Earnings call transcript: Linea Directa sees 72% net income rise in Q2 2025

Linea Directa Aseguradora SA reported strong financial results for the second quarter of 2025, with net income soaring by 72% year-over-year to €43.8 million. The company’s stock reacted positively, rising by 1.48% to €1.37 in pre-market trading. The insurer’s robust earnings were bolstered by new product launches and a substantial increase in their customer base. According to InvestingPro data, the company maintains a healthy overall financial score of 2.81 (GOOD), with particularly strong profitability metrics. The company’s revenue growth stands at 5.38% over the last twelve months.

Key Takeaways

• Net income increased by 72% year-over-year.
• Customer portfolio expanded by 241,000 policies.
• Solvency margin improved to 193.2%.
• Stock price rose by 1.48% following earnings announcement.
• New insurance products launched, including anti-occupancy and pet insurance.

Company Performance

Linea Directa demonstrated impressive growth in the second quarter, significantly outperforming its peers in the insurance sector. The company’s focus on product diversification and innovation contributed to its strong performance, with new offerings like anti-occupancy and pet insurance driving customer acquisition. The firm’s ability to quickly adapt pricing and strategy has been a competitive advantage, enabling it to capture a larger share of the growing motor insurance market in Spain.

Financial Highlights

• Revenue: Not specified in the earnings call.
• Net income: €43.8 million, up 72% year-over-year.
• Return on average equity: 23%.
• Solvency margin: 193.2%.
• Combined ratio: Improved to 92.3%, down 3.2 percentage points.

Market Reaction

Following the earnings announcement, Linea Directa’s stock rose by 1.48% to €1.37 in pre-market trading. This increase reflects investor confidence in the company’s strategic initiatives and its ability to deliver strong financial results. The stock is currently trading near its 52-week high of €1.69, showing impressive momentum with a 26.35% return over the past six months. InvestingPro analysis suggests the stock is currently fairly valued, trading at a P/E ratio of 18.65x. With a low beta of 0.31, the stock has shown relatively low volatility compared to the market.

Outlook & Guidance

Linea Directa remains optimistic about its future growth prospects. The company expects to maintain double-digit growth and keep its combined ratio in the low 90s. InvestingPro subscribers have access to additional insights, including 7 more ProTips and detailed financial health metrics that can help investors make more informed decisions about the company’s growth trajectory. The Pro Research Report, available for this and 1,400+ other stocks, provides comprehensive analysis and actionable intelligence for smarter investing decisions. It plans to focus on cross-selling opportunities and further enhance its health and home insurance portfolios. The guidance for the upcoming quarters includes EPS forecasts of €0.02 for Q3 2025 and €0.03 for Q4 2025, with revenue projections of €305.47 million and €313.47 million, respectively.

Executive Commentary

Carlos Rodriguez Fugarte, CFO, stated, "We are delivering high organic growth and profitability," highlighting the company’s strategic agility. He emphasized Linea Directa’s ability to quickly adjust strategies, which has been crucial in outperforming traditional competitors. Fugarte also noted the importance of gathering and retaining clients as a key focus area.

Risks and Challenges

• Market competition: Increased competition in the motor insurance sector could pressure margins.
• Regulatory changes: Potential changes in insurance regulations could impact operations.
• Economic factors: Macroeconomic conditions, such as inflation, could affect consumer spending on insurance products.
• Technological advancements: Keeping pace with technological changes is essential for maintaining competitive advantage.
• Customer retention: Ensuring high levels of customer satisfaction and retention remains a priority.

Q&A

During the earnings call, analysts inquired about the source of new motor insurance clients, which were attributed to both new car sales and competitive gains. Questions also focused on the company’s pricing strategy, with the CFO noting an average new business pricing increase of 5-6%. Analysts expressed interest in the firm’s focus on more comprehensive health insurance products, which are seen as "sticky" and capable of driving long-term growth.

Full transcript - Linea Directa Aseguradora SA Compania de Seguros y Reaseguros (LDA) Q2 2025:

Beatriz Zeissar, Head of Investor Relations, Linea Directa: Good morning to all of you, and thank you for joining the call today. Welcome to Linea Direpta’s First Half Results Conference Call. Presenting today is Carlos Rodriguez Fugarte, our CFO. And after the presentation, as usual, we’ll open up the call to Q and A. And with these words, over to you, Carlos.

Carlos Rodriguez Fugarte, CFO, Linea Directa: Thank you very much, Beatriz, and good morning to everybody on the call. We are very pleased to deliver an excellent set of results for the first half of the year. As always, I would like to start by commenting the key figures on Page five. In a nutshell, we are delivering high organic growth and profitability, excellent return on equity and a strong balance sheet. Business growth accelerated to 10.8%, with Motor at 11%, Home at 7.5% and Health at 13.6%.

