Morning, everybody. My name is Beatriz Izard. I'm Head of Investor Relations at Línea Directa. We published our full-year results earlier this morning. I have here with me Carlos Rodríguez Ugarte, our CFO. Carlos, over to you.
Thank you very much, Beatriz, and welcome from my side as well. As usual, we start on slide five, where we show the financial highlights of 2021. Policy holders grew by 4% and premiums by 1%. The year was remarkable for the home business. In the motor line of business, the market is extremely competitive, displaying a strong pressure on premiums. Combined ratio was strong at 88.3%, mainly driven by the motor segment. I would like to stress that the combined ratio for this line of business is more than seven points below that for the market as a whole. Loss ratio is back to 2019 levels. As regards expenses, we are showing once again our commitment to efficiency with an improvement in expense ratio. This fact is further protecting our technical performance.
Net result stood at EUR 110 million and return on equity at 13.4%. This year, the company paid three interim dividends for a total amount of EUR 77.6 million. Additionally, the board is proposing to the AGM a final dividend of EUR 21.5 million. Total dividends therefore amount to EUR 99.1 million, representing a compelling dividend yield of 5.7% and a payout of 90%. Finally, our solvency ratio remains robust at 186% and is already counting with the final dividend to be paid in March, as I just explained. Moving on slides seven to 10, we provide an update on the Spanish motor market, which is still displaying a complex environment. Rising frequency and notable severity up 15% as compared to 2020.
Turning to slide eight, this slump in new car sales, further impacted by the serious supply crisis that the car industry is enduring, has affected the turnover of the insurance business, as the used car market typically has more basic and lower average premiums. Page nine shows that while insured cars continued to grow, average premiums were down by 2.7% overall. Considering the last couple of years, 2020 and 2021, average premiums were down by 5.5%. Lastly, the update of the injury scale in Spain was finally confirmed last week, up 4.1%. This number includes 2.5% corresponding to 2021 pension revaluation index, plus an additional 1.6%. Cost inflation is also reflected in property damage, with parts up 4.4% and paint up 13%. Sorry.
Let's turn to page 10. Home continues with a very dissimilar development. Housing sales climb almost 35% to 565,000 in 2021, the highest number in 14 years. Home insurance sees further growth with revenue up 4.9%. On the negative side, the market was hard hit by atmospheric events, and the sector combined ratio now stands very near to 97%, yet was above 100% in the first quarter of the year. For its part, sanitary assistance retains remarkable growth in premiums and policyholders. The market is growing at 5.2%. Health costs and tariffs are also on the rise. However, the market seems to be passing the increase. Now I'll take you through the main figures for the year.
In the context I just described, the company continues to grow in policies and displays robust profitability metrics. Premiums were up 1%, reflecting an increase of 4% in clients, while price pressure persists in the motor segment. Technical margin decreased, reflecting loss ratio reaching 2019 levels. Expenses had a remarkable performance. Once again, our technical profitability displays a solid delta with the market that I will detail later on by line of business. Financial results, up 18%, includes realized gains of EUR 6.7 million on account of some issuers of security buying back our venture capital shares. All things considered led to a profit after taxes of EUR 110 million, down 18% on 2020 and up 2.6% on 2019, which it can be understood as a normalized year.
Please turn to next page number 14, where you see the breakdown of the policyholders and gross written premiums by line of business. The portfolio as a whole increased by 4%, supported by higher retention ratios. Quality measures are strong. Motor NPS stood at 41.99%, up 0.9 points from last year. Total net satisfaction score and net promoter score stood at 42.87% and 37.94%, respectively. Premiums grew by 1%, with the home and the health line of business outperforming. Home rose by almost 9% and health by 21%. The home business continues to increase its weight in the company overall figures. More specifically, if we turn to next page, the motor line of business decreased premiums in line with the market, 0.9%.
Excluding a fleet of unprofitable motorcycles that was canceled in the fourth quarter, premiums will have decreased by 0.5%. The portfolio recorded a solid growth in this extremely competitive environment. On the technical front, combined ratio stood at a remarkable 87%, which is more than seven points below that of the sector. Expense ratio was excellent. Loss ratio was equal to that of 2019. It is worthwhile to highlight the fact the company was prudent in its provisioning for the Baremo update. Moving to next slide. Home had a brilliant performance during the year and specifically during the fourth quarter of the year. Premiums were up 8.8%, a growth rate that beats the market by almost four points.
