Thank you for standing by. This is the conference operator, and we will now begin the conference.
Thank you, Chad. Good morning, and thank you for joining Quálitas first quarter 2022 earnings call. I'm Santiago Monroy, Quálitas IRO. Joining us today are our CEO, José Antonio Correa, and our CFO and International CEO, Bernardo Risoul Salas, to talk about our quarter results and performance. As a reminder, information discussed on today's call may include forward-looking statements regarding Quálitas results and prospects, which are subject to risks and uncertainties. Actual results may differ materially from what is discussed here today, and the company cautions you not to place undue reliance on these forward-looking statements. Quálitas undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. Let's turn it over to José Antonio, our CEO, for his remarks.
Thank you, Santiago. Good morning, everyone. Great to be with you all again. As stated in 2021, we continue to confront the new normal and facing business challenges while serving our customers at the best-in-class level. Microeconomic and global turmoil leading to high inflation and shortage of new cars and auto parts, along with market volatility, is affecting us all, with Quálitas being no exception. Our quarterly results are mixed and reflect this environment, as well as a continued and aggressive competition and mobility trends well above pre-pandemic. While our first quarter results are slightly below consensus and our own expectations, the reasons are clear and are being addressed. Most importantly, our fundamentals are stronger than ever, and our strategy, which includes international subsidiaries and new venues, is working and proving to be the right one.
Mexico car insurance market is yet to pick up, with 2021 numbers showing slight recovery versus 2020, but still down 6% versus 2019 in nominal terms. This is being affected by new car sales contraction that continues and was down 2.9% versus last year, and a full 24% versus 2019. We're expecting that things should sequentially improve in the second half, and that, coupled with the competition and inflation, put pressure in our underwriting results, which came in the low end of our expectations. The second piece of our business, the financial returns, in which Bernardo will elaborate, fell short of our target due to the combination of equity performance and increasing rates that are not fully reflected due to the duration of our portfolio.
Importantly, this quarter's performance follows industry business cycle and should be seen as part of the expected ramp-up process after the atypical last two years. We have seen them before. We know what to do, and we are taking the right actions. I want to expand on the competitive environment, which is as we have mentioned in the prior calls, have been particularly aggressive on the pricing front, sometimes to what we believe unreasonable levels seeking to regain market share by some of the participants. Our goal is and will always be to deliver the best value proposition for agents and policyholders, which doesn't mean being the cheapest. We acknowledge pricing levels are important, but even more important is the service we provide.
During this quarter, we adjusted prices of some of our business lines, which are now up close to 10% versus the first quarter of 2021 and taking them back to pre-pandemic levels. We are adjusting once again this second quarter to partially recover industry inflation. The adjustments we are taking are supported by our technical models and quite carefully assessed. We recognize that this may have a toll in our premiums since we are moving ahead of the market. This is the right action to ensure a sustainable and profitable operation. In parallel, we're also focusing on new technological tools such as Quali-Bot, our recently launched WhatsApp chatbot, the development of artificial intelligence in our call center, and the strengthening of our claims teams and processes to excel in the service provided to our clients.
Let me now touch on another key pillar of our strategy, a move that not in the short term but in a few years is expecting to be a relevant business, our new health and medical operation. Yesterday, we informed the market that the National Insurance and Bonding Commission, our regulator, will soon start a certification visit to our new Quálitas Salud subsidiary. The visit is estimated to last between two and three months, and this is important and final step, forward before having from the authorities a favorable opinion for the beginning of our operations. Also, I would like to remind you that this new subsidiary will be completely independent of our Mexican auto insurance operation to ensure not to lose focus in our core business.
In other news, as part of our never-ending effort to sustainability, I'm glad to share that in January, Quálitas was included in the 2022 Bloomberg Gender-Equality Index, GEI, as one of the 10 Mexican companies and the only Mexican insurance company to join the index, proving our commitment to transparency and best practices in gender-related topics. Before I hand it to Bernardo, let me reiterate that one of the Quálitas' biggest strengths has been our agility and our capacity to adjust and adapt. We will continue to follow very closely trends and factors that, while not under our control, impact our business. We will continue prioritizing a sustainable and healthy operation. We know the next couple of quarters are going to be challenging as the implemented actions will take time to fully reflect.
