Thank you for standing by. This is the conference Operator. Good morning and welcome to Quálitas's first quarter 2024 earnings results webcast. The conference will begin now. It is my pleasure to turn the call over to Santiago Monroy, Quálitas's IRO.
Good morning and thank you for connecting to Quálitas's first quarter 2024 earnings call. I'm Santiago Monroy, Quálitas IRO. Joining us today are CEO and Chairman of the Board José Antonio Correa and Deputy CEO and Vice Chairman Bernardo Risoul. As a reminder, information discussed on today's call may include forward-looking statements. These statements are based on management's current expectations and are subject to many risks and uncertainties that could cause actual events and results to differ materially from those discussed during today's call. 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 again. Before diving into our first quarter performance, and although many of you have probably already seen 2023 Mexican auto insurance industry figures, I would like to briefly point out some highlights and provide some color on current market dynamics. Total auto insurance industry posted an annual growth in premiums of 27%. Quálitas grew at a stronger pace, up 30%. This performance was mainly driven by strong 2023 new car sales figures and by tariff adjustments across the industry, in which Quálitas led the way on pricing, while competitors still have room to follow through 2024. Regarding the underwriting performance of the Mexican auto insurance industry, only 15 out of 37 companies posted a positive operating result. Quálitas Mexico combined ratios stood at 94% versus 102% from the balance of the industry.
As many times mentioned, excellence in service and cost control are and will continue to be our top priority. But this underwriting performance also reflects the external pressures our industry continues to face and which we believe will prevail during 2024, such as: number one, frequency and monthly above pre-pandemic levels; number two, theft's increase in line with historical trends during election periods; and number three, spare parts cost and its limited availability. Market supply chain still shows scarcity of specific brands and models. Quálitas's focus and actions are set to improve profitability and cost control w hile strengthening our competitive advantages. This enabled us to post strong results during 2023 and outperform, once again, the market. We reached a record high market share of 32.8% in Mexico, and our bottom line performance accounted for almost 60% of the total industry net result.
Our business model is evolving in line with technology and market needs, but after spending time with hundreds of agents and customers, I can tell you it's stronger than ever. Just as an example, around 35% of our clients process their total loss payments and 25% of their repair payments 100% digitally. We are now attending 28% of claims remotely and, in both cases, creating important operational efficiencies. At the same time, the satisfaction rate for first quarter of 2024 is above 90%, proving that it is possible to find projects that build on both costs and service improvement. Before handing it over to Bernardo and diving into our first quarter financials, let me just tell you that I feel proud of our strong results.
Top-line momentum prevailed and has been achieved by the powerful efforts of our agents, building a strong sales cycle, understanding the needs of our clients, while staying focused on excelling in service. The solid performance is still positively impacted by new car sales growth in Mexico, which were up 11% year-over-year. All in, once again, we reach a record high in terms of insured units, with a total of 5.5 million units or 191,000 additional units year-end 2023. Tariff adjustments demonstrate an underwriting recovery coupled by a strong financial income that translated into quarterly 38% bottom line growth. As anticipated, we are on track to a strong year with margins and ROE close to long-term objective ranges. We will continue to invest in technology and in our talent. Dedication of Quálitas people has been and will deliver.
I would like to thank each one of them for what they do every day. We encourage robust Quálitas DNA and culture in each of our team members, and with the effort of all of them, we strive to continue being recognized as the best-in-class service insurance company. And with that, I'll turn over to Bernardo to discuss the financial details of the quarter. Bernardo, please.
Thank you, José Antonio. Good morning, everyone. We're proud to continue creating value to all stakeholders while being true to our unique DNA. Let me provide you a bit more color on first quarter performance. Written premiums were up 37%, with the traditional segment accounting for 69% of the total premiums and leading the way with an outstanding 44% growth. Top line was driven by both tariff increases and organic volume. Directionally, the former accounts for a little over 60% of the growth. Important to highlight that first quarter top line was influenced by two large fleet policies that had historically renewed in December, but even excluding those, top line growth would have been 33%.