Combined ratio dropped by 5.1 percentage points and it stood at 88.9%, beating again the market by almost eight points. The expense ratio had a notable improvement. Also, claims behave extremely well in the last part of the year. Moving now to the next slide. The message here is that the health business remains on track. Premiums grew by more than 21%, and both loss and expense ratio display further reductions. We continue with a prudent underwriting policy and a careful risk selection. Please, let's move now to page 18, where we break down loss and expense ratio by lines of business. Loss ratio had a notable improvement across all lines of business. Motor loss ratio stood at 69.4%, the same number as in 2019. Severity and a prudent provisioning, with regard to the Baremo, mainly explain this figure.
We had an excellent performance across the remaining segments. Expense ratio was down 1.4 points, showing the strict ongoing control of expenses and operational excellence, protecting our technical performance. In the motor segment, expense ratio was 4.7 points below that of the sector. In the home line of business, expense ratio was marginally better than the sector for the first time since we launched this business. All things considered, it resulted in a solid combined ratio of 88.3%. If we move to the next slide, consolidated claim ratio stood at 67.7%. Key drivers were the very competitive environment in the motor insurance, claims frequency on the rise, increased severity in the fourth quarter, and prudence in our provisioning as we start to anticipate the impact of the injury scale update. Loss ratio is back to 2019 levels.
On the next slide, we elaborate on the expense ratio. Expense ratio was 20.5% down 1.4 points. This is our DNA. The company has a recurrent focus on cost control and innovation, which protects our combined ratio. Expense ratio is explained by lower acquisition costs, less significant negotiation campaigns, lower personnel outsourcing and telephone outlays as a result of the digitalization of processes and lower IT charges. Let's now move to slide number 21. Financial result was up 18.5%, reflecting realized gains for an amount of EUR 6.7 million. Adjusting for this effect, financial result is 8.8% down. We don't trade with our portfolio, and realized gains are explained by the issuer of security repurchasing our perpetual capital shares.
The fixed income portfolio reflects lower reinvestment yields, yet equities and investment property had a remarkable performance. Please, let's turn to slide number 22. The asset allocation has remained pretty much stable since last quarter. We reported good returns from equity, properties, and corporate bonds. The overall return of the total portfolio stands at 3.4%, 2.7% excluding realized gains. Moving to our solvency position. The company solvency margin is robust and it stands at 186%. As I mentioned before, the board has proposed a final dividend for an amount of EUR 21.5 million to be paid in March. This ratio is already accounting for that. The decrease in eligible own funds is driven by the best estimate for claims and premiums.
For its part, SCR increases for the whole year by EUR 60 million, however, drops by EUR 5 million in the last quarter. Main drivers are higher exposure to equities and the symmetric adjustments standing at almost 7%. It was close to zero in 2020. The increase in the best estimate for claims, the fine-tuning of a specific parameter, which now stands at 4.95%, whereas in September was 5.95%. As always, I would like to close the presentation by very briefly going through our progress in some of the company initiatives. Let's move to section three. At the close of 2021, all metrics on digital are improving. Customers who interact digitally with the company already add up to 85%, up 1% since September. 50% and 33% of the claims were opened digitally in motor and home respectively.
The former increasing by three points this quarter. 60% of customers have requested towing via the app, up five points as compared to September. Moving to slide 27, on the marketing front. We are renewing our advertising campaign and strategy. Top-rated ambassador Matías Prats ends his time as the face of our brand after 10 years and begins a search for his successor in the ads. We display what we stand for, the most complete coverage and service at a competitive price. Finally, on slide 28, we are launching our third Tú lo Nombras, a comprehensive insurance with a car included. This was a fresh and pioneering product of 2020. With each launch, we sold out in a few days. We are making progress in exploring these line of businesses. Thank you.
I will now hand the call over to Beatriz to begin the Q&A session.
Thank you very much for this presentation, Carlos. First, we'll begin with the questions received from the conference call.