Top line will face new upsets and claim index will likely stay on the high end of our expected range. Once again, all actions are intended to continue creating value to the policyholders, agents and shareholders. We will stay focused on executing against our priorities and strategy. Let me tell you, the future is bright. With that, I will hand it over to Bernardo to walk you through the financial details, and as I said, a deeper dive on the financial income. Bernardo, please.
Thank you, José Antonio. Good morning, everyone. As mentioned by José Antonio, first quarter operating results came in at the low end of our expectations while financial income performance was subpar. Relative to the industry, based on the 2021 overall figures that were released in early March, our performance continued to be ahead of the industry across top and bottom line. Most importantly, our value proposition continued to be privileged by the confidence of agents and policyholders, leading to record market share in Mexico and the balance of the market where we play. Going directly into our underwriting, top line grew 0.9% given the mentioned headwinds. Worth highlighting is the strong performance of the individual segment in Mexico that increased 6.8%, and of our international operations growing above 26% in dollars.
Our international subsidiaries now represent 9.5% of the total company underwriting, aligned with our strategy of boosting their potential in each of the markets where we play. In addition to premiums, one KPI that we always look to assess business strength and health is the number of insured units, which this quarter, once again, reached a record high of 4.6 million units, an increase of 284,000 units versus same period year ago and 109,000 up versus last year closing. In a contracting market, these results are worth recognizing. Due to the financial institution business linked to new car sales, our portfolio composition reflects that 78% of our policy on an annual duration and the remaining 22% are multi-annual.
This, among other factors, led to a lower reserve constitution, resulting in a 7.9% increase in earned premiums. By the end of 2021, the total used car sales made through loan or credit increased 14%. From the total car sales through financial institutions, around 17% were secondhand cars, the highest proportion in the past eight years. Since the pandemic hit in early 2020, the automotive trends have been changing continuously. The demand for used cars is increasing, and we're taking advantage of this through our network of 19,000 agents. Looking forward, we continue to aim for mid-single digits in our top line towards end of the year.
We recognize that the speed of recovery of the auto industry and the effect of the price adjustments, we don't know competitive reaction may impact our growth rate in the next quarters. Moving to our cost and indexes, to better understand the loss cost and ratio performance, I would like to mention how mobility trends impact our business. Mexico, which continues to be our most relevant subsidiary, COVID-19 restrictions in terms of mobility were lifted and the country is fully back to normal. When comparing mobility trends of private transportation by the end of March versus the pre-pandemic year of 2019, we are seeing it up 48% higher mobility. It seems everyone was desperate to get out of the house. The students are back in school. People are back in the office, or at least partially.
Travelers are back on the road and social gatherings are now seven days a week. That increased mobility is impacting frequency and thus the number of liability claims, which just this quarter were up 21% versus the same period a year ago. In addition, Mexican inflation levels of 7.5% is something we have not seen in the past decade. Even more, due to the supply issues and commodity prices, auto industry inflation is a couple of points higher, reaching close to 10%. These two main factors, which escalated faster than we expected, mean more claims at a higher cost. Hence, a 65.9% loss ratio by the end of the quarter. Total loss composition has not changed much, and around 80% is related to property damages and civil liability, growing 29% during the quarter given the previously mentioned items.
Around 13% is related to theft and robbery, which we have seen slight increase during the first quarter of the year. These impacts are cross-rate and affect everyone in the car insurance business. In our case, we want to stay ahead, partially mitigating cost increases by leveraging our scale and vertical integration. Most importantly, our risk prevention programs, discussed before at length, that seek to reduce accidents and thefts. The success of this effort is seen and measured quarterly, comparing not only our own goals, but to the balance of the industry performance. Our acquisition ratio was 23.9%, in line with the historical average, where a lower mix of financial institutions, which carry a higher acquisition cost, is offset by agent bonuses which are paid based on collection timing. We're maintaining our commission and bonuses in line with prior years.
