings agency upgraded 2 notches our subsidiary rating, which now stands at A minus, illustrating its financial strength and potential.

And third, only 2 companies in Peru managed to grow their written premiums during the third quarter, and Quálitas Peru was one of them, growing 75%.

And for the mix of annual and multi-annual premiums, by the end of the quarter, our portfolio had approximately 80% annual and 20% multi-annual. This portfolio mix, which relies on annual premiums more than our historic average, increases our ability to react more quickly to market and industry changes with tariff adjustment 3 or 4 times per year. We expect that, as we see economy recovering and new car sales restoring growth, we will likely see this percentage going up but never as much as the 50% plus we once had a few years back.

Moving now to costs. In the third quarter, our combined ratio stood at 81.6%, one of the lowest ones in our history. The adjusted combined ratio, which is the ratio that meets international standards, ended the quarter at 80.4%. That leads us to a very strong underwriting margin of 19.7%. These results were propelled by a typical loss ratio of 51.7% that compares to 59.5% of last year.

Although we're still benefiting from partial lockdown measures, we progressively see numbers of claims going back to average. For reference, during the second quarter, they were down 43%, and for the third quarter, they were down 26%. While external factors will play an important role on how fast we get to pre-COVID levels, we are expecting these normalization trends to continue, and we're planning accordingly.

It is important to highlight that we're not relying on matters outside of our control to determine our results. We're working, perhaps more than ever, on areas such as cost control, theft and accident prevention as well as service experience. We are incorporating new technologies and analytics and train people to do so. In the third quarter, we once again saw a positive trend in theft and recoveries. Robberies were down 19% for the industry and 20.4% for Quálitas. Our recoveries were again above 53%, which is 8 percentage points ahead of industry. We have had 7 consecutive quarters of improvement in this key metric.

On service, we boosted our express claim tool, which avoids the need of a claim officer in person. During the third quarter, we attended 20% of the claims through this channel. That compares to less than 3% during 2019. This goes back to Jose Antonio's opening remarks, as we have found this exponential growth to be a true win-win for everyone. It is a better customer experience by reducing time and implication, it increases people safety, and it also has a lower cost for Quálitas. We plan to keep and expand this in the future.

Perhaps one more example to illustrate the ongoing commitment towards cost control and service would come from our vertical subsidiaries. Earlier this year, we incorporated, through CristaFacil, the technology of car windshield repairs, something largely penetrated in other markets but inexistent in Mexico. Today, we are repairing 3.7% of car glasses that was previously repaired-- repaid, sorry. This is a significant cost reduction for Quálitas and a faster, risk-free and better cost since there is not deductible for the customer. We will strive to get to 15% in the next year, consolidating this as a true example of competitive advantage because of our vertical integration.

Moving to acquisition ratio. We closed the quarter at 22.6%, slightly higher than last year for a cumulative rate of 22.7% or 79 basis points above year ago. The cumulative increase is explained by an increase in production bonuses for agents in commercial areas and a less impacted underwriting through financial institutions, which carry a higher cost.

Finally, our operating ratio stands at 7.3% for the quarter, an increase of 92 basis points when compared to the same period a year ago. Year-to-date operating ratio stands at 7.7% or 1.7 percentage points above year ago. The increase is mostly explained by 2 factors: first, the employee profit-sharing account, which is linked to business performance. If we were to exclude it, year-to-date operating ratio would stand at 4.6% or 69 basis points above a year ago. And second, the financial costs behind interest rates -- interest-free installments offered to customers, which during the pandemic, we included up to 12 months interest-free payment. Worth noting as well, when looking at the cumulative operating expenses, we need to remember our 185 onetime benefit during the first quarter of 2019.

Now moving to capital requirements and consolidated solvency margin. The regulatory capital requirement totaled MXN 2.3 billion at the end of the third quarter, reflecting lower claims and our portfolio composition. As always, we will continue to apply our internal policy of having 1.5x the regulatory capital requirement to absorb potential fluctuations and as part of our conservative strategy. By the end of the quarter, the solvency margin was MXN 14.5 billion that represents a percentage of solvency margin of 718%, which is our highest ever. Dividend payout conversations will take place in April next year during the shareholder annual meeting, and we're not planning for an extraordinary dividend window.

Moving to our stock performance. Our stock closed the year -- the quarter at MXN 83.4. While down versus last -- second quarter, our year-to-date performance is up 6.9%, well ahead of the Mexican stock market and our financial sector peer group, and this puts us in a very short list of companies with positive yield in 2020.