As you recall, top line growth expectations for the year are to be in the mid to high double-digit, expecting a stronger first half as most of the pricing happened during the July-December of last year. Therefore, carry-forward effect will be larger during the first half of this year. We're also closely monitoring new car sales evolution. As José Antonio alluded, even though its positive trend continues, the pace of it significantly de-accelerated versus fourth quarter and full year 2023. It is worth to mention that Chinese brands' sales posted an 8% market share in the quarter, which compares to the 9.4% of last year. All in, JFM figures resulted in a slowdown of AMDA new car sales estimate for the year, which is now 6.6% versus prior expectations of 8%.
To illustrate the growing complexity in the Mexican auto industry, back in 2019, there were 34 brands and 550 different vehicles. For this year, several automakers have announced the launch of at least 78 new models, around 50% of them manufactured by Chinese brands, and most of them classified as SUV, which, by the way, have higher repair costs. With that in mind, we can estimate that by year-end, in Mexico, there will be over 570 different vehicle models, over 25% new models on the road versus pre-pandemic times. Electric vehicles and hybrid models sales combined have increased 44%, representing 5.4% of total new car sales, according to the latest available figures. EVs' growing presence represents new challenges as well, including the introductions of elaborate electric systems, expensive components, particularly their batteries, and a challenging of finding of specialized labor who can handle the repairs.
We are determined to make Quálitas the insurance of choice for this growing segment. Therefore, we have built a team that is already partnering with the leading global brands to be trained to develop the right skills and a network of service and products that will help us differentiate. Going back to our financials, top line growth was seen across all our geographies, with our international subsidiaries representing 6% of the total holding company underwriting by the quarter-end. LatAm subsidiaries reached 43% in local currency. In line with our strategy, the U.S. subsidiary slowed down and grew 9% as we continue to focus on restoring its profitability. By March-end, our U.S. portfolio composition was 86% cross-border and PPA binational, and only 14% domestic as we move forward to a full exit in the domestic 18-wheeler commercial trucking.
We have been accelerating in LatAm markets, and although in Quálitas we do not follow market share as a key indicator, it is worth to see, and our subsidiaries' progress has been reflected. In Costa Rica, we reached 71%, up 3.6% from two years ago, and in Peru, we reached 7.8% market share in less than five years of operation. Also, in line with our strategy and recognizing there is value to be created, we will continue to invest and accelerate. As an example, during February, the board of directors spent two full days in Costa Rica reviewing our international expansion plans as we also inaugurated our headquarters in that country, which also represents a sustainable real estate investment behind Costa Rica's potential. Earned premiums were up 29%, or MXN 3.2 billion, versus the same period of a year ago. Steep growth led to strong reserve constitution.
As many of you recall, there is seasonality within our reserve behavior, where in the first and last quarter of the year, we commonly constitute higher reserves. During JFM, we constituted MXN 2.5 billion reserves that represents MXN 1.4 billion more than first quarter of last year. Now to our cost, the loss ratios stood at 64.1%, starting to prove the effectiveness of last year's price adjustment as it represents 540 basis points below first quarter 2023 and 660 basis points below fourth quarter. Recovery was mainly driven by our Mexican subsidiary performance, which posted a 62.2% loss ratio, a 700 basis point decrease versus same period year ago. First quarter loss ratio was benefited by a holiday week that took place during the last week of March while in 2023 happened in April. Holiday season diminishes frequency as average daily claims decrease around 20% during those days.
Average claim cost is still pressure but stabilizing closer to an average inflation, being up 4.5% versus first quarter of 2023 and 27.6% versus first quarter of 2019. Another positive surprise in the quarter were thefts, decreasing 3% for Quálitas and 4% for the industry. Nevertheless, during the election period, it has been more challenging to recover stolen units. Quálitas' recovery rate stands at 42.9%, outperforming the rest of the industry average by 320 basis points, but stands 580 basis points below first quarter of 2019. Robberies represented 15.8% of our claim cost, the same proportion as the first quarter of a year ago. As always, backed by our data analysis, we have been working on strategic initiatives not only to increase Quálitas' recovery rate but also to prevent thefts and frauds.
Accelerated growth over the past 18 months has resulted in attending over 10,000 calls per day and more than 4,000 daily claims. In order to sustain service standards, we have increased 340 positions in the past 12 months exclusively in the areas devoted to claim management. Finally, our loss ratio continues to be impacted by our U.S. subsidiary. As we have been mentioning, our U.S. operation turnaround is still a work in progress, and it will take us until 2026. While we are no longer underwriting domestic, we continue to deal with prior year claims under litigation. With the intent of having our reserves moving to the midpoint of the technical range, we will continue to increase IBNR reserves this and next year. Now moving to our acquisition ratio, it stood at 21.3% for the quarter, in line with our historical range.
