Good morning to all of you, and thank you for joining the call today. Welcome to Línea Directa's third quarter results conference call. My name is Beatriz Izard, and I'm head of investor relations. Presenting today is Carlos Rodríguez Duarte, our CFO. And as usual, after the presentation, we'll open up the call to Q&A. And with these words, over to you, Carlos.
Thanks a lot, Beatriz, and good morning to all of you. I will start, as always, on the first slide by commenting on the financial highlights for the quarter. We are reporting premiums of EUR 844 million, which is an exceptional growth of 11.4%. By line of business, motor grew by 11.8%, home 7.3%, and health 13.9%. The portfolio of customers recorded an outstanding growth of 8.1%, reaching 3.65 million clients as of September 2025. Despite a few high severity claims experienced in the quarter, the combined ratio was a solid 93.4%. Our highly efficient capital model translated into return on equity of 22.3%, and solvency stood at 189%, which is supportive, of course, of future capital distributions.
Moving to page number six, here, the message I would like to convey is consistent with what we said in the previous quarter: further acceleration in the top line and sound retention levels by increasing the loyalty of our customers and attracting new ones to our brand. We accelerated commercial digital initiatives, aiming at improving top line development and efficiency in the coming years. It is always important to remember that growth can easily be achieved in our industry, but disciplined growth is a different story, and we only seek the latter. We posted a worse underwriting result in the third quarter from a few high severity claims, and still, the combined ratio was a sound 93.4% for the first nine months of the year. Expense ratio posted a further improvement.
Financial result was up 18.9% with higher income from the bond and equity portfolio and the revaluation of investment funds, and all of this led us to a profit after tax of EUR 60 million, up 46% over the nine months of 2024. As with regard to business volumes and clients, all lines of business reported significant growth, particularly the motor line of business, with more than 53,000 new clients in the quarter. We are very pleased with this progress. In health, we resumed growth, even considering the extraordinary dental campaigns of 2024. Excluding this effect, clients will have grown by 9.8%. Moving to page number eight, the evolution on the combined ratio was solid, despite a seasonal adverse quarter with a handful of high severity claims. We continue to invest in data and tech capabilities that will improve efficiency and customer experience.
We consider the expense ratio to be a key competitive advantage and remain very focused on this. Now, I would like to move to a more detailed explanation by line of business. In motor, we further accelerate growth with premiums up 11.8% year- on- year and 13.3% in the quarter standalone. We were able to see the market growth by more than 3 percentage points. The combined ratio stood at a solid 93.4% for the nine months. For the quarter standalone, a handful of high severity claims in the summer months added 2.3 percentage points. Excluding this effect, the underlying combined ratio stands at 94%. For its part, the home line of business posted significant growth with premiums up 7.3%. Profitability for the year continues to be remarkable with combined ratios below 90%. The quarter standalone stood at 87%. Moving to page number 11, health posted growth of 13.9%.
The figures are benefiting from more comprehensive products. Specialists and complete products now account for more than 65% of the portfolio. Very importantly, we will also resume customer growth. On the technical side, combined ratio posted a further improvement. Moving to the financial results, we posted higher income on bonds and equity instruments. The mark-to-market of investment funds was very positive in the year, particularly in the first half and less in the third quarter. The investment property result declined due to the temporary loss of rental income from a building under renovation at the city center. Completion is expected by the end of 2026, after which an updated rental income will resume. As with regard to the investment portfolio, its composition remained pretty much stable in the third quarter, with the portfolio excluding cash increasing by EUR 1.2 billion on the back of business growth.
The underlying return stood at 313 basis points. Average reinvestment yield for the fixed income portfolio was 249 basis points. Its duration is currently four years. On our solvency position, solvency margin stood at 189%. As we anticipated last quarter, a more consistent calculation has been performed in parallel with the development of our internal model for premium risk. Given the quarterly volatility, while we calibrate the tool, it is more appropriate to look at it on a yearly basis. Moving to the next page, SCR is mainly driven by underwriting risk, increasing as a result of business growth and market risk on the back of interest and spread risk, and a significant increase in the year of the symmetric adjustment. The second dividend, if the board decides to do so, is expected to be announced before year-end. To conclude, September results posted exceptional growth. Underwriting remains very prudent.
Combined ratio was also solid in the quarter, despite headwinds from a few severe accidents. We continue developing the necessary basis for our future ambitions and remain very focused on efficiency. I will now hand the call over to Beatriz to begin the Q&A questions.
Thank you, Carlos. 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 questions. The first question comes from David Barma from Bank of America. Now your line is open.
Good morning. Thanks for taking my questions. Firstly, on the motor profitability in the quarter, the 94 underlying new flag is still deteriorating a bit compared to the last several quarters. Can you talk about that level and what you're seeing in terms of underlying frequency and severity? And then secondly, on the reserve adjustments and solvency that you talked about, can you please come back on what you did there and whether that's mostly a model change one-off, taking back part of what you had done in the previous quarter? And then lastly, on average premium growth, it seems like it's starting to slow a little bit in Q3, both in motor and in property. So if you could give us an update on pricing trends? Thank you.
