Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros (LDA) Earnings Call Transcript

Good morning, everyone, and thank you for joining us today. We are pleased to welcome you to Línea Directa's September 2026 Results Presentation. I am joined by our CFO, Carlos Rodriguez Ugarte, who will take you through the main highlights of the period, followed by the Q&A session. Carlos, over to you.

Thank you very much, Beatriz, and good morning to everyone on the call. We are pleased to present a strong 9-month performance of Línea Directa, combining sustained growth, profitability and solvency. Let me start with the key numbers for the period shown on the first slide of the deck. Gross written premiums reached EUR 919 million, up 8.9% year-on-year, with all business lines reporting solid growth. The portfolio stood at 3.9 million policies, 6.9% higher than in September 2025 after adding 253,000 policies over the last 12 months. Technical profitability remained strong with a combined ratio down 2.1 percentage points to 91.3% compared with the first 9 months of 2025. Net profit increased by 34.8% to EUR 80.4 million, supported by business growth and the strong improvement in technical performance. Return on equity rose to 25.6%, while the solvency ratio remained robust at 191.5%. I will now go through the main drivers of this 9 months performance. Turning to Page #7. Insurance revenue rose by 10.8%, while gross written premiums increased by 8.9%, with all business lines adding to growth. Growth was supported by solid technical profitability with the insurance technical result up 45.6% and the combined ratio, as I stated before, improving by 2.1 percentage points year-on-year, reaching 91.3%. The expense ratio improved to 20%, down 1.1 percentage points year-on-year, reflecting increased scale, operating discipline and continued efficiency gains. The financial result was up 7.7% with the fixed income portfolio as the main driver, while also reflecting the temporary impact of the renovation of an investment property. As a result, profit after tax rose by 34.8% year-on-year to EUR 80.4 million. Turning to business volumes. Motor continued to deliver robust growth, while health and emerging business maintained a strong momentum. Turning to Page #9. The combined ratio reflects the benefit of disciplined underwriting and improved operating efficiency. On the loss ratio, performance remained well controlled at 71.3%, supported by underwriting and pricing discipline alongside with positive claim frequency. The expense ratio improved by 1.1 percentage points to 20%, reflecting greater scale, operating leverage and productivity gains while preserving investment in the capabilities needed to support future growth. Efficiency remains a structural strength of our model and a key driver of profitability as the business scales. Now I would like to move on to a more detailed breakdown by line of business. In Motor, premiums increased by 9.5% year-on-year to EUR 750 million, while the portfolio increased by 7.9%, adding 212,000 policies over the last 12 months. Technical profitability remained excellent with a combined ratio of 91.3% in the first 9 months, 2.1 percentage points better year-on-year and 91.5% in the stand-alone quarter. Home continued to gain scale with premiums up 2.6% to EUR 128.9 million and 27,000 additional policyholders, bringing the customer base close to 800,000 clients. Technical profitability remained particularly strong with a combined ratio below 90% in every quarter and 86.8% for the first 9 months and 87.1% in the stand-alone quarter. Turning to Page #12. Health maintained a strong commercial momentum with premiums up 17% to EUR 35.7 million and the portfolio reaching 131,000 customers, 10.9% above September 2025. The product mix also continued to improve with higher coverage products and higher average premiums accounting for 68.2% of the total. Technical performance also improved significantly with the combined ratio down 6.9 percentage points. The stand-alone third quarter ratio stood at 122.3%, confirming continued progress towards technical breakeven. Moving to the next page. The investment result increased by 7.7%, mainly driven by the fixed income portfolio despite the temporary impact of the renovation of one building. Works in this building are expected to be completed by year-end 2026, with rental income resuming before June 2027 under improved rental conditions. Excluding this temporary impact of rental income, the net investment result will have increased by 13.9%. Turning to Page 14. The investment portfolio amounted to EUR 1.28 billion with fixed income accounting for 83% of the total. We are rotating the fixed income portfolio to enhance its average yield. This allocation continues to reflect the group's disciplined investment approach, preserving financial strength while maintaining a prudent risk profile. Turning to solvency. The Solvency II ratio stood at 191.5% at the end of September, reflecting a strong capital position. The performance in September mainly reflects a strong organic capital generation, while the valuation of the investment portfolio due to higher interest rate has a negative impact. Within the SCR, non-life underwriting risk increased in line with business growth in both premiums and exposure. The rising market risk primarily reflects the upward shift in the interest rate curve, while health underwriting and operational risk increased in line with the growth of the business. To conclude, the September results demonstrate Línea Directa ability to deliver strong growth alongside technical profitability, greater operating efficiency and a robust balance sheet. Looking ahead, our priorities remain clear: to sustain profitability growth and continue to leverage efficiency as a core competitive advantage. I will now hand the call back to Beatriz for the Q&A session.

Thank you, Carlos. Our line is now open for questions.

[Operator Instructions] The first question comes from Maksym Mishyn from JB Capital.

Three from me, please. The first one is on motor. Customer acquisition has slowed somewhat in the third quarter. And I was wondering if it's a temporary slowdown? Or are you seeing more competition in the market? The second question is also on motor. How do you plan to approach the increase in inflation of repair costs to make sure your combined ratio does not deteriorate next year? And the last one is on home. You are offering quite significant discounts in home insurance according to your marketing campaigns. Can you explain how offering such discounts you are still able to get combined ratios below 90%?

Thank you very much, Maks. On your first question, well, it is true that if you take stand-alone quarters, the growth in motor has slowed down and materials. I mean, numbers are very similar to the last quarter. I think this is more a seasonal evolution. We are very happy with the evolution of the growth in motor. I don't see any slowdown in the growth. I think we are gaining market share throughout the year. Looking at the numbers of competition, I think they are still struggling on the combined ratio, and we are taking that opportunity. So again, it is true that the numbers are not similar -- are not the same as subdued, but they are very similar. On the inflation, I mean, inflation has been here since March or since April. I mean we've been in inflation near to 3% almost the entire year. So it's not something that came out on September. I mean we have been able to manage that with a very good combined ratio below 92% but still the market is way above 95%. Again, I mean, inflation, we look at it very closely. We monitor inflation almost every week, and we will adjust things as we need it. I mean we've been adjusting things already on our expense side of the business and also on our front side of the business on pricing. And if inflation keeps on going up, looking forward on the year and next year, we will need to adapt some things in pricing, and we will need to adjust some things on expenses. But it's not something new. I mean it's something that we've been monitoring since the beginning of the year. And then on the home insurance, I mean, it's a matter of our business model. I mean we are so efficient in all of our businesses, including home that we are able to have a very low expense ratio, very good loss ratio. I think the market as a whole is performing quite well on the loss ratio. But Línea Directa is even better. We tend to transfer those savings and those efficiencies on pricing. I mean, if I were to say home, we need a little bit more growth. But in terms of gathering clients, we are happy. We are close to 10,000 clients on the quarter. And well, we are performing quite well. I think a combined ratio below 90% help us very much on trying to grow and trying to be aggressive on pricing.