Also, during this quarter, we completed the cancellation of 12 million shares we repurchased during 2019, so we currently have 430 million shares outstanding. In this regard, with a share buyback fund of MXN 1.4 billion approved in our last general shareholder meeting, we have repurchased more than 6.5 million shares equivalent to MXN 600 million.

In terms of liquidity, the daily average traded amount during the quarter was around $3 million, and we managed to go up 2 positions versus previous month and 12 positions since last year, now standing at position #23 in the Marketability Index.

Moving forward, we will continue building on the path we laid out the last time we spoke. We're taking the right actions to overcome the current scenario, but we're not losing sight on where we are heading. Our strategy is working, and we will continue to invest behind it. We need to stay agile to adjust and exceed the needs of our agents, customers and the overall market. We have extended for the full year the discounted first as well as payment flexibility with interest-free 3, 6 and 12 months installments. We are tailoring plans for large accounts, and at the same time, working on further differentiating ourselves by offering services that create long-term relations and consolidate us as the insurer of choice.

As already indicated, our subsidiaries have become an engine of growth, and we're investing towards boosting their potential. We are very excited by the results, despite adverse market conditions. The upside is significant, and we expect the non-Mexican car insurance business to represent between 20% and 25% of our businesses in the next 3 to 5 years, proving as well that our model can and will be successfully reapplied elsewhere.

We're thoroughly assessing entering new segments, which will open new opportunities for Quálitas to better serve agents and customers. We're still working on the model definition to ensure we capitalize on our strength. We have a right to win, and we can do so financially responsible, which will be to launch, learn and then expand. We expect to share specifics in the next 6 months.

While our capital above requirement is in the highest level ever, we're in no rush to make decisions. We're carefully exploring different options that would maximize the value for the company and create value for our employees, agents, policyholders and investors in a sustainable way.

And with that, we will open up the line for questions.

[Operator]

[Operator Instructions] Our first question comes from Ernesto Gabilondo of Bank of America.

[Ernesto María Gabilondo Márquez, analyst]

Congratulations on your second highest quarter in the company's history in the context of a partial economic reopening and more circulating cars. So my first question is precisely on that. How should we think about the operating trends once we enter into a full economic reopening next year? Anything you can elaborate in terms of premiums, growing costs, I think, would be very helpful. And how would this translate in terms of your ROE target for the next 2 years?

[Jose Correa Etchegaray, executive]

Okay. Ernesto, let me take the first one. Clearly, at this point in time, it's very difficult to predict what is going to happen. I think that the important thing for us to consider and that we have always worked on in Quálitas is related to the fact that we have a successful business model focusing on the service and on the cost. Very importantly, we are very flexible, and we are fast on our feet. And I think that, that will continue to be, despite how the economies evolve. We know that this year is going to be a bad year, generally speaking, in Mexico and in the countries where we operate.

For this year -- for the next year, we see a rebound, and I hope that will also help us. But most important than that is the fact that we are going to be very agile and responding, and we expect to keep with those strengths and be faster than competition in making decisions to get advantage of the opportunities that the environment give us next year.

So to sum that up is to say that we don't know. I would like to know if someone can tell me exactly what's going to happen for next year. But rest reassured that we will continue faithfully in our specialization and in our model that has provided the excellent results over the past 26 years in Quálitas.

Regarding your second question, I don't know if you want to take it, Bernardo?

[Bernardo Salas, executive]

Yes. Your ROE question, well, we've certainly been delivering well ahead of our long-term guidance, no? And the long-term guidance, as you recall, early in this year, we increased it to 20% to 25%. We believe that is still a sustainable and very attractive ROE for the company.

We have been above 40% over the past 2 years. We know and recognize that 40% plus is not sustainable. What we continue to plan against is to ensure our investors can look at Quálitas for a 20% to 25% return on equity on the long run. Together, it's going to probably take us a while. And as Jose Antonio mentioned, we keep being very agile and true to our strategy, but we'll start adopting both pricing and claims as we see mobility getting back to normal.

[Ernesto María Gabilondo Márquez, analyst]

And I have another question on your international operations and your new health insurance product. Can you give us some color of your plans in the international operations? You are planning to go to a new country, or you plan to concentrate in your current geographies? And when do you expect to be more aggressive in the new health insurance product?

[Bernardo Salas, executive]

Ernesto, let me take the first piece, and then I'll ask Jose Antonio to address on the medical expenses. On the geographic, I think we're still on the very early stages on the -- on seeing the true potential of our subsidiaries. We know we play a niche role in the United States, but that seems to be working, and we want to expand throughout the broader market. We're enjoying a 50% growth. We are still learning on the bus program, which will launch this quarter. And as I mentioned, we, for the first time, are opening an office in Texas.