Thank you very much, David. In terms of the motor business profitability, which is very much linked to the combined ratio, it is true that our combined ratio on the standalone quarter ended on 96.2, I think, but I think we need to take the picture on the entire year, which is very close to 94. What happened on the third quarter, which is something that happens usually historically, if you take a look at the history of our combined ratio, I think almost all the third quarters were one or two. I mean, our combined ratio is worse than the second quarter. What happened on this third quarter? Frequency was more or less in line with what we expected.
Average cost was also very much in line, although average cost has been increased by a handful of severe claims, especially bodily injury claims, which I must say sometimes they come and sometimes they go. What we did is we took a look at these claims, whether they are very much impacted by the new business or not, and we see that basically those severe claims, most of them are on the portfolio, so very comfortable in terms of how we are gathering clients in terms of risk profiling. But again, I mean, when you have a handful of severe claims in the neighborhood of EUR 5 million, it has an impact of two points on our combined ratio. Looking forward, our expectation is still that we are doing things on the track we wanted, gathering clients with good risk profile. Frequency is still very much in line with our expectations.
And if the last quarter of the year performs well in terms of severity, we should be shooting for a combined ratio which is more close to low 95 than above 95. That's my expectations. In terms of solvency, it is true that we've been calibrating a new platform, which is not a change in the model. I mean, it's basically calibrating the model. I think it's a one-off. Of course, you also have to take a look to the premium provision, which has a lot of seasonality throughout the year. It's very positive on the second quarter, and then it's a little bit worse on the third quarter. Looking forward on the year-to-date picture, I mean, that premium provision is very positive for the capital, and it should be that the case for the end of the year.
Again, I mean, we are talking about a company which still has a 190% solvency ratio, which is very good, and third quarter solvency is a little bit of a seasonal effect. And I think we need to look at the solvency ratio on a yearly basis, more or less. And on the average premium, well, there is not a change on the strategy. I think the evolution of the company in terms of pricing is very much linked to the premium risk, and we focus on that. I mean, so we adjust premiums on that. If we take a look at the year, our average premium for the new business and for the portfolio are very much in line. In the core business, in the bulk of our business, individuals is very much into the 2.2% increase, and it's adjusted on an individual basis.
So it's not a strategy that we will start to lower average premiums. Indeed, if you take a look at the CPI increase in Spain, it's picking up a little bit now. It's in the neighborhood of 3%, 2.3% on the underlying CPI. And we will adjust premiums on that ground looking forward next year, again, on an individual basis. But still, I think we need to keep on adjusting our premiums to CPI increases.
The next question comes from Francisco Riquel from Alantra. Now your line is open.
Yes, thank you for taking my questions. My first one is a follow-up on this motor combined ratio, so you printed 92% combined ratio in the first half of the year in motor, so excluding the large loss claims that you mentioned and also the adverse seasonality in the Q3 due to the summer season, shall we expect a combined ratio in motor back down to 92% in the fourth quarter? If not, how can you reassure us that the fast growth in motor policies is not coming at the expense of underwriting risk, and my second question is, I wonder if you can also share the weight of digital in the motor business, both in terms of the total revenues and in the new business.
I understand you are not using the sector database for claims in the digital business, so I wonder if that is having an impact in the risk that you are taking through the digital channels and if you plan any change at all in the digital strategy? Thank you.
Thank you very much, Paco. Since you follow our numbers on a quarterly basis, probably you can go back to my script on June, and I was saying that 92% on a quarterly basis was too good to be true. I mean, we are a company that we should be more in line to that 94% or something like that. My expectations looking forward for the year is that we should stand in that level. I mean, it's kind of difficult to give you a number, but I always said that 92% was very good, and we are very happy to be on 92%, but I think the company should maneuver in the neighborhood of 94%, especially in an industry that, as you know, combined ratio is still on 99% as of June, 98.7%. So our positive gap is still there.
And looking to the third quarter, well, I tried to explain that. I think we have like 2.3 points on the combined ratio on the third quarter that are basically due to severe claims that are very difficult to manage. Again, it's very important to say that we do look at the short frequency of the new business. We look at the 30-day, 60-day, and 90-day frequency of the business, and that is performing quite well. Second of all, the main severe claims that we have on the third quarter are assigned to the portfolio and other two business. So the combination of those two things tells us that we are gathering clients with the risk profiling that we like. We will keep on monitoring that, but there's no concern on the company on those grounds. So looking forward, fourth quarter, things should perform quite well on the portfolio.
Things should perform quite well on the new business, and my aim is that we should be in the neighborhood of those mid-90s that I always said should be the target for this year for the company. The second question, I think, was on the digital side of the business, well, the digital side, the pure digital side, and when I say pure digital side, I say the online real-time digital business, which is opening the interaction with the company and closing the deal without human interactions, is still small. I mean, we are talking about 10% of the gathering of new clients. I mean, in the neighborhood of 70,000 clients, so the impact of that and not using SINCO, which is what you are saying, is not very important. I must say that, of course, we follow very much not using that database.