Thank you. If you would like to ask a question, please press star one on your telephone keypad now. If you wish to withdraw your question, please press star two. The first question today comes from Maksym Mishyn from JB Capital. Please go ahead.
Hi, good morning. Thank you for the presentation and the opportunity to ask questions. I have two. The first one is on motor insurance. I was wondering if you could share your view on the pricing cycle. Do you think that the update in the injury scale can help pushing the sector to increase prices faster than you previously expected? I was wondering if you see inflationary pressures accelerating in the fourth quarter compared to the third quarter. The second question is on dividends. Your solvency is now at 186%. I was wondering, what are your expectations for 2022, and what will happen to dividend payouts if solvency goes below 180% in the next quarters? Thank you.
Well, the situation in the motor segment is very complex as I tried to explain over the presentation. I mean, it's been a couple of years with average premiums going down by 5.5% in two years. Now, we have a situation where combined ratios are picking up, and they are getting to a normalized year, and that will put pressure on the market. On top of that, you have the inflation on the cost side of the repairs. All things together, I think the market is gonna have some pressure to start raising average premiums. I don't think it's gonna be something that you will see in the, you know, first couple of months of the year.
I expect, you know, the average premiums at least they maintain more or less on a level, on the same level as we are now. I don't see, you know, further pressure downwards on average premiums. Regarding the solvency ratio, I mean, we closed the year with 186%, including the dividend that we will pay on March this year. We have always say the same thing. I mean, we are very comfortable in levels of 180%. That I think is a level that we should maintain. As far as we are above that, we will keep on paying dividends on the same grounds we are doing nowadays.
If we reach below 180%, which I don't think will be the case, we'll see what happens. I'm kind of confident that our levels will always be above 180%. It is true that in 2021, we have a little bit more investments on the equity side of the portfolio. It's something that we did in the third quarter, and it's something that in the fourth quarter, more or less, we have the same position in equity. My perception is that we will be able to be close to 180% and therefore, my perception is that we will be on that dividend payout around 90% in this coming year.
Thank you.
Next question is from Francisco Riquel from Alantra. Please go ahead.
Yes, sir. Morning, thank you for taking my questions. I would like to ask two questions from me on the motor insurance. First on the loss ratio, if you can please quantify how much you have allocated to the update of the Baremo in the fourth quarter. And if you are front-loading costs from 2022 into 2021, or if you are catching up with this Baremo issue in the fourth quarter. And then also with the high number of serious accidents that you mentioned in the fourth quarter, if you can elaborate on this because we have not seen that for other peers. How can you reassure about your underwriting risk if you would need to change your risk-taking model or not?
You have also mentioned that you have canceled a portfolio of loss-making premiums if you are changing the subscription model here or not? Thank you.
I will start with the last question. Hello, Paco. Nice to talk to you. On the severity grounds, it is true that for the year it has not been a very good year on severity grounds. I mean, the lack of mobility, you know, at the beginning of the year had made the company to have some more severe claims that we are used to. I'm not concerned. I think we didn't change our risk profiling. We didn't change our subscription underwriting. You know, it's 2021 has not been a very good year. 2018 was a wonderful year, so sometimes, you know, these things happens. The good part is that those severe claims are more on the portfolio than in new clients.
That tells you a little bit that we are not changing our risk profiling. In that regard, we'll see what happens in 2022. First couple of months in 2022 have been very good in terms of severity. We will hope that we will see a turnaround there. In terms of the Baremo, I cannot give you a number because it's not something that we have calculated a number and we decide to, you know, more or less provision in advance. What we did, taking into account that the Baremo was coming and what we did is we did a more, if you will, slow down in the management of claims.
I mean, we were more prudent in our releases on some claims, expecting that some of those claims will be affected by the new Baremo update. It's not a matter of how much we have provision in advance. It's a matter of the management of some claims that we were more prudent in releases, grounds.
Our next question is from Thomas Bateman from Berenberg. Please go ahead.