Thus, we do not expect major variances other than the ones coming from channel and customer mix. Our operating ratio stood at 3.7% for the quarter, 38 basis points below the same period year ago, mainly explained by a 68% decrease of the employee profit-sharing account, referred to as PPE in Spanish, and by our revised vertical integration accounting consolidation. These sales are now considered as revenue in the other income item within our operating expense. All of the above, we're talking a combined ratio of 93.5% for the quarter. The actions mentioned include, but are not limited to tariff increases intended to get this combined ratio back to the low and midpoint of the 90%-94% range, although it will not be immediate due to the nature of our business.
Moving now to the financial income pillar. First quarter delivered MXN 348 million, representing a 3.3% ROI. This is below Mexico reference rate and our expectations. The top results are mainly explained by our 15% equity position that under-delivered, and to a lesser extent, the duration of our fixed income portfolio, which is 0.7 years. Therefore, not benefiting immediately from all of the rate hike. On this, it is important to note that our liabilities have durations of 1.2 years. Thus, we're already ahead of the curve anticipating this higher interest rate environment. As you recall, at the beginning of the year, we mentioned our expectations for CETES was between 6%-6.25% and 6.5% at year-end, which is currently where we stand.
Regarding our equity exposure, we are expecting that it recovers in the next quarters. We will continue to seek positions and investments that will allow us to close the gap versus our target, which as you recall, is to be 100 basis points above the average Mexican reference rate. At this time, and considering Q1 and our portfolio position, meeting the initial target seems challenging. Altogether, we posted MXN 736 million net income for the quarter, which represents a 7.5% net margin. Important as well to note that these results include a lower effective tax rate versus our historic one, mainly driven by inflation adjustments combined with lower profitability and deduction of items, such as annual agent bonuses that were reserved last year, but paid in this 2022.
We do not expect this low rate to be sustainable, and we're likely to be back in the 20% as an effective tax rate in the next quarters. Regarding our financial ratios, our 12-month ROE stands at 17%, reflecting our strong capital position. 12-month earnings per share stands at MXN 8.5, and price to earnings stands at 13.5. Finally, price to book value at 2.2. Now going to our regulatory capital requirements. They stood at MXN 3,619 million at the end of the first quarter, with a solvency margin of MXN 16.4 billion, equivalent to a solvency margin of 551%. We're working on a capital allocation interdisciplinary project seeking business continuity and diversification.
We're focusing on projects within the insurance ecosystem in Mexico that contribute to the long-term sustainability of our business. We remain committed to the previously mentioned date of mid-2023, by which we will have better visibility. Finally, and before we open up to the questions, later today, we're having our general shareholders meeting, where we're proposing the annual returns for our shareholders as follows. First, the cancellation of 6 million shares that were previously repurchased. With this cancellation, the number of shares representing capital stock will decline from 406 million to 400 million shares outstanding. Second, we're also proposing a cash dividend payment of MXN 2.6 billion, equivalent to MXN 6.5 per share, payable in two installments. First, 4 MXN in May, and secondly, 2.5 MXN in November.
This will represent a 60% increase versus the cash dividend payment from last year, with an approximate dividend yield of 5.7%. Third, a new share buyback fund for a total amount of MXN 1 billion, with the main objective of increasing stock liquidity, which, as you know, has improved significantly, going from $1 million traded on a daily average to over $5 million traded where we stand today. We will also continue acquiring some shares, although we're not going to cancel many of them anymore, as we do not want to affect our flow rate of around 40%.
To wrap it up, our commitment to you remains unchanged. We have the strength and we're ready to serve with excellence our customers by leveraging in our largest agent network, in our focus based on customer needs and in technology by capitalizing our senior management experience. We're optimistic for the future. We have built the right foundation, and we're focusing on what we can control. We're confident in our ability to successfully continue leading the industry. Our ambition is to transcend the industry and to create a significant long-term value for all our shareholders. Everything we've done put us closer in achieving that ambition. Now, operator, let's please open up the line for questions.