Costa Rica, there's still a 70% market share on 1 player, so there's a lot of upside to go there. And I think we found the right structure and model to win.

And in Peru, which is our youngest operation, international, we launched last year. We have now 3% of market share. We have close to 50,000 unit insured, and we keep seeing this very positive traction from agents. I think there's already enough potential. But I wouldn't say we're closed to opening new markets if the opportunity were to come at the right pricing and especially where Quálitas right to win can be successful in that market.

[Jose Correa Etchegaray, executive]

Thank you, Bernardo. Also, regarding the international, it's important also to notice that it has been a big help for this year, and we expect that to continue. And as Bernardo said, we will continue -- Ernesto, we will continue assessing opportunities that we receive from time to time. And for those that are accretive and generate future growth for the company, we will consider.

Now regarding the health and medical expenses that we want to expand, let me tell you that we are making progress. We have been probably not at the split we wanted, and that's primarily due as a fact of the -- government agencies have been -- because of the pandemic, have shown delays in some of the things. But we are moving. We are gradually moving towards that. We have gotten some permits, but not everything that we need. And clearly, we will -- you will hear from us in the next 6 months. Also, we expect to really make probably a big step forward in the next 6 months regarding the advancement of being able to operate in this new business.

It's important to say also that this is something that will carry on in the future. This is something that we don't want to go full scale from day 1. We want -- as we said that we want to learn and we will expand, and we will start small. Clearly, that's something that we see very long term. And I think that there's a lot of potential in this area in the coming decades, I would say.

[Operator]

[Operator Instructions] Our next question comes from Martin Lara of Miranda Global Research.

[Martín Lara, analyst]

Congratulations for the strong results. I have two questions. The first one is do you think that premiums will accelerate a little bit in the fourth quarter? And the second one is where do you see your loss ratio also in the fourth quarter? Do you think it will be a little bit higher?

[Jose Correa Etchegaray, executive]

Well, that's also a tough one considering the environment, Martin, but thank you for being in the call. Let me tell you that, yes -- I mean, we have been -- we have seen a competitive environment, in general, considering the fact that the economies have been contracting. So we have been reactive to that on 2 fronts. First, on recognizing that the loss ratio has been lower, and we have passed on some of these savings to our policyholders, for sure. In the fleet business, we have seen extended competition in which local competitors really want a piece of the pie. We have been successful defending that part of the business.

Now to what extent that will continue? It will depend on how the loss ratio behaves. We are expecting, as Bernardo indicated during his remarks at the beginning, that we have seen an increase. I mean it's still below a year ago, but now we are recovering -- I mean it is increasing the loss ratio, clearly well below what has been historical level. So as long as that continues to happen, we are going to be reactive in the sense that -- reactive to that situation. But obviously, we have always taken the leadership in terms of pricing.

So where will we stand? It's like that it will remain along the lines in which we are seeing now. I don't see that there's going to be a huge growth on that one, and it would remain along those lines.

And your second question was?

[Bernardo Salas, executive]

I'll take your second question, which, I believe, related to premiums growth in the fourth quarter and in the short term, no? I would say, and Jose Antonio alluded to that, there's still many uncertainties. It's hard to predict when will things stabilize. We do believe that in the short term, growing top line will be challenging, no, on 2 fronts. One, the economic slowdown will continue; and second, as we take prices down in line with the market and in line with our principles of putting some of the lower ratio back into more competitive prices, that creates the challenging even further because now we're selling at a lower pricing, no?

But we should expect that next year, we'll go back to somewhere in the low mid-single-digit growth. And in the fourth quarter will also depend on the market recovery. New car sales are down 30% year-to-date. They're expecting to be down, but not as much as the second or third quarter. So I think that will be an important factor for the fourth quarter top line growth.

[Operator]

[Operator Instructions] We currently have no more questions on the phone line.

[Bernardo Salas, executive]

Operator, there's one that comes from Carlos [indiscernible] from [indiscernible]. You have reached referred number in the P&L due to performance of combined index. Do you think this will normalize prepandemic levels or we can continue -- or can we continue to see it moving forward closer to 80%?

So I think it's still going to be a while, as José Antonio mentioned, but we do not see this business operating on a combined ratio of 80%. I think ongoing, we should go back to what we have called as our guidance in prior years, which is to be a combined ratio in the low 90s, 90% to 94%. That is where we want us to set. That is what we price against, and we always work on ways to get it to a lower combined ratio.