Commissions have remained unchanged, and ratio for the quarter reflects a mixed skew towards the individual and fleets, which carry a lower cost than financial institutions. Regarding portfolio composition between annual and multi-year policies, we feel comfortable on where we stand, being 82% and 18%, respectively. Finally, given the trend regarding premiums and loss ratio, we should expect higher payout of bonuses, which may increase this ratio in the following quarters. Operating ratio for the quarter was 4%, a 129 basis point difference versus first quarter of last year. When excluding EPS, employee profit sharing, which was up 145%, or MXN 126 million more than last year, operating ratio would have been just 20 basis points above last year.
Operating costs will reflect our annual salary increases of 7% on average, translating overall inflation and employee performance, and approximately the 700 new positions added to our payroll since January of last year to cope with the mentioned accelerated growth. Our current headcount is aligned with our organization's strategic goals and growth. We will continue to carefully assess structure needs, implementing productivity projects throughout automation and simplification, but always ensuring we're ready to serve our customers in a personalized way. All of the above resulted in a combined ratio of 89.4% for the quarter, below our 90%-94% target. We feel proud of having reached this target sooner than we expected, but recognize there's still work to be done as this quarter results were benefited from a top line above full year expectations, an unforeseen decrease in thefts, and the holiday week positive effect.
In the financial side of our business, as anticipated during March Mexican Central Bank rate cut, embarked Mexico on its easing cycle. By quarter-end, 88% of our portfolio was invested in fixed income positions with a duration of 1.6 years and a 9.2 yield to maturity. As a reminder, around 20% of our portfolio is invested in U.S. dollars or other currencies, which imply lower yield. Our investment strategy continues to be anchored on fixed income, in which we will seek to further increase duration to get us between 1.6 years-2 years in the next 3 months-6 months, always seeking to balance short-term opportunity cost with longer-term visibility on this high-end rate cycle. As a reference, with our current portfolio composition, for each 25 basis point decrease in the Mexican interest rates, we have an annual impact of around MXN 160 million.
Given our fixed income assets are classified as available for sale, the impact is reflected on our balance sheet, as we do not have any assets booked mark-to-market. The balance of our portfolio, accounting for 12% of around MXN 5.3 billion, is invested in equity. From that, we have around one quarter in the Mexican FIBRAs and the balance in ETFs and single-named equity positions that we are progressively moving away from. We have already built more than half of our ETF target position, which, as you recall, is heavily exposed to the U.S. market. Finally, the strong business performance and the discipline in our financial management has resulted in a portfolio asset increase of 20.5% versus last year.
All in all, we deliver a financial income of MXN 1 billion with an 8.9% ROI, in line with our expectations and slightly below from what we reported same period last year, given since the first quarter we are booking the majority of our portfolio as available for sale. If we consider the whole financial performance, realized and unrealized, ROI would have been 10.6%. First quarter effective tax rate stood at 36%, which is higher than our prior year's average. As several times mentioned before, past two years' low tax rates were indicated to be lower than our sustainable rates, mainly benefited by high inflation. This quarter effective tax rate was impacted by three particular aspects. First, higher employee profit sharing provisions of 145% versus same period year ago, this one being one good reason to increase operating expenses and taxes.
Second, quarterly provisions, mainly in commissions and bonuses, which are still unpaid and therefore still not that tax deductible. And third, a lower annual inflation adjustment, given its easing trend. Although this higher-than-expected tax rate impacted our net profit for the quarter, we are expecting the evolution throughout the year to take us closer to our historical annual rate and nearly around 30%. All in, Quálitas posted MXN 1.2 billion net income for the quarter with a 7.4% net margin, which is already within the range of our long-term target. Even with large reserve constitutions and higher-than-expected tax rate, first quarter net income represents 38%, or MXN 340 million, more than in same period 2023. Our 12-month ROE stood at 19.1%, reflecting strong momentum, sequential improvement on our claim cost, and a well-positioned financial portfolio.