The portfolio of customers grew in more than 241,000 policies to 3,580,000. Combined ratio stood at 92.3%, down 3.2 percentage points. Net income rose to EUR 43,800,000.0. Return on average equity rose to 23. And finally, solvency increased to 193.2%.

Moving to Page six. Here, the message I would like to convey is consistent with what we said in 2024, 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 posted a better underwriting result from a strong revenue growth and sound six months combined ratio with further improvement in claims and expenses. The evolution of the financial result was remarkable, up 33.9% with higher income from the bond and equity portfolio and the significant revaluation of investment funds. And all things together led us to a profit after taxes of €43,800,000 up 72% over the six months of 2024.

As with regard business volumes and clients, all line of businesses reported significant growth. Worthwhile to mention the Motor segment with 62,000 new clients in the second quarter stand alone. In Health, our more comprehensive products grew by 13.6%. Moving to Page eight. The positive evolution on the combined ratio was very solid from 95.5% in the 2024 to 92.3% as of June 2025, down 3.2 percentage points.

Once again, I would like to reinforce key messages: careful subscription and tight cost control. We are continuously working towards automatic processing, streamline the business in general as well as improving our digital setup. We consider the expense ratio to be a key competitive advantage. Now I would like to move to a more detailed explanation by line of businesses. In Motor, we further accelerated growth in the second quarter with premiums up 11% on the back of improved sales and retention.

We were able to exceed the market growth in more than two percentage points. The combined ratio stood at an excellent 92%, down 3.6 percentage points as compared to the first half of twenty twenty four. Also, the home line of business posted significant growth with premiums up 7.5% in the first half of the year. The combined ratio continues to be exceptional at 88.9%. In Page 11, Health posted growth of 13.6%.

The figures are benefiting from more comprehensive products. Specialist and Complete products now account for more than 64% of the portfolio, which compares to 57% as of last year. On the technical side, loss ratio was driven by the increase in hospital scales. Conversely, frequencies are declining. Moving to Page 12.

Financial result was up 33.9%, driven mainly by the increase in the mark to market of mutual funds. We also posted an increase in income in the bond and equity portfolios. Also, let’s remind last year, we had an impairment of EUR 1,300,000.0 in the corporate bond French company, Atos. As with regard to the composition of the investment portfolio, government bonds gained further weight in the second quarter with longer duration, which rose to four years. The underlying return on of the portfolio stands at three twenty two basis points and average reinvestment yield stood at two sixty one basis points in the quarter.

On our solvency position, solvency margin rose to 193.2%, which compares to 180.2% in the first three months of the year. The latter has been already adjusted for the first interim dividend of 2025 of EUR 50,000,000. Own funds were driven by the result of the quarter, the positive development in the available for sale portfolio and the best estimate of premiums. SCR increase was a function of market risk on the back of deterioration of the symmetrical adjustment and spread risk. Underwriting risk grew reflecting business growth.

To conclude, June results were strong. We delivered very consistent results. We are also developing the necessary basis for our future ambitions and much is expected from us in the upcoming years. I will now hand the call over to Beatriz to begin the Q and A session.

Beatriz Zeissar, Head of Investor Relations, Linea Directa: Thank you, Carlos. We’ll begin with the questions received from the conference call.

Conference Moderator: The first question comes from Maxime Schim from GB Capital. Now your line is open.

Maxime Schim, Analyst, GB Capital: Yes. Hi. Good morning, Carlos and Beja. Thanks for the presentation and taking our questions. I have two.

The first one is on the motor insurance. You’re capturing new customers strongly, and I was wondering if you could share more color on what type of coverage the new customers choose? Also, are they mainly new car buyers or customers coming from other companies? And then the second question is on home insurance. Any chance you could walk us through the combined ratio in the quarter?

Were there any extraordinary impacts? And what are your expectations for the rest of the year? Thank you

Carlos Rodriguez Fugarte, CFO, Linea Directa: very much, Max. Regarding the motor insurance, I mean, those 62,000 clients that we gathered in the second half of the year in the second quarter, And those are almost 50,000 that we got in the first quarter. I mean, they come from competition and they come from new car sales. I mean, Lina Directa is a player in the new car sales, but it’s a player in any transaction. So I mean, we are gathering from the market, and we are gathering also from the new business.

And regarding the type of clients that we are gathering in terms of mix of portfolio, very similar to what we have. I mean, we are a company very much focused on third parties insurance. We have also some fully comprehensive, but basically, it’s very similar to the mix of products that we have. Gathering from the market, getting new clients so that they are buying new cars. As you know, cars are sales are increasing in Spain in the neighborhood of $800,000 a year, 900,000.

So we are guiding there. And then in terms of mix of the portfolio, very similar to what we have. Regarding the home business and the combined ratio, combined ratio is good. I mean, it’s in the neighborhood of 89%. Mean

Conference Moderator: The next question comes from David Barma from Bank of America. Now your line is open.