Thank you. We will now begin the Q&A session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Jorge Henderson with Santander. Please go ahead.
Hi. Thank you very much, and thanks for the opportunity, and thank you for the presentation. I have two questions. My first is in terms of the top line. I wanted to ask you about the growth of written premium segment on cars against on trucks and also about your expectations on new car sales in Mexico. Also, I wanted to know if you have some color on the industry pricing. This is impressive. Thanks.
Thank you, Jorge, for joining us today. Let me tell you that we continue to see, particularly, in the fleet segment a lot of competition. We know that many of our competitors are really pushing, and sometimes they are going below what we believe to be reasonable. Meaning that they are even quoting for these businesses below the loss ratio, which obviously is not gonna be something that we want to do, you know? You know, during the first quarter, we have price increases that versus the past quarter in 2021 were close to 10%.
I want to say that we have done that as a leader of the industry and as a responsible from a profit standpoint that we have to do that. We are always assessing this very, very carefully. We know that considering the growth that has had the loss ratio in the last probably I would say eight quarters or so, we know that there's also the inflation. We need to recognize that there has been a lot of inflation on this one and this should help. To answer specifically your questions, I think that it's gonna be in the mid-single digits in general.
That's probably gonna be growing more in the individual part of our business, not in the financial institutions that will continue to grow below last year. That's because of the sales of cars. As I have been talking to some of the key car manufacturers in Mexico, I can tell you that all of them and most of them are expecting that the first semester is soft and will continue to be soft because of the logistics and the thing that we all know in terms of what's going on in the industry worldwide. All of them somehow expect that the second semester is gonna be better.
I would like just to say that we are seeing there's some inflation in car prices. We know that, interestingly enough, it's around 9%, slightly below 9%, as according to the INEGI, what has been the inflation of new cars, even though they are not necessarily available. Interestingly enough, there's also increases in the used car segment. That is sometimes surprising, and it is the first for many years in Mexico, you know? In all, we expect to be growing in the mid-single digits, which is what we expect for the year.
José, let me add two relevant things on the top line.
First, on new car sales and the financial institution segment, we need to dimensionalize the size of the impact given the slowdown on the car industry. To do so, we are now comparing, just as a reference, what would have been the increase on our top line if we had seen new car sales at the 2019 level. It is $300 million in premium. That is just the first year. In other words, there's three percentage points on written premiums impact had we seen the 2019 new car sales amounts. Okay? The second, Jose Antonio already alluded to the benefit and the good performance on the individual sector. I don't wanna be shy about the relevancy. The individual sector segment is up 10%.
It's not only 10% this quarter, it's up 30% or more or close to $1 billion in premium relative to 2019. That means that in a contracting market where new car sales have not increased, Quálitas continue to be able to capture new cars, either because they did not have an insurance or else we're bringing them from competition. That is through by playing to our strength. The fact that we just opened up new offices in the first quarter, seven of them. The fact that we've increased up to 19,000 of agents, our network, speaks to our ability to be able to reach and capture those individual customers, which actually have higher loyalty, and they also have better profitability.
Those two items, I think, are relevant to consider when seeing a top line that just by the number may seem that is shy at 1%, but that is foundational, very strong when you look at those two details. Thank you.
Thanks a lot for the analysis, Antonio. That was very useful. I only have a follow-up question. It's on your guidance. I don't know if you have the same guidance that you gave on last call, but it was the loss ratio between 63%-65%, the combined ratio between 90%-94%, ROI between 100-150 basis points over the reference rate and another really low end of 20%. Is that still the case or have you changed some of the projections?
Sure, Jorge. Let's start with the indices. We are slightly ahead of our target in terms of 65.7%. But it is important to note that, you know, the fact is that probably, as we stated in the early remarks, the mobility and the loss ratio increased a little bit faster than we had anticipated, and that's why we are taking the right actions regarding our pricing and that one. No? But it continues to be within our, it's in the top side of our range. For the combined index, it continues to be in our long term, within our long-term target.
Obviously, we have had a very good result back in 2020 as a result of the pandemic. Considering where we are now, we believe that we will be within those levels. No? Now, do you want to take the.