And really, and surprisingly, the risk profiling of the pure online clients is much better than the, well, I wouldn't say much better. It's better than the risk profiling of clients that they use our call center. So we are very happy on that. I don't think that is an area to be worried. I mean, we will keep on fostering our digital propositions to clients. We have more than 3 million transactions on a monthly basis of our clients. Almost 100% of our clients are direct. And I think for us, that is key and is non-negotiable. I mean, of course, we do look at the risk profiling, and we are very happy on the profile of those 70,000 clients that we have gathered on the year through our digital proposition.
The next question comes from Carlos Peixoto from CaixaBank. Now your line is open.
Yes. Hi. Good morning. A follow-up, actually, from my side. So you mentioned an expectation of combined ratio around 94% for 2025, if I understood correctly. I was just wondering if it's just difficult to clarify whether this is for the motor business and alone or for the company. And then on the second part of the question, looking into 2026 and beyond, do you see the 94% as a combined ratio, as, let's say, a normalized level for Línea Directa, or how do you, where do you see it over the coming years, basically? Thank you very much.
On the combined ratio by the end of the year, again, I mean, our expectation is to be in those mid-90s, below mid-90s. Of course, I don't have a crystal ball. I mean, it depends on a lot of many things. I mean, what we have to do is to manage our risk profiling as we do, and that should put the company in those grounds. In terms of company overall combined ratio, well, it's very much driven still by the motor business. I mean, indeed, I mean, our combined ratio year-to-date is very similar, 93.4 in both motor and overall company. I mean, overall company is very still driven by the motor business. Of course, if we take a look at the other two main businesses that we have, home insurance performs superb throughout the year with a combined ratio below 90%.
Of course, we are very happy about that, and we look forward to maintaining those levels by the end of the year. We will see what happens with the atmospheric events. I mean, the year has been kind of mild throughout the year, and we'll see what happens, but very happy with that business growing almost 8% in the gross written premium, and we have a very good combined ratio. Health business, also combined ratio is keep on improving. Again, we still are a loss-making business, but we are very happy with the growth on the upper lines, growing above the market quarter- on- quarter, so very happy on that, but combined ratio should be very much in line with the motor industry if we take a look at the company, and looking forward on 2026, I don't have a target on the combined ratio.
I'm currently involved in my budget for next year, so I don't have still numbers for that. I think the company has always said that we should be a company with the best combined ratio in the sector and one of the best on a pan-European picture, and that should mean that we have to be on those grounds on 94-95. It depends very much also on the evolution of our expense ratio. Our expense ratio has improved, again, almost 100 basis points, which is a very good number for the quarter, should keep on improving with our digital proposition, and that, in the medium term, should keep on putting pressure downwards on the combined ratio for the company.
The next question comes from Maks Mishin from JB Capital Markets. Now your line is open.
Hi. Good morning. Thank you very much for the presentation and taking our questions. I have two. It's on the new production, given the strong numbers you are posting in motor. I was wondering what's your ambition for the market share in the segment in the long term. And then the second question is if you could share a bit of more color on what kind of customers you are adding. Are there mainly first-time buyers or come from other companies? And what type of coverage do you sell the most? That would be super helpful. Thanks.
Thank you very much. Going on the last, our portfolio mix is very much similar to what we have. I mean, we are a company more focused on third parties than in fully comprehensive. And that is more or less the trend with the new gathering of clients. What type of clients are we gathering? Well, we are very strong on the new business, on new buyers of cars and second-hand cars. I mean, we have always been very powerful on those grounds. I mean, our market share there is well above our natural market share, which is in the neighborhood of 7%. I think our share on new business, new cars, is in the neighborhood of 10%. So we are there, and we are gathering clients from there. But then we are gathering clients from the competition.
I mean, if you take a look at the competition, and I know you do, I mean, they are losing portfolio, and some of those portfolios are coming to the company. The second question you were asking, the first question you were asking is, well, in terms of gathering of clients, my ambitions, no targets on that. I mean, I think our ambition is being able to grow more than the market, and it's something that we are doing in terms of gross retail premium. Our gross retail premium is well above 11%. Market is in the neighborhood of 8.98%, and that is the trend. I mean, what we want is to be a company that we are able to grow more than the market, and that growth will realize in gathering a good number of clients.
We have been gathering 50,000 clients more or less on a quarterly basis, and it's something that you should expect by the end of the year.
Thank you very much.
The next question comes from Juan Pablo López Cobeño from Santander. Now your line is open.
Hello. My questions were already answered. Thank you.
There are no further questions at this time. I will now hand back to Beatriz Izard, Head of Investor Relations. Beatriz, now your line is open.
Thank you. Thank you, Carlos, and thank you all for joining us today and for your questions, and as always, the Investor Relations team is here to help you should you have any further needs.
Thank you very much, and have a nice day. Thank you.