But just to be very clear, I think we're living at difficult times. The low combined ratio that we have seen in the past 2 quarters, which is the lowest one in our 26-year history, are unlikely to continue -- or shall -- we shall not assume to be the ongoing. So I think that hopefully clarifies.

[Jose Correa Etchegaray, executive]

That will also depend, I would say, on how fast the lockdown is eliminated. Just let me say that according to what we had expected, it is coming probably a little bit slower than we had anticipated. So it is good. And as long as, for instance -- in the case of Mexico, for instance, where we have the schools closed, et cetera, we will continue to see a good behavior on that.

So the speed at which this is going back to, let's call, normal average levels, it's taken a little bit longer than we initially had anticipated, which is good. But as Bernardo said, it is most likely we will be going back to levels of around 90%.

[Operator]

[Operator Instructions] This concludes the question-and-answer session. I would like to turn the conference back over to the presenters for closing remarks.

[Bernardo Salas, executive]

There is one more coming from online. Can you expand on the bus insurance program in the U.S., and why you see that as attractive? It comes from [ Glen ] from [indiscernible].

Well, as we continue to look for niche opportunities on both sides of the border, bus program was something we had discussed but we hadn't seen the right environment to go for it. I think we have a program that's in place that can be attractive for the users and can also be interesting for Quálitas. We're learning and, as many other things, we're launching. We will see how that goes, and then we will expand, no? And we just launched it in July, so we're early -- in very early stages to be able to conclude something, no? But we're very excited about the potential it has, and we just want to make sure that we can make that profitable.

[Jose Correa Etchegaray, executive]

We have another one, another question from [indiscernible]. It says, as you mentioned, the 10% discount on renewals and a drop in renewals in bank assured, how has it been possible to post these numbers in the written premium? Has mix been changing through the year?

Well, let me tell you that, that's one of the things that Bernardo indicated during his remarks. It's important because, as we have seen, we have seen a significant growth in the international operations and in the new businesses that we have. So yes, the answer is we have seen a mixed composition. And yes, we anticipate that these new -- these subsidiaries will represent a higher part of the company going forward. So this is one of the ways in which we have been possible to grow the written premium as the way we did in the third quarter.

But this is -- this provides a healthier company going forward, and we have still opportunities about growing in these businesses at the rate which is higher than the one and the market share that we, for instance, have in Mexico, which is there is not much upside in terms of market share in this regard and will depend more on the economic behavior.

[Bernardo Salas, executive]

And just to add some numbers on that perspective, we did lose some units on motorcycles, which carry a much lower premium. Motorcycles, we changed a little bit our strategy, and we're down around 16,000 units, which were partially compensated by trucks where we continue to grow despite all adversities, no? So I think the mix will continue to play a big role.

Next question comes from Carlos Gomez, HSBC. How will you the quality of -- how will you qualify the competitive position of the bank-affiliated insurance companies at present? Are they more or less aggressive than before COVID?

[Jose Correa Etchegaray, executive]

Carlos, no, I have not seen any -- it has been broad-based, the competition in terms of tariffs. I mean I don't see any specific addition to that one. Where we have seen more competition, it has been more than -- in the affiliated bank insurance companies, we have seen that more in the terms of the fleets' particular. As the pie grows smaller, they want to get a part of the pie, but not anything particularly regarding the bank-affiliated companies.

[Bernardo Salas, executive]

The last question comes from [ Guilherme ] from [ Onyx ]. The really abnormal figure this quarter is the loss ratio. However, even if we use last year's loss ratio, we will still be at levels of 87%, which is consistent with abnormally high ROE. Is that what we could expect for the coming quarters? Using 87% to 90% combined ratios, we would still be above your 20% to 25% ROE guidance.

The answer is yes, the math does work. And in the short term, we do expect that we will continue to be above 20% to 25%. The way we go back and the reason why we go back to 20% to 25% is because we want to make sure that on the long run, as we continue to grow in subsidiaries that are yet on the process of maturity and, therefore, incorporate lower ROEs, as a mix, as a holding company, we're able to deliver on that 20% to 25% range. But I think your math works, and it's in line with ours. And in the short term, we should continue to be above the 20% to 25% range.

[Jose Correa Etchegaray, executive]

Okay. Well, we don't have any more questions, operator. No more questions. So we want to thank all of you that attended today's conference call. We are happy, and we are ready to answer any questions that you might have with our investor relations area. As always, they have been dependable on answering more questions that you might have. Thank you very much, and have a good day. Bye now.

[Operator]

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