David Barma, Analyst, Bank of America: Good morning. Two questions on motor, please. To start with, it seems the average premium growth accelerated a bit in Q2, which is a bit at odds with what we discussed last quarter. Can you talk about new business pricing please and how it has evolved since Q1? And then staying on motor, the loss ratio ticked up a little bit by two percentage points compared to Q1.

Can you explain what’s going on there? Is it frequency or a little bit more of weather? You just discuss that, please? Thank you.

Carlos Rodriguez Fugarte, CFO, Linea Directa: Thank you very much. Let me first try to answer Max because we were missing one of the questions in the combined ratio of the Home business. The Home business, well, combined ratio is very healthy, I mean, in the neighborhood of 89%. Nothing weird there, very much in line what we have been posting in the last quarter since the end of last year. So while we’ll see the latest rains and how they impact the business, we’ll see what happens on the autumn where rain comes into place.

Very confident that our levels of the combined ratio will be in those grounds throughout the year in the neighborhood of all those 90%, 90%. And then on the average premium on the motor insurance, it is true that probably in the last quarter, we have increased a little bit our average premium on the business, on the new business. Well, at the end, as I always said, I mean, we try to individualize prices on our clients and try and adjust pricing to risk premiums. So at the end, it’s a matter of risk premiums and adjusting prices. The market is increasing average premiums above 7%.

In our case, I think our news business is still below that. So we are taking advantage of that, and we are taking advantage of the homework we did in the past. And regarding the loss ratio in the combined ratio of the motor insurance, well, I think it’s very similar. I think that there is no major changes. I mean it could be some seasonable impacts, but at the end, very, very happy with the loss ratio of the motor insurance, especially gathering more than 100,000 new clients to the business.

David Barma, Analyst, Bank of America: Thank you. Can you just share on your from your view the what the new business pricing was on average in Q1 and Q2, please?

Carlos Rodriguez Fugarte, CFO, Linea Directa: Well, the I don’t know what you mean by the average. You mean the average pricing of that? I think the average price for the new business is in the neighborhood of an increase of 6%, something like that. That’s the evolution of the new business. I mean, average premiums going on the rise, I think, in the neighborhood of that 5%, 6%, I mean.

David Barma, Analyst, Bank of America: And that was lower in Q1, right?

Carlos Rodriguez Fugarte, CFO, Linea Directa: Yes, it was lower in Q1. But it’s I mean, it’s we don’t have a year strategy on average premium. I mean, we tend to adjust pricing accordingly to how we see the situation and according to the risk premiums of the clients. I mean I think one of the beauties of Linea Directa is that our capacity to change the strategies in terms of pricing and in terms of gathering clients is much more faster than traditional companies as they have more difficulties on that. So basically, it’s a strategy that is ongoing always.

David Barma, Analyst, Bank of America: Thank you.

Conference Moderator: Next question comes from Karth Sperrykoto from Caixabank. Now your line is open.

Karth Sperrykoto, Analyst, Caixabank: Yes. Hi, good morning. A couple of questions from my side as well. So on the Motor segment, maybe if you could discuss a bit how you expect the evolution of gross premiums throughout the year? What type of growth should we see at year end?

Should we expect it to be at double digits? And how does that breaks down a bit into policy growth and price increases. Still within the Motor segment, your expectations on the cost the combined ratio evolution for the second half of the year, whether you still expect it to remain at low 90s in the year as a whole? And then if I may, just a third question on the Home Insurance business. We’ve seen this quarter two percentage points improvement in the combined ratio.

I just wanted to see whether there was here any specific item driving this improvement, whether you see these levels Or perhaps if you could give us some range on where you think the combined ratio there will be throughout the year? Thank you.

Carlos Rodriguez Fugarte, CFO, Linea Directa: Thank you very much, Carlos. On the Motor segment, well, I mean, the evolution of the gross written premium for the company, I think, has been excellent since last year. I mean almost one years point ago, our growth was in the neighborhood of 2%, 3%, and now we are on a stand alone basis, more than 12%. Our the evolution of sales and especially the evolution of retention has been very, very positive throughout the year. My expectation is that we will be able to maintain those levels of extraordinary retention and those levels of sales.

So I hope that we will be able to be in those levels of double digit growth. The most important thing is that we have been able to overcome the market growth by far. Market growth was as of June in the neighborhood of 9%. And a stand alone in the second quarter was on 8.7%, whereas in our case, a stand alone, the second quarter is 12%. So very, very good news there.

In terms of the combined ratio, well, we posted 92%, which is basically the same as we did on the first quarter. I mean we feel very comfortable on those grounds. Of course, it depends very much on frequency. It depends very much on average cost. We’ll see what happens throughout the year.