Moving now to our regulatory capital, it stood at MXN 5 billion with a solvency margin of MXN 12 billion, equivalent to 336% solvency ratio. Recent capital allocation determines our 12-month earned premiums to capital ratio at 2.3 x. During our past conference call, we mentioned there is one due diligence process intended to strengthen our vertical integration and maximize value creation. This is still currently under assessment, and we expect to make a final decision in this AMJ quarter. As always, we will inform you promptly if and when we reach an agreement. Now, before moving to Q&A session, let me remind you of our next week's general shareholders' assembly proposals.
First, a cash dividend payment of MXN 8 per share, payable in two installments, representing an 84% payout and in line with what we had anticipated to the market of being at the high end of our dividend policy range. This amount is 60% higher versus last year's dividend, and just as a reference, this is 1.7x the absolute amount of dividend paid from 2016 - 2020 combined. We also propose an MXN 800 million new share buyback, with the main objective of providing liquidity for all of our investors. And with this, we reiterate our commitment to create value for our shareholders and exceed our customers' expectations. Actions taken set the stage for a very strong 2024.
Our people consistently raise the bar at every stage of the insurance journey, reinforcing that our DNA and qualitization process remains as our top priority as demand sophisticates and accelerates in the industry. Thank you all for spending time with us this quarter and give us the opportunity to show the benefits of all the hard work the team has been doing to improve profitability and making sure we keep our business stronger than ever. Now, operator, let's please open up the line for questions. Thank you.
Thank you. We will now begin the question and answer session. To join the question queue, you may press the Raise Your Hand button in your screen, and we'll open the mic for you, or you can send it through the Q&A chat. To withdraw your questions, please press the button once again.
We will pause for a moment as callers join the queue. Our first question comes from Jitendra Singh. Please state your company name and then ask your question.
Hi, everyone. Thank you for taking my question. So I have two quick questions. So on written premium growth, we saw very strong growth during the quarter, and that is mostly coming from the pricing adjustments. So how sustainable is the current trend in coming quarters? Do you believe this growth for the full year? I mean, as you said, that growth should be in what you said, around mid to high teens. So should this growth be sustainable in coming quarters? And second, I just wanted to ask in terms of your investment portfolio. We saw some increase in equity exposure during the quarter. I think the growth was around 13% sequentially.
And I believe this is in line with your strategy to invest in ETFs. So can we expect Quálitas will continue to prioritize equity exposure in its investment strategy going forward? And last, if I may ask, so I was looking on if you look at your solvency margins, so we saw a decline in surplus capital of around MXN 30 billion. What was that related to, and what is the level of solvency you target? Thank you.
Thank you, Jitendra. Thanks for attending the conference. Let me take the first one, Bernardo, about what can we expect from the top line growth. Well, it is important to remind all of you that during 2023, we did a lot of adjustments. As you all know, we had a combined ratio, which was higher than what our target is.
So all that we did over the past year was to make sure that we adjust our tags to take care of the increasing costs and to make sure that we were in a good shape to begin the year. Actually, the executions that we have taken have been very effective. So we are happy with that. Clearly, also, last year helped a lot of the sales of new cars. This year, the first quarter, they grew 11%. That's what we saw in terms of auto and around 10% for heavy equipment. So with all that, I think that it has helped with that for the first quarter. Important to note that the industry is now forecasting slower pace for the year. I think it's important. At the beginning of the year, they expected the growth of new car sales of around 8%, and they have now slightly below 7%.
So they foresee some reduction on the growth for the remainder of the year. Now, regarding the tariffs, we have made the most important changes already. And going forward, what we believe is that we are going to be, as we have always done, to adjust according with inflation. And this is very important. Clearly, the first quarter top line results are above what we had expected. And as we said that we were going to be probably in the mid-teens or something like that for the full year, we expect that balance of the year is not going to be as high as we have seen in the first quarter. Important to note that there are going to be presidential elections in Mexico. There is a lot of government spending for the first six months of the year.
So we have seen that this spending is felt throughout the economy. And what, generally speaking, the economists are expecting is that for the balance of the year, I mean, for the second half of the year, this will have a reduction. So net, I do not expect that we will continue with such a big growth as we had in the first quarter. But still, it's going to be a very significant growth, which is going to be higher than the average of the past years in general for the full year. So that is what we could expect regarding that, Jitendra. Bernardo, can you take the other ones?