Hi. Good morning, everybody, and thank you for taking my question. Just following up on the last question a little bit. Just trying to understand the prudency in the reserves, because you say that you've been prudent in provisioning for Baremo, but the margin on best estimate has gone down, in regards to solvency. I don't know if you could just give a little bit more background around that would be really helpful. Secondly, I was hoping to hear from Patricia maybe this morning. Could you just give us a little bit of color around the change in CEO decision? Finally, just going back to motor once again, there's also been a lot of moving parts over the last two years.
I don't know, for example, if you could give some guidance in terms of the 2022 combined ratio. You know, if pricing was to stay flat, for example, what do you think the motor combined ratio would look like for 2022? Thank you.
On the combined ratio for 2022, I mean, we are very comfortable on the current combined ratio that the motor business has. I mean, our combined ratio, again, is much better than that of the market, you know. My expectation looking forward is that, more or less the combined ratio should stand close to what we have seen by the end of the year in the neighborhood of 87%-89%. Of course, always, we will try to be below that 90%. Taking that into account, keep in mind that the market is already on the 94%-96%, and I think it will reach even higher. In that, our gap will still be very positive.
On the best estimate question and on the solvency and all that, it is true that the gap has shortened a little bit. I mean, again, I think it's a matter of the combination of two things, severity. I mean, we have more severe claims that we have had in the past, especially in the first half of the year, but also in the last quarter. That's why it was not a very good quarter in terms of severity. So that put a lot of pressure on the best estimate of our liabilities. On top of that, again, I mean, what we have tried to do is try to anticipate a little bit the Baremo.
Keep in mind that the Baremo not only affects the new claims coming into place in 2022, but also affects some of the claims that we have already opened, because if you do some development in those claims and you know the Baremo will come into place. What we have done is you know again try to be very prudent and trying to avoid some releases on some claims that previously in the past we could do it. I think that is the combination of both. You know more severe accidents during the year. Not a good year for the company in terms of severity as compared to 2019, for example. Second of all, being prudent on the releases from claims.
Regarding Patricia Ayuela, well, I must say, I mean, I think the new appointment of Patricia as CEO, you know, is wonderful news for the company. Patricia is a person that has been with the company for many years. She is a CEO that knows very well the business. Indeed, you know, Patricia was managing the Home insurance business many years ago. She's been managing also the Motor insurance business for the last years. She has a lot of experience, you know, on the business. Besides that, I think she's one of the big sponsors of the digital process of the company. She's been in charge with all the transformation of the company.
I think the combination of all those, if you wish, asset, you know, will make you know that her presence as CEO of the company, I think is gonna be very, very positive for the company, looking forward, you know.
Okay, that's great. Just again, on the reserving, it feels like you've provisioned for the claims that happened in 2021, which are exposed to the higher tariff, but it doesn't necessarily give you much of a cushion for 2022, i.e. we still need price rises to help offset that in terms of if we wanna keep the combined ratio steady.
Mm.
Is that fair?
Well, I was-
Do you think that you have additional provision in for claims in 2022?
No, but we'll see what happen with the claims on 2022. I mean, new claims, they will be affected by this increase on the Baremo. I expect that the existing claims, you know, they will not need additional provisioning because what we have tried is that. I mean, you know, to anticipate that on the existing book of claims. I mean, we'll see what happen with 2022. You know, frequency on January and frequency on February has been very good for the company. I hope, you know, that will be the norm or the standard for the rest of the year. 2022 claims, new claims on 2022, they will be affected by the Baremo.
Hopefully the oldest ones, they are already well provisioned in order to cope with the Baremo increase. In terms of average premiums, of course, I think pressure on claims, pressure on inflation and, you know, also the market going to combined ratios close to 100%, my perception is that sooner or later, you know, average premiums will start to pick up. I was reading, I think, last weekend something on the U.K., and on the first month of the year, average premiums, they went up by more than 4%. My perception is that we can anticipate or we can look for a change in the cycle. We'll see.
It won't happen on the first couple of months, but I think looking forward during the year is something that it will happen.
Thanks, Carlos. Our next question is from Carlos Peixoto from CaixaBank. Please go ahead.
Hi. Hello, good morning. I'm sorry if some of my questions may have already been answered as I joined a bit later. I was just wondering if you could tell us or if give us a bit your expectations on pricing evolution into 2022. Basically, we have seen in 2021 a strong compression in average premiums. How do you expect to see this evolving into in the next year? And then also on financial income, this year you had some extraordinary or some capital gains in the year.
