Morning, everyone, 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 Rodríguez 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, 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 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 number seven, 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 standalone 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. 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 continued to show a strong momentum. Moving to page number nine, the combined ratio reflects the balance between underwriting discipline, claims frequency control, and a large operating base. 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. I would like to move on to a more detailed breakdown by line of business. 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 standalone. Technical profitability remained excellent, with a combined ratio of 91.1% in the first half, 0.9 percentage points better year-over-year, and 19.8% in the standalone second quarter.
The home line delivered moderate growth, with premiums up 2% and the portfolio increasing 3.7% year-over-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 standalone second quarter. Let's move to page number 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 impact, it will have increased by 5%. Turning to page number 14. The investment portfolio remains heavily balanced in fixed income, with a measured reduction in equity exposure during the period. This allocation reflects the group discipline 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 three point five 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 18 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 sessions.
Thank you, Carlos. Our line is now open for questions.
Ladies and gentlemen, we will now begin the Q&A session. If you'd 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 devices are muted locally before proceeding with your question. The first question comes from Maks Mishyn from JB Capital. Your line is open.
Hello. Good morning. Thank you very much for the presentation and taking our questions. Three questions from me, please. The first one is on Motor. What drove such a notable improvement in claims quarter-on-quarter? 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? How can you comfort us that inflation will not hurt profits? The third one is on Home insurance. Similar to Motor, what drove the spectacular combined ratio in the quarter? Thank you.
Thank you very much, Maks. On the first question, well, it's kind of difficult to explain what happened on the second quarter, even in the first quarter. I think we need to look at the numbers on a yearly basis. I mean, on the evolution of frequency on 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. Again, on the claim side or on the entire business, I think we have to take a look on a yearly basis. We have some sustainability impacts that might happen on the second quarter, on the third quarter. Again, frequency was fine for the quarter. It's been fine for the year.
In terms of average cost, even with the worries on inflation, it is lower than we expected. 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. 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. We monitor that. If we need to adjust more, we will do so. As of today, we have an average premium upside of 2%, and we will monitor.
We will need more or less. This is a matter of price risk. This is a matter of technical margin. Our technical margin is keeping on improving every quarter-on-quarter. We are very comfortable on the situation right now. If inflation becomes an important issue, we will adjust average premiums. On the Home insurance. Home is performing in terms of technical result very well for the last year and a half or something like that. Even the market as a whole is performing quite well. It is a matter of having less atmospheric events, that we expected, good risk profiling on the book. 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. Regarding the latest fires in Madrid and in Castellón. 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 risk or not.
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. I think today, the thing is to be in the side of the clients or very close to the clients to help them.
The next question comes from Carlos Peixoto from Caixabank. Your line is open. Your line is open.
Hello. Are you hearing me now?
Yes, we can hear you, Carlos. How are you?
Okay. Sorry about that. I'm fine, thank you. Good morning. A couple of questions from my side as well. On the combined ratio on the Home business, while we mentioned that the market's benefiting from low levels of atmospheric events. Should we take that as something, 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.
Also on the payout policy, I was wondering the string devolution on the P&L, whether we could see some changes on that front, whether this year you consider paying four interim dividend or four quarterly dividends, basically, or not. Just some views on the expected payout policy. Thank you very much.
Thank you, Carlos. On the Home insurance side, I don't have a 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 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 consortium. It has been a very good year in terms of that. Again, let's see what happen after summer. Normally, October is not a very good month in terms of atmospheric, although last year was very good. I see this combined ratio very powerful.
Of course, we expect to be in that line, I don't know if it's going to be an 83% or it's going to be closer to 90%. Again, being on those grounds, I think it's a very, very good number and very solid number for the company. In terms of the payout policy, now you should expect two quarters, two payments throughout the year, and one complementary after the year-end. In terms of the dividend payout, well, it is true that we have a 196.3% solvency ratio.
Very happy on that, coming from a 183% on the first quarter. Again, solvency ratio is also has a lot of seasonability effects, with the premium provision and all other adjustments such as renewals and so on. We have to wait and see. Very happy on a 193%, on those grounds, we will see what the board decides in terms of payout.
The next question comes from Juan Pablo from Santander. Now your line is open.
Hi, good morning. Thank you for taking my questions. I got two questions. First one is regarding solvency. Solvency ratio performed very well this quarter. You mentioned that one of the reasons the revaluation of the portfolio recognized in equity. If you could elaborate a bit on that one. 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.
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 devolution of the unrealized capital gain or losses of the portfolio. I think as of March, our portfolio had unrealized losses of EUR 1 million or gains of EUR 1 million. On this quarter, the unrealized gains were very close to EUR 10 million. When you put solvency points on top of that has a lot of impact. 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?
The digital sales.
Yeah. Well, I think it's going quite well. If you take a look at these numbers that we started to post two years ago, it is true that on the first quarter we were in the neighborhood of 9%, and I think we are in the neighborhood of 13%, 14%, [14%]. The evolution is very good. Again, I repeat, these are sales that they don't have any human interaction. They are completely done by the client, the entire process. The intention of the company is to keep on doing that or keep on fostering digital sales, not only because of the savings that you might have on the expense ratio, but also because I think it's much better for in terms of customer satisfaction and so on.
