Peña verde, S.A.B. and subsidiarias

Consolidated financial statements

December 31, 2020 and 2019

(With Independent Auditors’ Report Thereon)



Opinion


We have audited the consolidated financial statements of Peña Verde, S. A. B. and subsidiaries (the Group), which comprise the consolidated balance sheets as at December 31, 2020 and 2019, the consolidated statements of income, changes in stockholders’ equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.



In our opinion, the accompanying consolidated financial statements of Peña Verde, S. A. B. and subsidiaries have been prepared, in all material respects, in accordance with Mexican Accounting Criteria for Insurance Institutions (the Accounting Criteria), issued by the National Insurance and Bonds Commission (the Commission).


Basis for opinion


We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Mexico, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.


Key audit matters


Key audit matters are those matters that, in our professional judgment, have been the most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and in forming our opinion thereon, we do not provide no a separate opinion on these matters.


Current risk reserve amounting to ($4,568,247), outstanding provisions for incurred but not reported claims and adjustment expenses amounting to ($1,798,838), contingency reserves amounting to ($ 278,762) and catastrophic reserve amounting to ($6,598,073).
See note 3k to the consolidated financial statements.
Key audit matter How the matter was addressed in our audit


The valuation of technical reserves for current risk reserve, outstanding provisions for incurred but not reported claims and adjustment expenses, contingency reserves and catastrophic reserve requires the application of the methodology approved by the commission, which considers complex calculation and the use of internal and external data. An error in the calculation, as well as the quality of the underlying information may generate material impacts on the estimate. Therefore, we have considered the valuation of technical reserves as a key audit matter.


The audit procedures performed among others, are as follows:

  • • We evaluate the use of relevant actuarial assumptions according to the approved methodology by the Commission.
  • • We evaluated on a selective basis, the accuracy and completeness of the relevant data used in the calculation.
  • • We recalculated on a selective basis the determination of the estimate according to the methodology approved by the Commission.
  • • We obtained an understanding of the process and tested the internal control implemented by the Institution for the calculation and recording of the technical reserves.
  • • We evaluate objectivity, competence, and the findings of the external actuaries hired by management to determine the status and sufficiency of technical reserves, including their evaluation of significant assumptions and methods used by the management. Further we evaluate that the information provided to actuarial auditors were consistent with the information that was provided to us as part of our audit.


The procedures described above were performed with the support of our actuarial specialists.

Other information


Management is responsible for the other information. The other information comprises information included in the Institution’s Annual Report corresponding to the year end December 31, 2020, which will be filed with the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) and the Mexican Stock Exchange (the Annual Report), but does not include the consolidated financial statements and our auditors’ report thereon. The report is expected to be made available to us after the date of this auditors’ report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.




In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate that matter to those charged with the Intuition’s governance.


Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements


Management is responsible for the preparation of the consolidated financial statements in accordance with the Accounting Criteria issued by the Commission, and for such internal control as Management deems necessary to enable the preparation of consolidated financial statements that are free of material misstatements, whether due to fraud or error.

In preparing the consolidated financial statements, Management is responsible







for assessing the Institution’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Institution or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the group Institution’s financial reporting process.


Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements


Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. Also:

  • We identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures in response to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement due to fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Institution's internal control.
  • We evaluate the appropriateness of accounting policies used and the reasonability of accounting estimates and related disclosures made by Management.
  • We conclude on the appropriateness of Management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Institution's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Institution to cease to continue as a going concern.




  • We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Institution to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provided those charged with the Institution’s governance with a statement that we have complied with the ethics requirements applicable to independence and that we have communicated all relationships and other matters that may reasonably be thought to bear our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor´s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.


KPMG Cárdenas Dosal S. C.

RÚBRICA

C.P.C. Paul Scherenberg Gómez

Mexico City, April 8, 2021