Yeah, I'll take number two and three. First, starting with the investment portfolio. As you well highlight, Jitendra, and consistent to the strategy we laid out since last year, we have been increasing our equity position.
It is consistent to our ETF goal of building that equity position, not on single-name equities or companies, but more on ETFs. There are two things you should expect moving forward. One is this continued trend on increasing equity position. Our goal is to get back to that 15%-20% equity position that we had historically been, except for the high-interest rate period that we believe is coming to an end somewhere in the next 12 months-24 months. We haven't changed also our strategy of those ETFs being mostly skewed to U.S., but also global ETFs. So that will also incorporate a slightly higher exposure to U.S. dollars. Okay? So that is for the second question. Now, going to the solvency question, yes, we did see a decrease in solvency. As you know, our solvency margin considers capital requirement from each of our subsidiaries.
In the past years, Quálitas México has paid dividend to the holding company, Quálitas Controladora. In this specific year, we have made a provision for that dividend payment that goes from Mexico to Controladora for the amount of MXN 3.2 billion, which, as it happens, it will represent a net zero because it only moves from Mexico to Controladora. But from an accounting perspective, since that is something we already provisioned, we cannot incorporate as a solvency margin in our Mexican subsidiary. Net, we believe this is just a temporary dip on the solvency. As at this point, there is no money coming out from Mexico to parent company. And that would be the way to see the solvency margin decrease for this first quarter.
Thank you.
Thank you. Our next question comes from Tiago Paula. Please state your company name and then ask your question.
Hi, everybody. Hi, José Antonio. Hi, Bernardo, e veryone from the IR team. It's Tiago Paula here with BTG Pactual. Well, first of all, congrats on the strong results. And I have one question here on my side, if I may, a nd that's related to the G&A ratio that you see for Quálitas in the future. I mean, there is this kind of a structural impact coming from the headcount increase, but there is mainly this profit sharing effect, which is usually more volatile. And also, Quálitas, we know that you are a very lean company. You usually pursue efficiency and etc. So just to get a sense on how do you see the behavior of this G&A ratio going forward. Thank you.
Well, Tiago, good morning. Yes, indeed, operating ratio was up.
And I think it's fair to always exclude. W e will provide that perspective, the EPS, [audio distortion] Mexico, because the more we are able to increase profitability, the more we're going to be seeing that ratio going up. So that would be a good reason why we would see operating expenses going up as a percentage. So we will always provide with and without EPS. Now, that's one piece of it. The second, we recognize we have been increasing headcount significantly. As you recall, last year, we saw an uplift on a very steep increase in units growth that stressed our service structure. And one key pillar that we're never going to jeopardize is service. So with that in mind, we have been increasing the people that we need to have to make sure that service and our NPS continues to outstand. We have made that catch-up.
We will continue to do so, but we believe that most of that has already happened. Just as a reference, last year, we increased 600 employees. This year, we have increased 200 employees, most of them devoted to service structure. But you pointed out something that is very important. We're not walking away from being a nimble company. We will always look at what is the right size of the organization, what is the minimum that we require, but never at the expense of service. Just to wrap it up, I think moving forward, you should expect that 3%-4% operating ratio to continue to be true. We will wait to see how things evolve in the next two quarters.
Yeah, let me add to what Bernardo said, Tiago. And thank you for being in the conference today.
Let me tell you that it is important for us to maintain service. We had some hiccups, as Bernardo said, I mean, last year. We took the steps to really get back to the service levels that are expected by our customers. That's why we had that increase. Now, having said that, for us, it has been in the past. I don't know how long you have been following our company, but in the past, EPS, when we had significant growth in 2018 and 2019, it increased significantly for the operating ratio, which is, in a way, something good because the more we provide to the shareholders, this element will be higher.
Now, having said that, I am confident that we will maintain our operating ratio between their targets of 3% or 4% as long as we don't cross the 4%, excluding, obviously, the EPS. I'm very, very comfortable with that. Important to note that in terms of the operating ratio, typically and historically, for the last at least 10 years, we have been well below the industry average. So that will continue to be our targets. And very likely, we will be able to maintain such a performance. So that's something that is not concerning in my mind.
Got it. Thank you very much for the comprehensive answer. Thank you. Have a good day.
