Linea Directa Aseguradora, S.A.

Good morning, everyone, and welcome to our December 2024 results. I am Beatriz Izar, Head of Investor Relations here at Línea Directa. As usual, we'll 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 Duarte.

Thanks a lot, Beatriz. Good morning and thank you for joining us. Before I kick off, there are a few things I would like to highlight. One is taking a more holistic view on how we are at Linea Directa. Almost four years have passed since the listing, and I would like to remember the context of what we have been through in these years. And I just wanted to take you through some of the macroeconomic headwinds we have experienced. One of them is inflationary environment. In Spain, It was very benign, unstable, and then overnight it skyrocketed. For any insurance operator, inflation is the worst enemy, especially when it comes suddenly and abrupt. This is something we have to tackle. In addition, we have seen geopolitical uncertainties, COVID, and even a war in Ukraine. Besides, the value chain was impacted globally. All things together, there has been a lot of uncertainty around us. At Linear y Directa, we had to manage all these contexts, but at the same time, and most importantly, we have kept working on the projects and initiatives that will take us into the future. So here we are. First, a leading brand, which is the company's largest asset. Our strong franchise is a key company asset and is crucial in driving company growth. Linea Directa is the number one insurance brand searching Google and leading in advertising awareness. We also come with a dynamic media strategy, ensuring an adequate ROE. We are committed to be the reference company in transparency, simplicity, and delivering always good prices. Priority for the next period is to further accelerate the customer experience to earn customer loyalty and drive financial impact. Second, as you can see, Linea Directa is not just the brand. We are committed to bring the direct model to excellence and moreover to bring digitalization wherever our clients prefer to interact with us in this way. 90% of our clients are already digital and they demand best-in-class digital assets. Efficiency and digitalization are an intrinsic part of the culture of Linea Directa. All this translates into an extraordinary expense ratio. We will continue to deliver. Two pillars sustain our ambition, growth and transformation. Our ambition must generate growth and resilient development in our insurance markets, expanding our product offering with less dependence on motor. and notable obtaining understanding returns on capital. We must deliver in productivity and reduction in administrative cost. We continue to make massive steps in digitalization. We have improved our pricing models alongside with continuous improvement in our risk selection. Our technological capabilities are constantly being optimized. We also intend to further leverage the data model to enable better decision-making in the company. I would like to stress our robust solvency and prudent investment portfolio. And finally, nothing of this will be possible without a strong corporate culture and people highly responsive to changing work environment, as recently demonstrated. To close this section, sustainability and ISE are embedded in our day-to-day operations, as shown by the continuous improvements in our commitments, marks, and ratios. Without further delay, I would like to move to section two on results. In page 12, you will find the usual snapshot. We are very happy to deliver an excellent set of results, which are very much in line with our guidance along the year. Business growth accelerated in the last quarter. Premiums grew by 4.8% and 8.6% for the 12th and fourth quarter, respectively. the portfolio of clients multiplied by 1.5 times as compared to the third quarter. Combined ratio was excellent and stood at 94.7% for the entire year and an excellent 92.6% in the quarter. Return on average equity rose to a more than remarkable 19.6%. And we are pleased to propose to the AGM a complementary dividend of 50 million euros. Solvency ratio maintains its strength at 185% considering for that. Let's turn to page number 13. Here I would like to highlight once again the acceleration in the top line. We expect this trend to continue in 2025. we had an excellent combined ratio with outstanding improvements in the claims ratio and very contained expenses. The evolution of the financial result was also remarkable, up 16% with higher income from the bond portfolio. All these led us to a profit after taxes of 64.2 million euros, which compares to the loss of 4.4 million euros over the same period of last year, a turnaround of more than 68 million euros. As with regard business volumes and clients, all line of businesses reported significant growth, both in premiums and policyholders. Growth speed up in the fourth quarter. Moving to page number 15, the progression of the combined ratio was remarkable, from 104.1% in 2023 to 94.7% for the 12 months of the year, down 9.4 percentage points. Loss ratio was the main driver of this important improvement, as the actions carried out had been earned in the income statement. The ongoing effort on administrative expenses also paid off with a progressive improvement. And we also achieve greater efficiency in customer acquisition. Now I would like to move to a more detailed explanation of my line of businesses. In motor, we further accelerate growth in the fourth quarter on the back of improved sales and retention. Premiums grew by 8.2% in the fourth quarter. The combined ratio stood at an excellent 94.8% and 93% in the quarter standalone. Also, the home line of business accelerated its growth in the fourth quarter. Clients multiplied by 2.5 times versus the third quarter, and premiums rose by 8% year on year. Combined ratio was extraordinary for the year and for the quarter, and it stood at 88.3% and 84.1% respectively. Moving to page number 18, in the health line of businesses, it has been a success to sell under Linea Directa brand and incorporate the health operations under the same company umbrella. We were also able to cross sell significantly to our portfolio. Health posted an outstanding growth of more than 17% in the fourth quarter, and the mix benefited from more comprehensive products. This growth was not at the expense of risk appetite. We have cemented our underwriting discipline and risk selection, and frequencies were lower than those of last year. Moving to page number 19, financial result was up 16.6%, driven mainly by higher income from the fixed income portfolio. As usual, we show the credited interest in a separate item. Remember that this reflects the financial unwinding of the claims provision for the prior years. The increase is explained as 2023 was a year of higher interest rates. As with regard to the investment portfolio, no major changes, only to mention corporate bonds have gained some weight in the portfolio as we were seeking for higher yields. The return of the portfolio stands at 325 basis points, and average reinvestment yield stood at 355 basis points for the year. Moving on to our solvency position, solvency margin stood at 185.4%, This is taking into consideration the proposal of a complementary dividend for an amount of 50 million euros. If this additional dividend is approved by the AGM, payout ratio will stand at 72% for the year. The breach of own funds basically show the positive contribution of earnings and the deduction of both, the 50 million dividend pay on December 19th and the proposal of the complementary dividend for another 50 million euros. Then SCR remains stable in the quarter. On the one hand, we recorded lower market risk on the back of reduced equity exposure and the decline of the symmetrical adjustment provided by the European regulator. On the other hand, non-life risk was steady with two opposite effects. As of year end, we updated the specific parameter. The USP improved due to lower volatility and improved combined ratios in the motor line of business. The increase of SCR due to increased business volume was more than offset by improve of USP. To conclude, December results were strong. The company was able to accelerate further client and revenue growth while improving considerable its combined ratios. As I commented at the beginning of my presentation, we had to tackle in the past with inflation and plenty of uncertainties. But most important of all, we didn't overlook projects that will take us into the future. Our customer-centric strategy and the capabilities to further accelerate growth and transformation have been built. I think the company is better prepared for 2025 and the following years. We have now a better company to succeed in our growth ambitions. I will now hand the call over to Beatriz to begin the Q&A session. Thank you.

Thank you for the presentation, Carlos. First, we'll begin with the questions received from the conference call.