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

Good morning, everyone, and thank you for joining us today. We are pleased to welcome you to Línea Directa's First Half 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 first half for Línea Directa, combining growth, improved technical margins and a robust solvency position. Let me start with the key numbers for the period shown on the first slide of the deck. Gross written premiums reached EUR 609.3 million, up 9.2% year-on-year, with all business lines contributing to our growth. The portfolio stood at EUR 3.86 million risk, 7.8% higher than in June 2025 after adding close to 278,000 risk over the last 12 months. Technical profitability continued to improve with a combined ratio of 91.1%, 1.2 percentage points better than in the first half of 2025. Net profit increased by 19% to EUR 52.1 million, supported by higher volumes, better underwriting performance and efficiency. Return on equity stood at 23.3%, while the Solvency II ratio fortified to 196.3%, already reflecting the EUR 18 million first interim dividend for the year. I will now go through the main drivers of this first half performance. On Page #7, premiums increased by 9.2%, supported by growth across the group. The customer portfolio also expanded by 7.8% year-on-year with around 60,000 additional risk added in the second quarter alone. This growth was accomplished by an even further improvement in technical profitability. The combined ratio stood at 91.1% and improved further to 19.6% in the stand-alone second quarter. The expense ratio improved to 20.2%, reflecting scale benefits, operating discipline and continued efficiency gains. The investment result reached EUR 21.8 million, driven by higher income from both the fixed income and equity portfolios. As a result, profit after taxes reached EUR 52.1 million, up 19% year-on-year. Turning to volumes. Motor remained the main contributor to growth, while health and emerging businesses continue to show a strong momentum. Moving to Page #9. The combined ratio reflects the balance between underwriting discipline, claims frequency control and a large operating base. On the loss ratio, performance remained well controlled across the main business lines, supported by an excellent second quarter performance in both Motor and Home. On the expense ratio, the improvement reflects increasing scale, operating leverage and productivity gains while maintaining investment in the capabilities that support future growth. Efficiency remains a structural strength of the model and a key lever for protecting profitability as the business continues to grow. Now I would like to move on to a more detailed breakdown by line of business. In Motor, premiums exceed EUR 490 million, growing by 9.8% year-on-year. The portfolio added more than 222,000 policies over the last 12 months, including 59,000 in the second quarter stand-alone. Technical profitability remained excellent with a combined ratio of 91.1% in the first half, 0.9 percentage points better year-on-year and 19.8% in the stand-alone second quarter. The Home line delivered moderate growth with premiums up 2% and the portfolio increasing 3.7% year-on-year. Profitability in the segment was particularly strong with a combined ratio of 86.6% in the first half, improving by 2.3 percentage points and 83.9% in the stand-alone second quarter. Let's move to Page #12. Health maintained a strong commercial traction. Premiums increased by 17.7% to EUR 28.9 million, while the portfolio reached more than 128,000 policies, 10.4% above June 2025. We continue to shift toward more comprehensive products with complete and specialty products now accounting for almost 68% of the portfolio. From a technical perspective, the combined ratio improved by 8.6 percentage points to 125.1%, showing gradual progress towards technical breakeven. Moving to next page. The financial investment result increased by 5.2%, mainly driven by higher income in both the fixed income and equity portfolios. By contrast, the real estate contribution reflects the temporary impact of the renovation of one building. Works are expected to be completed by year-end 2026, with rental income resuming in June 2027 under updated market conditions. Taking both effects together, the net investment result declined by 1.8%. Excluding this one-off of impact, it will have increased by 5%. Turning to Page #14. The investment portfolio remained heavily balanced in fixed income with a measured reduction in equity exposure during the period. This allocation reflects the group disciplined investment approach, focused on preserving financial strength while maintaining a prudent risk profile. The portfolio delivered a return of 275 basis points, while the fixed income portfolio duration stood at 3.5 years. Turning to solvency. The Solvency II ratio stood at 196.3% at the end of June, reflecting a very strong capital position. Own funds increased mainly as a result of solid organic capital generation during the first half and the positive revaluation of the investment portfolio through equity. This increase was partially offset by the deduction of the EUR 80 million interim dividend. On the SCR, market risk reflects lower equity exposure, offset by the increase in the symmetric adjustment, while non-life health and operational risk evolved in line with business growth. Counterparty risk also increased mainly due to higher health receivables and reinsurance recoverables. To conclude, first half results show that Línea Directa continues to combine growth with technical discipline, efficiency and a very strong balance sheet. Looking ahead, our priorities remain crystal clear: maintaining profitability growth, protect technical margins and continue leveraging efficiency as a core competitive advantage. I will now hand the call over to Beatriz to begin the Q&A session.

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

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

Three questions from me, please. The first one is on Motor. What drove such a notable improvement in claims quarter-on-quarter? And do you expect any impact from Madrid forest fires in the third quarter? The second is on average premiums. They seem to continue slowing down. According to my estimates, they increased less than 2% year-on-year in the second quarter. Does inflation worry you? And how can you comfort us that inflation will not hurt profits? And then the third one is on Home insurance. Similar to Motor, what drove the spectacular combined ratio in the quarter?

