Message to Shareholders

Dear investors:

We are pleased to report the results that Grupo Peña Verde recorded during 2022, as we were able to continue strengthening our insurance and reinsurance operations, as well as bringing operating effectiveness very close to optimal ranges and making steady progress in the development of strategic results.

In this regard, we once again reached a new all-time high in written premiums, recording Ps.14,607 million in 2022, representing a growth of 22.1% compared to Ps.11,963 million in 2021. While both divisions (Insurance and Reinsurance) contributed to this performance, Reaseguradora Patria positioned itself as the main catalyst, posting its best written premium result in a single year, surpassing, for the first time in its history, the Ps.11,000 million mark.

The foregoing was supported by strict expense control in both the Insurance and Reinsurance divisions, which resulted in a 4.9% reduction in net operating expenses, from Ps. 1,026 million in 2021 to Ps. 976 million in 2022. As a result, Reaseguradora Patria’s operating expense ratio was placed in Best-in-Class ranges, contributing to a Group-wide reduction of 189 bps, from 8.6% in 2021 to 6.7% in 2022.

Unfortunately, the Group’s operating results were lower than expected, due to the higher number of claims recorded in the insurance division and the higher cost of inputs, such as vehicle spare parts, medical and construction materials, as a result of persistent inflationary pressures.

The above, together with the practically null contribution of financial margin, given the effects of the complex macroeconomic and geopolitical situation that prevailed globally on our investment portfolio, caused the Group’s profitability to be below expectations for 2022.

In terms of our strategic results, during 2022 we made steady progress in our transformation process and in our 2022-2027 Business Plan, mainly in the areas of growth, efficiency, customer prioritization and sustainability. In this regard, we developed a cloud-based data management platform that is allowing us to improve the accuracy of those indicators that support our decision making. Particularly in the Automotive business, we have been able to identify and monitor the main business drivers and their effect on the entire portfolio, thus creating a capability that will help us to take timely action in the face of market changes.

On the other hand, in the Health area, through the launch of PASS (Platform for Health Services Attention) we seek to improve the claims attention experience of our clients and providers through digital channels in an agile and simple way, which guarantees the value of our services and improves our brand position; the launch was in November in Mexicali for a portfolio of more than 20 thousand policyholders; more than 160 trained doctors, integration of the 5 most relevant laboratories and 5 pharmacies in the region and the first 3 thousand 100% digital medical consultations.

In the Reinsurance division, during 2022 we made progress in the installation of version 3 of the SIREC system, which is Reaseguradora Patria’s integral reinsurance and accounting system. At the beginning of 2023, the first phase was completed (migration of the engine and updating of the reporting server) and the second phase began (inclusion of additional transactions for accounting closings). All of this will contribute to better control and greater capacity to manage the business’s operational activities.

In summary, our technological and business transformation efforts are progressively advancing as planned, we continue to strengthen our operational capabilities, while reaching economies of scale to support the aggressive growth shown in our 2027 plan. Investment in this transformation effort is around 2.15% of revenues, of which one third is focused on renewing obsolete technology, and the rest is in the main projects mentioned above, including investment in the cultural change that accompanies this type of implementation across all subsidiaries.

In the area of sustainability, in fiscal year 2022 we published our first Sustainability Maturity Level Self-Assessment, reaffirming our commitment to the adoption of ESG best practices. We also renewed our adherence to the UN Global Compact, reaffirming the commitment of all of us at Grupo Peña Verde to incorporate the 10 universal principles related to human rights, labor standards, environment and anti-corruption into our operations, as well as to contribute to the 17 Sustainable Development Goals.

We renew, as we have every year since 2020, our adherence as signatories to the United Nations Global Compact, contributing through our role in the insurance and reinsurance sector, as well as in the asset management sector, for the achievement of the Sustainable Development Goals of the 2030 Agenda.

Finally, although we are aware that the adverse factors that impacted the profitability of our investment portfolio, and consequently that of the Group, will continue to be present during most of 2023 (high inflation and interest rates, low economic growth and the uncertainty generated by the unfortunate conflict between Russia and Ukraine), we are confident that the resilience of the insurance sector in Mexico, the operational and strategic advances we achieved throughout 2022, as well as the recent incorporation of Patria Re (US) Inc. (a reinsurance platform that was incorporated in the State of South Carolina in the United States in early 2023), will enable us to effectively meet the challenges of the current environment and restore profitability in a sustainable manner.

As always, we take this valuable opportunity to thank our business partners, customers, suppliers, agents, brokers and reinsurers for the trust they place in us every day, as well as our entire team of collaborators for their commitment and dedication, since their talent and effort is the main driving force of Grupo Peña Verde, because together we deliver results!