Yeah. The financial, let me expand, José, on the financial income, because this was something that, well, I alluded to in my initial remarks, that is important to consider. No? Our financial income for the quarter had two main impacts. One on the equity position, as I mentioned, and the other one on how we're tying our portfolio in terms of duration versus the increase on reference rates. We are increasing the reference rate expectations from the previously expected 6% to 6.5%, which by the way, was the consensus at the beginning of the year, to now a mid to 8.5%.
The fact that only a portion of our portfolio, around 60%, captures immediately the benefit on rate increases or decreases, means that we will not be able to fully capture that upside in interest rates this or fully this year. Therefore, delivering between 100-150 basis points ahead of reference looks a bit more challenging. That also considers the fact that we are behind the curve on the first quarter results. We're taking the right actions without jeopardizing or taking unnecessary risk and always in compliance with our investment guidance to maximize the portfolio. As I said, it's looking very challenging to be where we want it to be between 100-100 basis points ahead of reference.
Okay, that was very clear. I mean, only to get that clear. You're still telling that with this, all the that you mentioned, you're still expecting to post an ROE between 20%-25% or in the low end of this range. Right?
Our long-term commitment remains unchanged between 20%-25%. As we over-deliver a few years back, and we have consistently over-delivered in the past four, there might be some bounce, and we may be falling short in the next quarter. This quarter was at 17%. This is not only based on business performance, you know, and the profitability quarter by quarter, but also recognizing what we have said about our capital and equity base. You know, the numerator is now at a high end of. Actually, it's at a new high watermark above MXN 20 billion. That plays against us when we're looking at ROE. We're taking the right measures.
We're increasing dividend payout and giving back to shareholders, and we're also increasing on the projects that will provide the sustainable growth and profitability for the long term of the business. Net, we should expect the next quarters we may still be down off the 20%, but that doesn't mean we're shifting our long-term commitment of that range.
I would add to what Bernardo said, Jorge, that our business and our industry is cyclical to some extent. We are now in the low end of the cycle, but we've had like seven or eight years to go. This is no different than that, but we expect that at some point in time the market recovers some sense and we go back to that. As Bernardo indicated, we continue to be with those targets in mind in the medium and long term, for sure.
Great. Okay. Again, thanks a lot for the call and your time. Thank you very much.
The next question comes from Carlos Legarreta with GBM. Please go ahead.
Hi. Thank you. Good morning, and thanks for taking the question. Just in terms of the policy, let's say the prices for the policy, according to INEGI data, those have been increasing by around one point below the CPI overall increase. This is for 2022. Is that something that makes sense to you given the data that you've seen for you guys in the market or?
Let me tell you, Carlos, and thank you for staying with us today. Let me tell you that the INEGI is a very general numbers. I mean, I have asked the technical people here to find what the INEGI says, and I found that it is very general. It is important to note that we have very specific in terms of pricing in our different business lines. No? It is very difficult to say that that is because they usually, they consider that in terms of new car pricing only. No? We take, you know, everything. We take fleets, we take financial institutions, we take individual, we take everything. No? Yeah. Yes, it is.
As I mentioned earlier, you know, the inflation in car prices and new car prices was slightly below 9%. But we have seen also that in the used cars, we have increasing more than that. We take and we price according to street rate, we price by risk, taking risk. It is very difficult to us to compare vis-a-vis the INEGI. Because what we are trying to do is to right price on the risk to make sure that we have a profitable business in that we are on the way. No?
Thank you. That's what I had in mind. Just wanted to confirm that.
Thank you, Carlos.
The next question comes from Carlos Gomez-Lopez with HSBC. Please go ahead.
Just wanted to go back to the growth that you expect for the coming years. I think that you have higher inflation today. How much do you expect your units to grow for the next two or three years? Do you think part of the current inflation, especially in the used cars, might be reversed? How would that affect your business? Thank you.