Thank you very much, Maks. On the first question, well, it's kind of difficult to explain what happened in the second quarter, even in the first quarter. I think we need to look at the numbers on a yearly basis, I mean, the evolution of frequency and average cost. I think frequency behavior in the second quarter was very much in line as we expected. Average cost was a little bit lower than we expected. So probably that is the result. But again, on the claims side or on the entire business, I think we have to take a look on a yearly basis, and we have some seasonabilities impacts that might happen on the second quarter and the third quarter. But again, I mean, frequency was fine for the quarter. It's been fine for the year. And in terms of average cost, even with the worries on inflation, it's lower than we expected. On the average premium, it is true that if you do the numbers, we are talking about an average increase in the neighborhood of 2% in the book on the new business. Well, we are concerned about inflation, and we monitor inflation -- not only inflation, but we also monitor all the collateral impacts on the repair side of our business, especially on the repair side of cars, and we monitor that. So if we need to adjust more, we will do so. As of today, I mean, we have an average premium upside of 2%, and we will monitor, we will need more or less. At the end, this is a matter of price risk. This is a matter of technical margin, and our technical margin is keeping on improving every quarter-on-quarter. So we are very comfortable on the situation right now. But again, if inflation becomes an important issue, we will adjust average premiums. And then on the Home insurance, well, Home is performing in terms of technical result very well for the last 1.5 years or something like that. Even the market as a whole is performing quite well. It's a matter of having less atmospheric events that we expected, good risk profiling on the book. And the combination of that puts that combined ratio in the neighborhood of 80%. My expectation looking forward is that probably we will have to wait until the climate issues on autumn and see what happens with atmospheric events and whether we will adjust the combined ratio. So far, so good. And regarding the latest fires in Madrid and in Castellon, Well, we are concerned. I think nowadays, we are much more concerned on helping our clients, potential affected people, trying to reach them to see that everything is fine besides covering the resort. I think the important thing nowadays is being on the side of clients more than concerning about the impact that it might have on the P&L that, as you know, we have a lot of insurance programs that account for these issues. But again, I think today, the thing is to be in the side of the clients and very close to the clients to help them.

The next question comes from Carlos Peixoto from Caixa Banco.

Hello? Are you hearing me now?

Yes, we can hear you, Carlos.

So a couple of questions on my side -- a couple of questions from my side as well. So on the combined ratio on the Home business, well, you mentioned that you have -- the market is benefiting from low levels of atmospheric events. But should we take that as something -- so in the medium term, you don't see this level of combined ratio as something sustainable? Or do you think it's something that can be upheld into the medium term? Just to get a bit of your sensitivity on that front. Then also on the payout policy, I was wondering considering the evolution on the P&L, whether we could see some changes on that front, whether this year you consider paying for interim dividend or for quarterly dividends basically or not? Just some views on the expected payout policy.

Thank you, Carlos. On the Home insurance side, I don't have the crystal ball to see what's going to happen by the end of the year in the combined ratio. What I always said is that atmospheric events, they have a big, big impact on this business. It's been a very mild year in terms of atmospheric events because the rains that we had on the beginning of the year, mostly they were covered by reinsurance or consortia. So it has been a very good year in terms of that. Again, I mean, let's see what happened after summer. Normally, October is not a very good month in terms of atmospheric, although last year was very good. But I see this combined ratio very powerful. And of course, we expect to be in that line. But I don't know if it's going to be an 83% or it's going to be closer to 90%. Again, I mean on those grounds, I think it's a very, very good number and a very solid number for the company. And in terms of the payout policy, now you should expect 2 quarters payments throughout the year and complementary after the year-end. And in terms of the dividend payout, well, it is true that we have 196.3% solvency ratio. Very happy on that coming from 183% on the first quarter. Again, solvency ratio also has a lot of seasonability effects with the premium provision and other adjustments such as renewals and so on. So we have to wait and see. Very happy on 193%. And on those grounds, I mean, we will see what the Board decides in terms of payout.

The next question comes from Juan Pablo from Santander.

I got 2 questions. First one is regarding solvency. Solvency ratio performed very well this quarter. You mentioned that one of the reasons is the revaluation of the portfolio, recognizing equity. If you could elaborate a bit on that one. And also, I see that the diversification benefit performed well in the quarter. If you could also elaborate on that. My second question, sorry if I missed this one, it's regarding digital sales. If I remember right, in the previous quarter, you mentioned around 9% of the new production, new sales were done through digital channels, 100%. If you could update that for us, that would be helpful.

Thank you, Juan Pablo. Regarding the first question, well, one of the positive or negative adjustments that you have on own funds when you calculate the solvency ratio is the evolution of the unrealized capital gains or losses of the portfolio. I think as of March, our portfolio had unrealized gains -- losses of EUR 1 million or gains of EUR 1 million. And on this quarter, I mean, the unrealized gains were very close to EUR 10 million. So when you put solvency points on top of that, that is the -- that has a lot of income. I think the impact of the investment portfolio has been in the neighborhood of 400 basis points on the solvency ratio. Regarding the second question, what was the second question?

Digital sales.