Good morning, and welcome to Línea Directa's conference call to discuss September 2024 results. I'm Mark Brewer from the investor relations team. As usual, we will first walk you through the slides, and then we'll be happy to take any questions you may have. Now, let me turn the call over to our CFO, Carlos Rodríguez Ugarte.
Thank you very much, Mark, and good morning, and thank you for joining us. I will go straight to page number five. After nine months of 2024, we can clearly confirm a strong consolidation of the group's P&L, and an important turnaround of client growth since the second half of the year. We are pleased to present these results. Combined ratio stood at 95.4% in the first nine months of the year, 10.6 percentage points below that of 2023, and the same ratio in the third quarter standalone, that is 94.4%.
As in previous quarters, this remarkable improvement year-wise for our combined ratio has been driven by both an improvement of the loss ratio, but also our ongoing effort on the spend side of the business, where, again, our expense ratio has improved 0.4 percentage points from 22.4% to 22.0%. As for the revenue side of the business, our gross written premiums grew 3.5%, with a clear improvement in the third quarter standalone, where premiums grew by almost 6%. Noteworthy, growth has accelerated in the health line of business. Another highlight, which we already anticipated in our previous results call, has been the growth in the customer portfolio. During the third quarter standalone, it grew by more than 39,000 clients, reversing the recent loss trend and accelerating its gain over past quarters.
Net income increased by EUR 40.7 million , which compares to the loss of EUR 12.5 million reported for the first nine months in 2023. Finally, solvency ratio stood at 189.5%, mainly driven by the positive result seen during the quarter. Turning to page number seven, insurance revenues were up 2.9%, with the contribution of all lines of business. Technical insurance result stood at EUR 32.9 million , confirming the positive trend we have seen throughout the year. Loss ratio dropped by 10.2 percentage points, and expense ratio further 0.4 points. Hence, combined ratio dropped to 94.4%.
Likewise, for the third quarter standalone, combined ratio stood at an excellent 95.4%, which compares to 102.2% for the same quarter of last year. Investment result was up 6.1%. Underlying investment results will have been up by 11.7%, excluding the prudent write-off we have recorded for the Atos bond during the previous quarter. Credited interest, which is shown separately from investment result for clarity purposes, is the financial unwinding on the prior year discounting of the provision for claims incurred. The unwinding was an expense of EUR 6.5 million for the first nine months of the year.
Altogether, profit after tax stood at EUR 40.7 million, which compares to the loss of EUR 12.5 million over the same period of last year, a turnaround of more than EUR 52 million. Let's go to page eight. As usual, we break down premiums and policyholders by line of businesses. Health continued to enjoy significant revenue growth. It is also important to mention the very positive evolution of the gross written premium for each business for each business line on a quarterly basis. Third quarter standalone has shown significant improvement on the revenue side of the business. The portfolio also grew quite significantly during this quarter standalone for motor and home, confirming the trend already reflected in the second quarter of the year.
Turning to page nine, the portfolio in the motor business grew more than 19,800 policyholders. Gross written premiums on the quarter grew by 5.4%, as compared with 1.1% in the second quarter. Combined ratio, again, had extraordinary progress, 95.1% on the quarter and 95.5% on the year, clearly reflects the effort and actions that the company has been implementing in the last couple of years. Let's go to page 10. In the home business, as with motor, the portfolio of customers grew by more than 2,900 clients during the third quarter, reinforcing the upward trend we already had on the second quarter of the year. Premiums grew 4.8% on the year, but if we look at the third quarter by itself, this growth reaches 5.7%.
Combined ratio remains quite low for the year and stands at 89.8% year- to- date and 91.8% for the third quarter standalone. Still, this quarter, low presence of weather events was a key component to which it also adds the careful subscription of the company. As with regard to the health business, the remarkable growth continues, posting a 10% increase in premiums for the year and 12.9% increase on the quarter standalone. Combined ratio also had an outstanding performance as compared to last year and it keeps moving downward. As usual, full disclosure on combined loss and expense ratios by line of businesses is provided in page 23, and in the Excel financial supplement. Please, let's move now to slide number 12.