Thank you. Our next question comes from Andres Soto. Please state your company name and then ask your question.
Good morning, José Antonio, Bernardo, and to all the team. This is Andres Soto from Santander.
I have three questions, but let me go one by one. The first one is regarding the pricing strategy that you had implemented last year. You mentioned 24% price increase. I would like to understand how much of this price increase is yet to be reflected as your policies are up for renewal in 2023. In line with that, I would like also to understand you mentioned that you move ahead of competitors. What is the current gap between Quálitas policies and competitors? I understand you don't pursue market share gains, but I assume if competitors follow suit and you are still providing best-in-class service, you are going to gain market share.
I would like to understand what will be the reaction to that, if it's going to be gain in market share or it's going to be additional price increase given the room that your competitors are going to allow you.
Thank you, Andres. Let me take that part of the pricing strategy. Well, to be clear, I do not know exactly how much of the pricing that we took last year is already in. But I can anticipate that we will still have some positive impact for the rest of the first half of the year because we took some relatively high increases last year. I still think that we still have a quarter or two that we are going to be seeing the benefit of the price increases.
Now, as far as how we are against the industry, well, we do know it will depend because we know that, for instance, we have been leading, and we have been leading this in heavy equipment, for sure. We have lost some big accounts in terms of the pricing lead, but we are ready to lose money to maintain those accounts. Now, let me tell you that this is important because while we have lost some, we have recouped them because the service that they have received is not what they expected. We have recouped some of them. That is helping us both in our service and also in maintaining the top line growth. Regarding the other one, we continue to lead pricing. We have always said that we want to be a profitable company.
We want to be top-in-class service, but we are going to be and we are going to be having profitable businesses. So yes, we still have from the big companies, there is still one of them that are still probably a little bit below what we see. But the other ones are pretty much following. So I think that that's the situation that is regarding pricing. Now, as I alluded before in the previous question, yeah, I expect that this will we will not be seeing the 3/8 increases in premium in the second half of the year. And it will be closer to the historical average of how we increase prices in Mexico. I hope this answers your questions, Andres.
Thank you, José Antonio.
Taking advantage of your comment on the written premium performance throughout the year, I would like to understand, for how many quarters do you expect still written premium to be above earned premiums?
I think it would be about one and possibly two. But I would say that we would still be seeing at least one additional quarter with the benefit of the increases. Now, remember that in the remarks that Bernardo said, we also had an impact, which is around 4 percentage points we estimate that could be attributable to the fact that Holy Week fell this year in well, no, this year was in March. And that has an impact in terms of how we see the growth. So we will be seeing that. And that's something that we are seeing, Andres.
Andres, let me just comment on this written versus earned premium.
As we alluded, we built a higher than ever amount of reserves this quarter, MXN 2.5 billion, that compares to MXN 1 billion last year. So we do have a lot of reserves having built over the past six months. And we should expect those being released in the next month. So I think from a written premium standpoint, we will continue to see at least a second quarter that is ahead of the year average. And from an earned premium, I think it's going to be towards the balance of the year that we start seeing this higher in earned premiums than in written premiums. But as I said, reserve constitution is not discretionary. We follow technical-approved models. And this is just a result of the higher-than-expected written premiums model. Thank you.
Of course. Thank you.
My second part of the questions is related to your comments, Bernardo, on EV vehicles in Mexico. I would like to understand if this trend will change your expectation for the loss ratio to be at 62%-65%. How do you see the economics of insuring EV vehicles, which I understand have a higher cost to repair?
No, clearly, Andres, the fact that the cost to repair electrical hybrid vehicles is much higher than the non-hybrid, the way we price them actually makes sure that we are always with our target combined index in the end. The loss ratio that we have as a target, it will continue to that. So frankly, the insurance prices for those vehicles are typically higher, reflecting simply the fact that they cost more.
So we try always to reflect and to make sure that we charge for the risk that we take and that we will continue to do that.
And let me just expand a little bit because while the endpoint is not necessarily different, how we manage those electric and hybrid is different. And just as a reference, it's not the same way you tow electric vehicle versus a regular vehicle. It's certainly not the same way you value salvages, recovery, and the price of those salvages is certainly different. We're in the early stages of that learning process. And as I laid out, we want to make sure Quálitas is set up in the best possible way to serve those customers. So we have allocated a SWAT team of all service structure that we're partnering with the leading brands to be able to learn.