We have summertime now that people go out with the car. We’ll see what happens with frequency and severity. But again, I mean, being on those levels close to 90s where the company feels comfortable, we should be there in the medium to long term. And regarding the home insurance business, well, it’s a matter of more than frequency than average cost. Average cost is more difficult to manage in the home business.

Evolution of the FOGFC has been good. It is true that we have some rain and some throughout the semester. But again, I mean, frequency is performing quite well. And also the earned premium is performing quite well, which is the other part of the equation. So again, as I said in the previous question, my expectation is that we should be in those grounds, 90s, low 90s.

Conference Moderator: The next from come from Francisco Riquelme from Alantra. Now your line is open.

Francisco Riquelme, Analyst, Alantra: Yes, hello. Thank you for taking my questions. My first one is if you can please elaborate on the bell for premiums and claims in the second quarter, what is driving the increase in €15,000,000 during the quarter? And connected to this, how can you reassure on the underwriting risk of the new business that you are taking? And then my second question is the growth in policies is remarkable, but it comes mainly from the motor business, which is the growth engine.

You mentioned in the past that you were trying to focus on cross selling, but home and health insurance, the growth in policies is lagging behind. So if you have any plans to reverse this trend and improve cross selling? Thank you.

Carlos Rodriguez Fugarte, CFO, Linea Directa: Thank you very much, Paco. Well, the evolution of the best estimate of premiums throughout the solvency ratio, it’s very similar. And as other years, it has some seasonability sometimes. And it stood at it posted, I think, EUR 70,000,000 funds available for solvency. We’ll see the evolution of that.

But no concerns in terms of the risk profiling of customers that we are gathering. I mean we follow very much the evolution of these 150,000 new clients that we put into the company. We look at the frequencies on the short term, which means three months, six months and the evolution of the risk profiling is it’s very good. I mean so at the end, it’s not a matter of that we are gathering clients with our worst risk profile than the rest of the portfolio. So we’ll see what happens on the best estimate of premium because it has some sustainability, always that.

But again, I mean, it’s no concerns of that. And on the growth in policies, I think we put 20,000 new clients on the home insurance, which, of course, is not the 115,000 clients that we put on motor insurance, but we are happy with the evolution. We are gathering clients, which I think is a We have to keep on working on that on the home insurance. And then on the health insurance, we came from our first quarter where we lost around 5,000 clients.

And now more or less, we are in breakeven. What we decide last year after making all the changes in terms of organization on selling distribution is to focus more on more sticky products such as specialists such as Complete, I think, is working. The evolution there, the growth there is 13.6%, which is very good. But we need a little bit more time to see that in the total number of clients of Health. So again, very good in motor insurance, very happy with motor insurance and the growth.

Happy with the home insurance. We need a little bit more, about 20,000 clients or 20,000 clients. And in the health insurance, you should expect on the last part of the year that the portfolio will keep on improving.

Beatriz Zeissar, Head of Investor Relations, Linea Directa: And just to add about how can we reassure about the underwriting risk about regarding the best estimate for premiums. This is a very positive message. It’s on the contrary. I mean, this is insolvency too. This provision is a margin of future premiums, of premiums that you haven’t earned on the P and L.

So precisely, we are reassuring about the subscription that we are doing and the pricing that we are doing. So this is, yes, on the contrary, very, very reassuring.

Francisco Riquelme, Analyst, Alantra: Thank you.

Conference Moderator: There are no further questions at this time. I will now hand back to Beatriz Zeissar, Head of Investor Relations. Beatriz, now your line is open.

Beatriz Zeissar, Head of Investor Relations, Linea Directa: Thank you. So we’ll now proceed with the questions received through the webcast. We have one question coming from Marissa Mazo. Buenos Dias, Marissa. She’s asking about other insurance businesses, whether what is the key driver of specific insurance businesses that is driving growth?

Why the acquisition costs are so high in the second quarter?

Carlos Rodriguez Fugarte, CFO, Linea Directa: Well, thank you very much, Marisa. Starting from the last part of your question, why acquisition cost is higher than on the previous quarter because we have launched our retail business. We have we put some effort in acquisition cost there. I think the evolution of the new products, we basically are all packing that other caption of the information. I mean, it’s performing quite well.

Keep in mind that in the last few years, we launched anti occupancy insurance. We launched the pet insurance. We have launched since April the retail insurance. And all things together, our technical result is already in breakeven or almost in breakeven, so very happy. Acquisition cost, while basically doing some effort in terms of marketing, brand awareness and so on in the new type of products that we have.

Beatriz Zeissar, Head of Investor Relations, Linea Directa: Thank you, Carlos. We have no further questions on our webcast. So thank you, and thanks a lot for joining us today and for your questions. As always, the Investor Relations team is here to help you should you have any further queries.

Carlos Rodriguez Fugarte, CFO, Linea Directa: Thank you very much, and you have a nice summer for all of you.

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