Loss ratio stood at 73.4%, 10.2 percentage points lower compared to last year, with motor leading the improvement, with a 10.7% decrease in claim cost. Also, home and health posted lower claims experience on the back of good behavior in average cost and frequencies. Turning to page 13. On expenses, the company keeps on improving its efficiency, and once again, it has improved its overall expense ratio to 22% on the year, representing an improvement of 0.4 percentage points over last year. Noteworthy, the expense ratio for our core business, motor, which stood at a remarkable 19.96% on the year, has improved 0.6 percentage points since the first quarter. Turning to page number 14, on financial result. Investment result was up 6.1%.
Let's remember that on the second quarter, in a prudent approach, the company decided to record an impairment in a bond of the French technology company, Atos. Excluding such effect, financial result will have been up by 11.7%. The increase is driven by the income from the fixed income portfolio, especially on the corporate bond portfolio. As usual, we are providing the credited interest in a separate line for clarity purposes. On slide 15, we disclose the portfolio composition, the movements that flow directly through equity and their IFRS 9, and some other metrics. The message here is that the overall yield of the portfolio still stands at around 3%, excluding realized gains or losses, and the overall duration of the fixed income portfolio is 3.1 years. Portfolio composition, with minor changes, remains pretty much the same.
Moving on to our solvency position. Solvency margin rose to 189.5% in the quarter, with positive contributions to eligible own funds coming from the profit of the quarter and the development of the available-for-sale portfolio. For each part, SCR increased by EUR 6.9 million in the quarter, mainly driven by market risk, due to the greater exposure to fixed income and equities, and the quarterly symmetric adjustment published by the European regulator. This was partly offset by the lower counterparty risk as balances in deposits decrease. To conclude, our September results so far, that the company's back on track in client growth, sound risk profiling, ongoing efficiency efforts, and last but not least, a remarkable improvement in revenues and profits.
As we always say, these results are a reason to be pleased, but again, we believe the company strategy, the company culture, and the people of the company will allow us to deliver better results in the short term. Thank you very much. I will now hand the call over to Mark to begin the Q&A session.
Thank you for the presentation, Carlos. First, we'll begin with the questions received from the conference call.
Ladies and gentlemen, we will now begin the Q&A session. If you would like to ask a question, please press star five on your telephone keypad. If you change your mind, please press star five again. Please ensure that your device is unmuted locally before proceeding with your question. The first question comes from Maksym Mishyn from JB Capital Markets. Now, your line is open.
Hello, good morning. Thank you very much for the presentation and taking our questions. I have a couple. The first one is on motor insurance. You've accelerated growth in new customers, and my estimates also suggest growth in average premiums increased in the third quarter. Does this mean you see markets more benign? Have you made any additional changes to your strategy to accelerate growth in both clients and premiums? And what kind of hikes in average premiums and increase in clients should we expect for the rest of the year? And then the second one is on the combined ratio of the motor insurance business. Claims in motor have increased quarter on quarter, and I was just wondering if this has been driven by frequencies or any other reasons.
Do you continue to see easing pressure of repair costs, and do you think we could see repair costs declining in the coming quarters? What kind of combined ratio do you expect for 2024, and what would your ambition be for 2025? Thank you.
Thank you very much, Max. Regarding the evolution of the motor business, I mean, in terms of average premiums, I mean, we were more in line of rising average premiums individually to clients, but very, very much in line with CPI increases a little bit more throughout the year. Of course, what we are seeing is that the market is increasing average premiums in a higher numbers as Línea Directa, but it's something that we did last year. I mean, so again, I think the market is doing the homework we did last year. In our case, on average, we are increasing average premiums at a, as I said, very close to CPI increases, and that should be the trend looking forward this year and looking forward on the coming years.
In terms of the combined ratio, well, the combined ratio for the motor business has been more or less the same as in the previous quarter. I think we posted 94.8%, and now it's 95.1%, so basically it has been more or less the same. Of course, you have the holiday season, which always has an impact on frequency and so on, but our frequency, our severity has been quite mild throughout the year. My expectation is that this combined ratio should keep on improving looking to the end of the year. And for 2025, I mean, we should be looking at a combined ratio more in line with 94%-95% than anything else.
Thank you very much.
The next question comes from Francisco Riquel from Alantra. Now your line is open.
Yes, morning. Thank you for taking my questions. I have two. The first one, I wanted to ask you about the strategy motor. For now, you are growing policies and premiums again, but they're still below the sector. I wonder if you have completed the process in terms of tariff hikes, and if you will be looking to regain market share in coming quarters, or do you still have farther to go in terms of risk profiling and tariff hikes in your motor business? And then the second question is about the policy count, which increased almost 20,000 quarter on quarter in motor, but just by 3,000 in home. I thought you were focused on the bundle offering between motor and home, and in cross-selling home within your motor customer base, but home is lagging behind.