Well, we don't have a magic ball here, but what we would go back to is we want to grow ahead of the industry. That is an ongoing expectation. We understand that the actions that we are taking that are ahead of the market, and as I mentioned, may have an impact in the short term in the next few quarters. What we have forecasted for the Mexican operation ongoing is around mid-single digit, so anywhere between 4%-6%. It will always be affected by new car sales and how the recovery goes. On top of that, we expect that the international subsidiaries contribute to around two points of that growth. Then the new venues are expected to contribute between one and two points.
We do have a line of sight that, as a parent company, we want to grow between 8%-10%. Again, that is broken down differently by business unit. To the most relevant of our business, I would say that mid-single digit growth is what we have in the base model for us.
Sorry. That's for the year or for the coming two or three years?
That's for the coming two and three years. I would say that the year expectations still in the mid-single digit growth. It's certainly gonna be an uphill next two quarters. Anywhere between low and mid-single digit would be still fair to assume. Carlos, one more thing. You also mentioned number of units. I think that's a tougher one. No? Because when I mention growth in terms of premiums, that incorporates some pricing. The number of insured units we've grown over the past five years, our compounded annual growth rate is 4.5%, I think would be fair to assume.
As I said, the strength of our business is evident when we look at growing 100,000 units in just one quarter or over 350,000 units in a year in a declining and contracting market. No? I think that will continue to be our priority, to go out there and capture as many units that do not have an insurance or that may be positive to our business.
I would add, Carlos, that if you look at how is the breakdown by all of our business lines in Mexico and the different countries, all of them, and I repeat, all of them are growing in the number of units of insured units.
Thank you. About the price for the cars, in particular the used cars, how is that positive or negative for your business?
Actually, there is an increase in used car sales. Actually, what we have been doing is increasing the insured amounts. It is surprising because we started seeing this at the beginning of the year, and in which we are seeing the market value of used cars has increased. So actually that is increasing the total amount insured. Obviously our premiums reflect those increases for our customers, for sure.
Isn't that what we should expect, what is happening in the U.S., which is the reference market? My question is more, what happens when the prices reverse? Would that be very negative for you? Or that's the normal ebb and flow in your business.
Well, I think there's twofold. One, in terms of cost of premiums, we follow the dynamics. So when we see those prices going back, we will adjust accordingly. Now, there's a different angle to this that is having a benefit actually by having used car sales going up, which is our salvage recovery. As you know, Quálitas, as the market leader, generates around 2,000 total losses per month. Those total losses are sold through an auction, and we recover a good percentage of the cost. Now, that percentage has also been following the trend of used car sales. We're now recovering close to 50% of the value that we pay to those, and that compares around the 30%-35% historic percentage of recovery.
Therefore, when you look at claim costs, all of that is helping mitigate the claim cost average increase. It's all part of the equation, and we consider it as such. When we see that turning point, which we know will happen eventually, we will also see that percentage of recovery going back down, and therefore, we'll have to see and adjust to other items.
On the claims, also the claims will go down. That's not gonna be an issue, I assume. Okay. Thank you very much.
Once again, if you have any questions, please press star then one.
I think we'll now go with the waiting ones. We'll start with Javier Elosúa from Muza Gestión.
Good afternoon. In addition to the 10% price increase implemented in first quarter 2022, what level of price increase should we expect in the following quarters? Thank you.
Well, let me take that, Javier. Let me tell you that really the 10% increase is consistent versus last year that we have been doing since the second half of 2021. Now, we have implemented pricing. Again, we implement this by our breakdown of the type of equipment that we have is quite substantial. We analyze that very carefully in order to take the price increase. Now, to answer your question, you know, very simply, is that we in the second quarter should be taking around 5% in terms of price increases. That, actually, we are in the implementation phase as we speak. That should help us.
The key here is to be able to make sure that we stay within our targets in terms of loss ratio as we have anticipated. That would be the short answer.
Historically, we have gone through the whole technical assessment of pricing every four months. Therefore, in the next four months or sooner if needed, we will look again at the trends and the prices and the cost increases and adjust as needed.