Thank you.
There are no further questions at this time. I will now hand back to Beatriz Izard, Head of Investor Relations. Beatriz, your line is open.
Thank you. We have some questions received through the platform. The first one is coming from Paco Riquel . Hello, Paco. Can you explain basically the differences in between the loss ratio in local and IFRS 17?
Well, I assume that you want to understand why the combined ratio in one side is one number and the other side. It's very kind of difficult because you have a lot of adjustments. You have the statistical adjustment, which is not exactly the same on IFRS 17 as in local. You have the adjustment of the risk margin, which is not exactly the same as the percentile. They are different adjustment. If you take a look at backwards, there have always been those difference between the combined ratio in local and in IFRS.
Having said that, the combined ratio in local, I think year-to-date is 92.4%, which I think is the best combined ratio you might find here in the insurance sector in Spain. Very comfortable on that. It is true that on IFRS it's better. Again, our official numbers are on IFRS 17, and the case is that we have a very competitive combined ratio. Again, on local it's 92.4%, which I'm very comfortable on that. The mismatch or the difference are different adjustments that you have to do in the 2017 regulation.
The next question comes from BofA, from Nimrat Kaur. The first question is, you mentioned continued pressure on claims cost in the press release. Are you seeing an ongoing increase in claims inflation? Your second quarter 2026 loss ratio of 69.2%, how much that improvement is supported by better claims frequency, versus a continued sustainable improvement?
Inflation is something I think that we follow very much. Indeed, we have an internal observatory of inflation where we not only look at the inflation itself, but also the impact that it has in different materials, raw materials that impacted our business, especially on the repair side of the business. As of today, the evolution of the average repair cost or the repair price index, which is something that we follow, is more or less contained. We are concerned, but it's not evolving bad. We will see what happen if the Brent price stays on the nineties and things like that.
We need to monitor that. Again, I always say the same thing. If the risk premium of the company, which is a matter of frequency times cost, increases, we will need to adjust average premiums as we did back in 2022 and 2023. We monitor very much that. The split. I don't have the split between frequency and average cost. It's something that probably we can share later with you. Again, frequency is performing quite in line as we budgeted at the beginning of the year. Some deviation maybe on the bodily injury frequency, better on the materials frequency. In general, terms of performance up to now, it's very much in line as our expectations.
Thank you, Carlos. The second question from Nimrat says, your home expense ratio is 30.5% in the second quarter of 2026. This is the first time it's gone above 30% since the second quarter of 2023. Could you explain what is driving that and how we should think about it going forward?
Well, going forward, in the medium long-term, you should expect the expense ratio of the Home insurance going down, because at the end, it's embracing the total expense ratio of the company. Our objective has always been becoming more efficient and more efficient. If you take a look at the company as a whole, the expense ratio keeps on improving every quarter. What has happened in this quarter?
Well, the home insurance is still a very thin business. Whenever you put a little bit more pressure on marketing, that expense ratio goes up. I think we put a little bit more pressure on market trying to help the upper lines of the company. Again, the strategy of the company is improving that expense ratio, and it is true that having a combined ratio below 90%, you can afford to spend a little bit more on marketing.
Thank you. The third question is, could you please explain why the real estate rental income continuation has been pushed out to June 2027 from November 2026?
Well, it's not something that you should take by something that's going to happen. Again, we have a big building in prime Madrid, which we are renewing entire business. We don't have any rentals nowadays. We are talking about a 10,000 sq m building, which provides quite a bit of real estate income. We pretend or we intend to finish the works by the end of the year. We will find a tenant that given the fact that it's in prime Madrid and there is very few competitors in that, will be not very difficult to find a tenant.
You have to negotiate with them, when they start, they need to do their implementation in the building and so on. We are kind of conservative in getting numbers on the first half of 2027. Again, you shouldn't take that by granted because it's basically trying to be conservative as we always are. The good thing is that the asset that we have is first quality asset. The rentals on that will be very high, because, again, we are talking in the center of Madrid, and whether it will be in the first half of 2027 or in the second half is not very relevant.
Thank you. Now the last question comes from Marisa Mazo, from [GVC Gaesco]. She's asking about the investment in technology. What's the total investment? How much are compulsory? How much is about enhancing capabilities? What are the estimated future savings as well?
Well, on the future savings, I think it's too soon to tell you. I don't think we do things based on saving money or saving expenses. I think that is not the real strategy. The real strategy is putting technology towards get a much better customer experience, get a much better customer knowledge so we can offer different products to our clients at the right moment, but not because of the spend savings.
We are a very efficient company and we will always be with investment in technology or not. The company is really embracing in improving productivity. To do so, we have to invest money in tools in order to know much better our clients, CRMs, things like that. That's something that we are going to do on looking forward for the next two years. In terms of numbers, I think it's kind of difficult to share with you numbers nowadays.
Thank you, Carlos, and thank you all for joining. The investor relations team remains available for any further information.
Thank you very much, and have a safe summer.