Línea Directa has presented net losses of 15.5 million euros in the first half as a result of the impact of inflation and compared to the profits of 48.9 million obtained in the same period of 2022, as reported this Friday in a press release sent to the National Securities Market Commission (CNMV).
According to the insurer, this situation is due, first of all, to "persistent" inflation that continues to cause a "strong increase" in repair and replacement costs in the auto industry, the one with the greatest weight in Línea Directa's accounts.
Added to this is the 8.5% increase in the injury scale for this year, which is added to the 4.1% rise in 2022 and which has generated greater spending on personal compensation for traffic accidents.
The entity's financial result stood at 16.9 million euros, 7.9% less. In recurring terms, however, it increased by 2.6% if realized capital gains are excluded.
The company states that it is already applying measures to optimize claims management and contain the cost of claims. "This, together with the rigor in the selection and underwriting of risks, are the two main levers already activated by the company to offset the effect of inflation on service costs," reports the insurer.
The CEO of Línea Directa, Patricia Ayuela, has assured that "all the necessary measures are being taken in an inflationary situation like the current one, which we already anticipate would be complex".
"We are tightening underwriting, adjusting premiums to the risk of each client and making claims management more efficient. All of this will make us emerge stronger in order to take advantage of the opportunities that the change in cycle will bring. Cost inflation, although it shows incipient signs of deceleration, has consolidated at high levels and continues to affect the margins of the sector as a whole and, temporarily, the results of Línea Directa. In any case, in the first six months of the year we have demonstrated our ability to grow steadily profitable in revenue and operate with increasing efficiency," he explained.
Premium income was 491.9 million euros, 3.6% more than in the same period of 2022, thanks to the growth in the entity's turnover in all its business lines (auto, home and health).
The company's insured portfolio stood at 3.47 million customers at the end of June, which represents a slight decrease of 0.3% that would be fully offset by the improvement in billing.
"In addition, it is fully aligned with the action plan announced by the slim director at the general meeting of shareholders, for which the company is applying a rigorous subscription and applying an individualized rate adjustment according to the risk of each client in the current inflationary context", explains the company.
In this sense, it points out that the earned premiums, whose effective registration in the income statement is computed throughout the 12 months of the contract, increased by 4.6% in the first half of 2023. "This is the highest growth in earned premiums recorded by the group in four years, since the first half of 2019," he adds.
By branches, Línea Directa's revenues in the automobile branch exceeded 396 million euros, 3.4% more, chaining six consecutive quarters of improvement in billing, although the customer portfolio stood at 2.56 million policyholders, 0.8% less.
For its part, the home business line, despite the pressure of the increase in official interest rates on the real estate market, grew by 1.2% in the number of clients, to 746,000 policyholders, and increased premium income by 5%, to 75.3 million euros.
Along the same lines, Vivaz, the company's health insurance brand, registered an improvement in premium billing of 5.1%, accelerating its growth to 7.5% in the second quarter, up to 19.8 million euros. In addition, health policies grew 1.6%, to 108,000 insured, "leveraged on a prudent risk selection strategy."
OPERATING EXPENSES REDUCTION
On the other hand, Línea Directa reports that gross operating expenses fell by 4% year-on-year in the semester, and 7% only in the second quarter. In this way, the company closed June with an expense ratio of 19.7%, 0.1 percentage points less than at the end of June 2022. This indicator also fell in the second quarter to 18.3%, 3.9 percentage points less than that registered at the end of the 2022 financial year.
The insurer affirms that this "positive" evolution of expenses is a consequence, on the one hand, of the "recurring discipline" in the company's general expenses and, on the other, of the advances in the optimization and digitization of internal processes and services achieved by the group as a result of the efficiency plan started last year.
For example, it points out that it has already begun to apply Artificial Intelligence in operations such as the opening of claims. In addition, it highlights that 87% of customers are already digital, more than 56% of car insurance reports and tow truck requests are managed through digital channels and 46.5% of home claims are filed this way.
"All this is being reflected in an increase in productivity, so that the volume of premiums per employee of the entity rose by 7.5% in the first semester," he adds in this regard.
The group's loss ratio stood at 88.9%, 18.7 percentage points more than at the end of June 2022, while the combined ratio rose to 108.5%, with an increase of 18.5 percentage points.
In the second quarter, the company strengthened its solvency margin to 186%, with an excess of 162.5 million euros over the required capital and 3.1 percentage points more than at the end of the first three months of the year.