Next year, what type of expectations do you have in terms of how much financial income or averages you can get out of your income? Thank you very much.
Thank you, Carlos. Pricing evolution, I think I tried to explain before. You know, the situation of the market on the motor insurance is very complex. Again, it's been a couple of years that you know, the situation has been very weird. 2020 with a great loss ratio for the market. I think most of those savings on the loss ratio what they were turned around in the average premiums of the sector. Looking forward to 2022, inflation, Baremo, I think the mix you know will give the idea that maybe the market is gonna turn around. In the case of Línea Directa, it's not something that we are saying we are gonna rise average premiums.
I mean, we are a company, as you know, that we try to make individual pricing for each client. It depends very much on the risk profiling of the client. It's not something that as a general rule we will apply. I think the market, if it's a rational market, it will reach combined ratios close to 100%. Then I think the market will try to turn around in terms of pricing. Regarding the financial income, 2021 has been an extraordinary year. I mean, if we didn't have those realized gains, you know, probably our financial income, not probably, really our financial income was almost 9% down.
Looking forward, I mean, we'll see what happen with, you know, with interest rates, if they still, they keep on going up. Línea Directa is a company that we don't do any trading on the portfolio. I mean, we basically see it on coupons and on dividends, and that is our intention. 2022 numbers will not be probably as good as 2021 because we have almost EUR 7 million of extraordinary, you know.
We have no further questions on the phone line. I will hand back to the webcast questions.
Okay, thank you. Thank you, Carlos. Now we'll continue with the questions received through the webcast. The first question is coming from Mario Ropero from Bestinver. He's asking whether there's any Baremo pending hit. I think he refers to 2022 and going forward.
Well, I think now the situation on the Baremo is clear. I mean, 4.1% increase. I think you know all the rules are set. I mean, the only thing is why we need to quantify how much impact it's gonna have in the sector. It depends very much on the severity and on the claim evolution on the market. I mean, I don't expect any more changes since the ones last week, where the Baremo was increased from 2.5%- 4.1%.
Again, I don't think there will be no news on Baremo, but we need to wait and see how much is gonna be the impact for the market, which is gonna be an important impact, I think.
Thank you. He's also asking, well, this was answered before, but he is also asking, please comment on the 2022 outlook for motor premiums, and please comment also on average price expectations.
Well, I think I already tried to explain that. I already tried to explain how we see the market, you know, in terms of average premiums. After two years of a lot of pressure downwards, my perception is that we will see a more stable year and even picking up on average premiums. I mean, it will depend very much on the evolution of the lower part of the P&L of the companies, combined ratios and expense ratio. Again, Línea Directa is very well prepared on those grounds with a very competitive loss ratio with an excellent expense ratio.
If you take a look at the technical margin of Línea Directa as compared to the market, we are more than six points above the market. We are well prepared, you know, for any situation on the market. My expectation is that we should start to see a changing cycle.
Thank you. Finally, he's asking whether you can guide him for a normalized combined ratio. Let's say if it can be around 86% or 87%.
Yeah, I think that is a good number. We should be, again, on the 87%-88%, always below 90%. That is my perception. Keep in mind that the market will be well above 95-96% looking forward.
Okay, the next question comes from, again, Mario Ropero from Bestinver. He is asking about the solvency ratio, which is down, and what is the minimum level that we are comfortable with, and what is the payout expectation for 2021?
Well, we are comfortable on 180%. I mean, I think it's something that we explained right from the beginning when we were listed, that the company is comfortable on 180%, which on those numbers, if you exclude mutualities and so on, it will be one of the best solvency ratios on the market. Comfortable on 180%. As long as we are on, you know, 180% or above that, we will be a higher dividend pay company.
Okay. We have another question from Mario. He's asking whether we can comment on the average premium for Vivaz and how it compares to peers' average, and how this price should perform in 2022.
