Dear shareholders:
Globally, 2020 was characterized by a strong health and economic crisis, as well as by a high level of uncertainty derived from the unknown dynamics and evolution of the COVID-19 pandemic. This, coupled with the fact that we live in an ever-changing environment due to the digital revolution and the demographic and socio-political changes that our country, market and labor force are undergoing, means that our operations now demand a great deal of agility and initiative.
I would now like to discuss the most relevant results and activities from each pillar of our strategic roadmap.
Learning and Development
From a learning and development standpoint, Peña Verde aspires to be a group committed to a continuous process of cultural, business, and technological transformation.
All the Group's companies realize that the future of the insurance industry is digital and will therefore have to transform themselves accordingly. We know and are well aware that digital transformation can significantly improve our performance and give rise to entirely new business models that will shake up the different sectors. We are taking concrete steps towards this process.
As for the strategic objective of having committed high-performance teams working through an effective management system, during 2020 a new performance evaluation model was developed and implemented, which fosters a results-based culture. This model promotes the importance of measuring the impact of individual work in achieving results at the Group level. Likewise, we evaluated the alignment to the culture based on compliance with the cultural pillars and accountability practices.
Regarding the compliance culture, we implemented a follow-up indicator for all remediation plans established by the Group's control areas. Likewise, we will continue our efforts to reduce to a minimum the observations made by the authorities.
On the design and implementation of a new corporate structure to support the Group's growth, the foundations are being laid to establish the new business, data, communications, and application architectures. This was achieved mainly through SAVIA, which consisted of the implementation of SAP's S/4HANA software throughout the organization as an enterprise resource planning system, and which began operating in the last quarter of 2020; and MOVA, an initiative that seeks to enhance value proposal through customer service, rates, and broker experience in the Insurance Division.
In addition, during 2020, we launched TEKKU, the technological transformation program (which has already started the operation of the SAP support desk), the demand management system, and the initiatives to mitigate technological risk (priority zero), which will be completed during the first half of 2021.
At the end of the year, the implementation of the "Solutions" software was completed, which will allow the investment area to focus on more analytical tasks, freeing the operational side of the business to an automated system. Finally, the plan to implement security standards applicable to the Group's people, assets and information reached 45% progress, 5.0% ahead of schedule.
Corporate Front
We believe that corporate governance is a fundamental and strategic function that must consolidate and catalyze the business development function, since, like two sides of a coin, both aspects are essential to the creation of value in our group. The authority necessary for good corporate governance must be exercised effectively but always supported by an attitude of service and respect for others.
In this regard, during 2020 we pushed forward the restructuring of the Boards to make them entirely composed of independent directors with extensive experience and reputation, visionary, efficient, strategic, results-oriented, who not only adapt to change, but also promote it by ensuring that the decision-making process is inclusive and representative, fostering transparency and accountability.
The members of the Board were appointed following the Group's guidelines and the review of suitability criteria. In this way, we ensure an efficient and transparent operation within the framework of ethics, integrity, investor confidence, and sustainable performance.
In line with the above, a proposal was drafted for the organization of boards and committees, a structure that will allow the decisions made to be effectively implemented, bringing direct benefits to our clients.
The Company's corporate governance and internal control comply with Article 69 of Mexico’s Insurance and Bonding Institutions Law (Ley de Instituciones de Seguros y de Fianzas, known as LISF for its Spanish acronym), and are one of the cornerstones contributing to the achievement of Grupo Peña Verde’s 2020-2025 Business Plan: Sustainable Profitability.
Additionally, we started working to comply with the ISO 31000 standard (risk management) and the consequent implementation of COSO ERM in 2025, achieving a progress of 27.5% in the roadmap.
One of the pillars of the transformation is the technological infrastructure, which must be modernized together with the strengthening of cybersecurity measures and the implementation of new CORE systems. Elaborating further on this topic, the Insurance Division continues with the implementation of the Wee platform, General de Salud’, which seeks to enhance the value of services by providing more effective digital handling of health claims, and with the selection of the new CORE platform of General de Seguros, through the CONECTA initiative.
Customer Front
From a client perspective, we seek to be a group with visibility and influence in our markets.
During 2020, Mexico's sovereign risk ratings were downgraded as rating agencies considered that the effect of the COVID-19 shock would push Mexico into a recession in 2020, and that the recovery would be constrained by the factors that the agencies had identified as limiting growth prior to the pandemic. Notwithstanding this, Peña Verde and its subsidiaries retained their credit ratings, which are higher to that of Mexico.
Since customers are key stakeholders, it is a priority to manage the company's strategy and that of all its business units in an effective and comprehensive manner. In this regard, Grupo Peña Verde’s 2020-2025 Business Plan, labelled “Sustainable Profit”, was presented and approved by the Boards of Peña Verde and its subsidiaries, following up on its compliance through the strategic roadmap and the indicators of the Balanced Scorecard (BSC).
In addition, the SET and GAEF Divisions implemented initiatives to support compliance with the strategy. GAEF incorporated the Administration and Finance area into its structure and began a restructuring plan to generate synergies among the Group's subsidiaries, consolidate operating efficiencies and improve transparency and control. Meanwhile, SET implemented a new form of invoicing among the Group's companies in order to mitigate the fiscal risks detected at the beginning of the year.
The creation of social and economic value, through the adoption of sustainability standards, is also a priority for the Group. In this regard, we have initiated the development of a methodology to make sustainable investments to contribute to the fulfillment of our strategic objective. During 2021, sustainable indicators will be included in the BSC , such as sustainable savings and investments in sustainable development.
Lastly, we cannot overlook the importance of generating value and a satisfactory experience for our end customers, which is the foundation on which the Group is built.
In this sense, efforts have been made in the Insurance Division to improve the customer experience, such as the Digital Channel, which consists of our own direct sales portal to market automobile insurance; the launch of AMAE, the first 100% digital health insurance product in Mexico for people with diabetes mellitus II; as well as the redesign of the web portal to make it more accessible and useful to customers and brokers. In the case of the Reinsurance Division, we are working on the implementation of a CRM (customer relationship management) system, which seeks to identify and classify clients to offer products tailored to their needs and detect business opportunities.
Financial Front
Peña Verde aspires to be a Group that generates value for its stakeholders and target markets, with sound financial strength, solvency, and suitable liquidity. To this end, it is a priority to have productive business units with adequate operating margins.
During FY2020, the credit rating processes were carried out, maintaining A.M. Best's national scale rating at "aaa.MX" with a stable outlook, backed by the Group's support, strong capitalization levels, improvements in underwriting performance, consistent cash flow from investment activities, experienced management team, and a solid reinsurance program.
At year-end, the Group has the financial solvency and allowable equity necessary to cover the solvency capital requirement (SCR), maintaining a coverage ratio of 1.6 times the SCR, a technical reserves coverage of 1.1 times and minimum capital of 14.9 times, in addition to Ps.944 million in N4 assets.
Words of thanks
We are aware of the global situation, and we are working to tackle these challenges. All our companies are well managed, and we are confident in our abilities to achieve our goals. The results attained so far are not the result of chance, but of the great effort and commitment of all the people who collaborate, believe in, and are committed to Peña Verde. In the current economic and social backdrop, we reiterate our commitment to our clients and collaborators, as well as to society.
I want to acknowledge the great commitment we are all putting into to build our company, overcome this crisis and continue providing the services we have committed to deliver.
Pablo de la Peza Berríos
General de Seguros’ Chairman