If you can comment on this. Thank you.
Thank you, Franco. Well, regarding the motor business and the strategy, well, I think now we are in that process of gaining market share and on gaining clients. I think we grew by 5000 clients in the second quarter, standalone. Now we are in 19,000, almost 20,000 clients on the quarter, standalone. So I think that should be the trend looking forward. I mean, we are still adjusting prices to CPI. It's something that you should expect, not only for the year, but also for the next years. I mean, adjusting our average premiums individually to clients, but very much in line with CPI increases. But of course, the pace of our increases nowadays are lower than the market.
That is the reason also why we are not only gaining new clients, but also retaining our clients much better than the last year. That should be the trend looking forward. In terms of the home insurance business, well, it is true that numbers are not the same as the motor insurance. I mean, I think we grew by almost 3,000 clients. We also improved from the second quarter, and that should be the trend. Are we happy with the bundle of the product of home and motor? Yes, I think it's working quite well. If you take a look at the evolution of our gross sales, both in the motor insurance and the home insurance, they have improved.
But probably we need to accelerate a little bit more on the home insurance, you know, looking forward to try to grow more. But again, I think for the motor insurance, from the home insurance, and also for the health insurance, the evolution in terms of premiums and the evolution in terms of clients is much, much better than second quarter, and it should be better by the end of the year.
The next question comes from David Barma from Bank of America. Now your line is open.
Thank you, good morning. Just coming back on the very first question about the balance of premium, average premiums and policy count growth in motor, which looked a lot better than I expected, but you don't seem surprised. So maybe the difference there comes from inflation and what you consider the average level of inflation in Spanish market today. So can you talk about what the level of inflation you're seeing in both in bodily injury claims costs and material damages in motor today? And then secondly, on home, do you think we're back to a normal run rate of profitability now in the low 90s?
And linked to that, was there any support from prior year reserve development in the quarter, like you had in the last few ones with EUR 3 million- EUR 4 million of support? Thank you.
Thank you very much, David. Beginning from your last question, I mean, there were no extraordinary reserve releases throughout the quarter. Basically, I mean, we have managed our reserving as the business has gone. Home insurance, I think it's been a very good year in terms of claim cost, not only for Línea Directa, but I think also for the sector. I mean, atmospheric events are, they have been quite mild throughout the year. A little bit worse in the third quarter than in the second quarter, but still very good quarter in terms of atmospheric events. We'll see what happens on the fourth quarter.
My expectation is that this business should be a business which will have to move in combined ratios close to 90%, 91%, 92%. I think expecting something below 90s is too optimistic from my point of view, not only for Línea Directa, but also for the sector. I mean, atmospheric events, they really have an impact. I think throughout the year, the major impact that we have is EUR 1 million, which compares to a big number on previous years. So, I'm happy if I'm able to deliver a business in the neighborhood of 91%, 92% combined ratio. And then on the motor insurance and the strategy, I mean, we are still being impacted by inflation.
I mean, inflation, it is true that closed on September, I think on 1.5% increase, which is nothing compared to the previous year, but it's still there. So we used to expect inflation throughout the year in the neighborhood of 2.5%-2.8%, more or less, throughout the year, by the end of the year. So we will have an impact also on, on our business. Of course, in terms of average repair cost, in terms of claim cost itself, the average increase is quite lower than the previous year. But it's also true that we are still adjusting prices.
I mean, our pricing, if you take a look at the average premium of the company, we are still rising by 3.5%, more or less, average premiums, which is coping with increase on the cost side of the business. I think, in terms of a strategy, and I'm trying to go back to the previous question, I mean, in the second quarter results, we said that we will see a positive evolution in clients. It's something that we are seeing nowadays. I mean, again, coming from 5,000 clients in the motor business in the second quarter, and now we have almost 20,000 new clients, or increasing the portfolio, and it's something that you should expect throughout the year and coming years.
I mean, we have been working very, very much in the retention. Our retention rates, they have improved quite a bit throughout the year, and that should be the trend looking forward.
Is inflation much higher on bodily injury?