The competition, because we cannot, you know, we need to make sure that at some point in time, as you know, and as it is public information, some of our top competitors are with combined ratio in excess of 100%. Hopefully, they will have some incentive to increase prices, and it will depend also on that part.
We will now go with Carlos Botello from Línea.
To what extent do you expect ROE levels to recover to historic levels above the 20% range? What would drive the recovery?
Carlos, I think the recovery will be led by two folds. One is the business. We want to continue delivering strong underwriting results and strong financial results. We acknowledge that this quarter we fell short on financials. Moving forward, we should expect that part of the recovery is by regaining the strong top and bottom line in the operations and a strong financial income in line with our targets. The second piece on the ROE recovery would be just to reduce our capital to sustainable levels.
That is gonna happen by the actions that we've mentioned, both maintaining our dividend policy and consistency as we have done so in the past, in compliance with the revised dividend policy that was issued last year. Second, by making sure we put that business to work. A lot of that put money into new avenues that probably not in the immediate or short term, but in the mid- to long-term, can be accretive to that 20%-25%. That is one of the things that we're highly considering when we're assessing new potential avenues. To be fair, if we were not to come up with any of them, then the money belongs to shareholders, and we would see the stocks accordingly in the right time. We will now go with Roberto Garcia from Barclays question.
Hello, good morning. Can you comment on the strong performance from the international operation? Where do you see sustainable premium growth?
Certainly. Roberto, you take that one.
All right. Thank you. We're very encouraged with the international subsidiary performance. They're growing broadly in terms of the inter-units. We're gaining new agents on a monthly basis. We're opening new offices following the Mexico successful model. Just over the past month, we've opened up in Peru, for example, a second office in Lima, a new office in Arequipa, a new office in Cusco, and there's line of sight for two more cities to be opened in the next month. So I think it's taking some time.
You know, the international expansion we tried 10 years ago, but we're putting our foot on the gas pedal, and we're pushing further because I believe we now have what is a model that is relevant for the local market, in which agents are seeing Quálitas, the company they can trust, and we're creating value for all stakeholders. It is important to note that different businesses are in different levels of maturity. For example, in Costa Rica, in the first quarter, we crossed the milestone of MXN 10 million in written premiums and a 13% market share, both of them record share, record numbers. El Salvador is up to a nice recovery. Peru, as I mentioned last year, it's looking very strong.
We believe that we have what it takes to continue that 20% growth momentum. Now, just to wrap it up, in the U.S., we know there's a huge potential out there. You know, I mean, the U.S. just crossed last year the $100 million premium milestone, but that can be a business of $200 million-$300 million or up to $400 million in premiums. What we need to pay attention to is we need to acknowledge that it requires a lot of capital. It needs a different model there in the U.S. We want to balance top line and bottom line momentum because profitability is a different story as well in the U.S. considering long litigation costs and timings, especially in the Texas state. Thank you. Thank you.
We'll go with now another question from Carlos Botello.
What is the potential for increased penetration of auto insurance coverage in Mexico? And what is the current level of non-compliance with mandatory coverage? And is there any impetus to improve compliance?
That's a good question, Carlos, and thank you for your question. The potential is very substantial. Having said that, it's not gonna happen anytime soon. The reason being, more than anything, we are around 31% in terms of penetration of car insurance in Mexico. Let me tell you that as long as the economy is soft, and it continues to be soft after the pandemic, we need to remind everyone that in 2022, we have not yet recovered the economy, the Mexican economy, to the levels prior to the pre-pandemic.
That's important because in order to improve penetration, it is important that the economy behaves in a healthy way, something that is not happening. Now, having said that, and considering the other part of your compliance with the mandatory insurance, that's something we are working with the industry to make sure that it improves. There is a big chance of that. Let me tell you that the mandatory insurance in the case of Quálitas is, it's not moving the needle. I mean, we would like that to be better. Certainly, we will continue working through the industry. Really it is very low, the impact in Mexico.
You know, we are the leading car insurance company in Mexico. It is amazing that there's such a low level of insurance being the mandatory insurance. I think we do not have any other questions. If there's no other phone ones, then I think we could call it a wrap.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.