Well, average premiums on the health insurance are picking up. I think it's something that is happening in the market. The new Baremo update or the increase in the Baremo scale during 2021 as a result of the evolution of the 2020 pandemic and so on, we have seen pressure upwards in the market. In the case of Vivaz, we have also start to increase a little bit our average premiums, but of course, with a positive gap as compared to the market. In our more common, you know, product, I think the average gap is around 100 EUR. The other question, how do we look at Vivaz on 2022? Well, 2021, Vivaz has been on track, as I explained in the presentation.
I think we are fulfilling the budget that we have for 2021. We have a plan for 2022, which is still, you know, on the rising side, you know, with premiums going up, increasing our portfolio, trying to renew commerce to the market, and that is our intention. Again, we are over 100,000 clients already. Our first goal is to reach those 200,000 clients, that it will be something that we will be able to do by the end of 2024 or beginning of 2025.
Thank you. The last question comes from Jaime Pallares. Thank you for the presentation. In 2021, the combined ratio has increased up to 87% versus 2019. What is the main reason for this? Additionally, given the current inflation rates, how should we expect evolution of the motor combined ratio during 2022?
Well, the main reason of the increase of the combined ratio up to 88% is been, you know, what I tried to explain on the motor side of the business. I mean, I think we had a loss ratio of 61%-62% by the end of 2020, and we had reached a loss ratio of 69%. Again, frequency is back to normal, and normal is 2019. Severity for the year has not been very good, so that put pressure on the loss ratio. We reached 69% and push up, you know, the combined ratio of the company as a whole.
I would like to say that evolution in the home business, we didn't talk about the home business, but the evolution in the home business in terms of loss ratio or combined ratio has been very good. I mean, the home business market reached in the first quarter a 100% combined ratio. Now there is a company that probably is one of the most competitive companies in terms of combined ratio, both in the loss ratio and on the expense ratio, you know. Looking forward to 2022, I expect again having a combined ratio as a whole in the company below that 90% that I explained before.
Thank you. We just received another question from Roberto Casoni. He's asking, when you say to expect a combined ratio for 2022 in line with the 2021 at 87%-89%, does it include expectations of rise in premiums in price?
Well, when I try to explain that we will be in the 88%-89%, that means, you know, having taken into account everything, you know. Again, we don't have an approach of increasing average premiums on 2022. We have an approach of trying to put pricing on an individual way to each of the clients. What I do expect it's that the market as a whole will not keep on lowering average premiums, or so we will see a first part of the year with average premiums more or less stable, and a second part of the year, you know, with average pricing going up.
In the case of Línea Directa, just to remind, if you take a look at the history of the company, that when the cycle is upwards, normally Línea Directa is able to gain market share because normally we have a much more competitive pricing.
Now we just received a question from Felipe Ruiz from Ibercaja. He's asking whether, on average, premium compression in motor, are you still seeing clients choosing third-party cover over comprehensive cover as vehicles get older?
Well, what I see is that the mix of the portfolio has been changing in 2020 and 2021. I mean, the car industry situation, you know, with 32% less cars sold in 2021 versus 2019, I think that it has put pressure on the mix of the type of insurance clients are taking. Yes, I think that people are moving more toward third party more than to comprehensive. I think it's something that happens with Línea Directa, but on the same grounds, I think it happened to the entire sector.
Thomas Bateman is asking how much was the benefit of solvency driven by the specific parameter adjustment.
I will have to check the number. Of course, in the third quarter, you know, the problem with the specific parameter is when things are weird as 2020 was, so it has an impact and a negative impact on the specific parameters. Again, I mean, putting into the historical series one year as 2020 has somewhat disrupt, you know, basically all the calculation of the specific parameter and it was a negative hit on September and some positive hit by the end of the year.
Yes. In fact, it was mainly driven in the fourth quarter by the adjustment of the specific parameter, the decrease that you see in the fourth quarter. Also, Thomas Bateman is asking whether we should expect more redemptions on venture capital securities in 2022. Are there many more securities available for redemption?
No, I don't expect any extraordinary income by 2022. I think 2021 was extraordinary year. We'll never see, but I mean, I don't expect that. I think the portfolio will be stable and we shouldn't expect any additional redemptions.
Thank you, Carlos. Okay, it seems that there are no further questions. This concludes our meeting. Thank you very much for your time, and bye.