No, no. Bodily injury, as you know, is very much linked to the Baremo. Baremo, the CPI increase is set the previous year, and it was above 3%, so we'll see what happens next year, and my expectation is that next year, Baremo increase will be in the neighborhood of 2.5%-2.8%. It will depend on the November number on CPI, but more or less, it should be lower than this year.
Thank you.
Peixoto from CaixaBank. Now your line is open.
Yes. Hi, good morning. A couple of questions from my side as well. The first one, actually, on shareholder remuneration. You had paid an interim dividend on the first half results. Now, I believe you're not paying anything on the third quarter alone, I mean. Does this mean that you're changing your dividend policy towards two dividends per year? Or should this in 2025 move back to the quarterly dividends that you were doing before? And also, if you could give us some color on the type of payout ratios that you expect going forward.
Then on a separate question, which does relate a bit to what my colleagues were asking before, but on the motor business, what type of gross written premiums evolution do you expect over next year? Should we expect mid-single-digit growth in premiums, or should we expect closer to double digits? Thank you very much.
Thank you, Carlos. In terms of shareholder remuneration, I mean, well, that's, it's difficult for me to give you some light in there. I mean, it's a board decision. I mean, and it is true that the board in this quarter has not approved any dividend so far. So throughout the year, we have paid only dividends on July, I mean, on the six first months of the year. My expectation is that while this is a year where still we are being very cautious on the evolution of the company, I think the board is being very cautious on taking decisions on remuneration.
But I think you should expect Línea Directa being a company with a high dividend payout. I mean, either in quarterly basis or in a semester basis. I mean, but again, I think the board is being very cautious. I think it's the right way to do it. But again, my expectations, and I think yours, you should expect Línea Directa being a high dividend payer. And in terms of on the evolution of the motor business, in terms of premiums, gross written premiums, looking forward next year, we should shoot for a better number than this year. And when I say a better number than this year, we should be shooting for a single digit, but a high single digit.
In terms of pricing, again, I think the company's strategy is try to adjust the average premiums that, in an individual basis, but always very much linked to CPI increases.
The last question comes from Juan Pablo López Cobo from Santander. Now your line is open.
Yes. Good morning, everyone. I got two questions. First one is a follow-up from Carlos' question regarding shareholder remuneration. It would be interesting to see to listen to your thoughts. We saw Solvency Capital Requirement increasing a bit for the non-life risk on the market risk. If we were to deduct the EUR 15 million net income from the quarterly results, the solvency ratio will be around 182%. Do you have any minimum or target solvency capital ratio? That will be my first question. And regarding the second question is related to the investment portfolio. We see there's been some changes quarter on quarter.
There's been disposal from Portuguese bonds and probably increasing Spanish and Italian bonds, and also increasing corporate bonds in BB B rating. I guess I don't know if you could elaborate a bit regarding your strategy regarding the investment portfolio in a lower rate environment, and I don't know if we could assume that you are trying to invest in bonds with a slightly higher yield to offset the potential impact of lower rates? And maybe, to conclude, if we should expect this EUR 10 million financial income on a quarterly basis for the short, medium term? Thank you.
Thank you, Juan Carlos. Well, yes, I mean, we feel comfortable in a solvency ratio of in the neighborhood of 100%. I think it's something that we always said since we were listed back in 2021. The board is very comfortable on those grounds, and again, if you do the numbers as you did, if we were to pay out the amount that you say, we were even above 100%. But, I mean, the, I think the company feels very, very much comfortable on those grounds.
And in terms of the investment portfolio, I think the big change throughout the year has been that we have weighted a little bit more our investment in the corporate bond portfolio than in the government portfolio, and basically it's because the yields are much better. You shouldn't expect any changes in terms of prudence of the company. We have always been very prudent, investing in investment-grade corporate bonds, in governments, and that should be the trend. I mean, what's gonna happen when interest rates or what's gonna happen with interest rate coming down? Well, we will maneuver in order to provide, you know, the investment income more or less in line as we are providing nowadays.
I mean, we were in that situation not so far away, and we were able to maneuver and to post good numbers in investment income, and we will do so. Another thing is that the portfolio has increased quite a bit. I think the portfolio has increased by almost EUR 90 million throughout the year, and that is because we are getting much more premiums from clients, and we have more capacity to invest. So that will also help us on the investment income, you know. But again, shouldn't expect any major changes, trying to look for higher yields, going a little bit more in the corporate side than in the government side, but that should be more or less the trend throughout the year and throughout next year.