I think Mexico, in that regard, is slightly behind the U.S. and some European markets. So we want to find out how is it that they're doing it and how can we set Quálitas in the best possible way to make of this niche business something that we also outstand and prove our leadership.
And the industry is learning too, Bernardo, because you can see that now there has been not so much hype in terms of the EVs that there were a couple of years ago. So we are all in the process of learning to make sure that we service the best to our customers.
Understood. And my last question is regarding the loss ratio, seasonality, and the effect of Easter holiday. That happened in April this year, right? It was the first week of April.
So I would like to understand if for the first week of April, you already saw an increase of 20% of your claims as a result of the reversion of this seasonality.
So this year, Holy Week or Easter or Spring Break holiday, as you want to lay it out, happened in the last week of March. This compares to the first week of April in 2023. There are a couple of effects. As I mentioned, during those holiday periods, we tend to see a 20% reduction in daily claims. So while it's an important effect, it wouldn't change the trend. But we should expect that the second quarter, we have one more week of regular claim average. So I think that's one important that we wanted to lay out.
There is also a couple of things, and that's why we're taking it on a very, we're happy to see the loss ratio where it stands. But I don't think we're just saying we're out of the woods yet because there is seasonality as well. First quarter and second quarter are usually below in terms of loss ratio than the second half of the year. A lot of that related to weather and climate changes. I think this year, we had non-catastrophic events. Last year, as you recall, in January, we had this situation in social instability in Culiacán that resulted in a lot of total losses. So I think that's why we're very encouraged to see the progress, but we do not see this as the new base for the balance of the year, including but not only because of the Holy Week period.
So that's an important thing.
Perfect. Thank you so much for all your answers. Congratulations again on the results.
Thank you. Our next question comes from Tej kiran Kannalluri. Please state your company name and then ask your question.
Hi. This is Tej from White Oak Capital. I hope I'm audible. Congrats on a strong quarter. I wanted to unpack the solvency ratio into, let's say, the required capital and available capital. So required capital seems to have grown 10% QOQ, while the premiums grew on a quarterly basis, low single digits. So on a long-term, how should we expect the required capital to evolve? Should it match the return premium growth? And secondly, on the available capital, even if the dividend payout and buybacks is overall around 100% of net profits, why do we see a decline in the available capital?
Shouldn't it stay flat if the reason solvency declined is because of the provisions made for dividend payment? Thank you.
Thank you. Good morning. I think it goes back to the question that Jitendra mentioned on solvency. And as I mentioned, there is one temporary piece that is affecting the Mexican accounting because we are paying a dividend from the Mexican operation to the holding company. So that needs to be considered as something that no longer is excess capital, but something that is a commitment. And that is eventually going to flush out in the next quarter when we realize that because then we're going to see that as an excess capital in the holding company. Our capital requirements have not posted any major change, and we're not expecting to see any major change. Obviously, the steeper the growth is, the more we need to constitute.
As I said, that's one of the reasons why you also see earned premiums growing less than written premiums. But we should not expect, and we're not looking at any major change in terms of regulation that would imply a change in the capital requirements in any of the markets where we operate.
Thank you. Understood. Just to confirm my understanding, once the dividend is being upstreamed to the holding company, should we see the solvency go back to around 400+ levels in the second quarter?
So dividend from Mexico to parent company is going to be on two instalments. So the first one, if approved, will happen next week. So that will be something that 50% will go out in the next quarter. And the second is happening on Q3. So that will also be something that we'll see on the second half. I believe it's Q4, sorry.
So that's the way you see it. But at the year-end, again, this is an effect that will go out, that will fade out.
Got it. So adjusting for the solvency effects of the dividends in Mexico, could you provide as a pro forma number of what the solvency would look like currently? If that were not an issue and if it were treated as the same as last year, how would the solvency look like this year?
I think we can talk that offline. We have some ranges. I think it's just we can't exclude this one time or one effect. But there are many things moving along. The pieces that affect solvency, it's not just this. But we can take it offline and take you through the models and some ranges.
I think we lost you. Tej kiran, are you still there?
Well, I think we lost Tej kiran, but thank you for your question. And now we'll go with the written questions because we do not see any more telephone questions. So the first one is from Miguel Cabrera from Signum Research. In the future, to mitigate the loss ratio and keep it within the expected range, will the strategy involve a much higher growth in premiums? Secondly, continuing with the line of the loss ratio, will there be an update regarding the expected range by the end of 2024?
Can you repeat the second question?
Sure. Continuing with the line of the loss ratio, would there be an update regarding the expected range by the end of 2024?
No, Miguel, thank you for your question. No, we don't see a higher growth in written premium.
Actually, we probably will remember that as a target, we have to be in the double-digit long term. So everything that we are working for in terms of the strategy that we have with Quálitas is to have a top line growth of around 10% or so and the ROE in the low 20s range. So that will continue to be. So in terms of the growth, we do not expect once we finalize adjusting the prices, as we are very close to it now, that it will revert to those levels. And it will depend clearly, obviously, on what happens with the economy. And regarding the updating of the loss ratio, that's something that we are not going to be doing because we manage the company for the long term.
As we manage the company for the long term, we are very clear on how we are going to be meeting the ranges that we have for both loss ratio and combined ratio. And as long as we are within the ranges, we will continue to abide for a long-term growth, as I mentioned, in the low single digits I mean, in the double digits, low single double digits, sorry. And that's the long-term commitment that we have made with the market.
We'll go with the next question from Anand. Can you give a sense of the competitive intensity in various lines of business?
Okay. Anand? It is very interesting because competition never stops, obviously. It's the same as in any other market. It continues to be very intense.
I remind you that during the pandemic, there was a lot of competition in terms of the heavy equipment that we still have a very strong market share there, like 44%-45% of the market in heavy equipment. And there were many entrants coming in to try to get a piece of the market. And they actually had a big reduction in pricing. And this big reduction in pricing that we knew back then that it was not sustainable. We were not competing with them. And last year, a couple of big insurance companies dropped that part of the market. So it will continue to be, and it will continue to be very, very intense competition in the heavy equipment now. In the sense of our business, I mean, it is as always.
And it is interesting because as you see the cycle, the insurance cycle, you see that usually, when loss ratios go above 100, most of the companies, and I repeat, most, try to be more I don't know how to put I mean, to behave better, so to speak. So they began addressing and correcting their pricing as we have seen recently over the past probably 12 months or so. But there is always the situation in which once the combined ratio begins and the loss ratio begins to go lower, they really want a higher piece of the market. And it's a cycle that happens. And we are seeing now the inflection point, one say, in terms of going down both loss and combined index. Now, that said, I think that it will continue.
We have seen that many companies are following our lead in terms of correcting the price because rather than talk about price increases, it's correcting the price to what the levels are to make a decent and reasonable profit and margin. But that will continue to be. And it will happen. It will happen, as it's always been the story, in about three cycles in the past probably 16 or 18 years.
And another question related to that from Anand. Do you expect any price hikes or cuts in any of the segments this year?
I think, yes, we're always going to have price adjustment. This is a never-ending cycle. On a monthly basis, there's a whole team that looks at opportunities and needs.
Just as a reference, during this first quarter, and despite all the aggressive pricing done in last year, we did adjust low single digit in auto and pickups this quarter. This second quarter, we will be adjusting slightly buses and public transportation. So I think one key difference by being specialized is we take pricing on a very laser-focused approach. We go very into the details, and we adjust both up and down as we need it, as we see it fit, and as we see claim ratio evolving. So I think the balance, as Antonio mentioned, is that we expect pricing to still be up, but at a much rate closer to local inflation.
And I think we have the final question from an anonymous attendee. Why is financial income stalling despite invested assets or float being the highest ever at MXN 44,393 million?
Yeah. ROE for the quarter was 8.9%. But this is what we take to the P&L. At this point, equities investments, and in line with the compliance and regulatory norms, these assets are classified as available for sale. So its performance is 100% reflected in the balance sheet. And we're not taking that to the P&L as a mark-to-market. So just as a reference, if we were to consider the unrealized gain, which is around MXN 175 million, our performance would be 10.6%. This, again, speaks to not having an appetite for daily trading on those equity positions, but rather holding them. These eventually will flush into the P&L, but they don't do so on a daily or on a quarterly basis. Thank you.