Linea Directa Aseguradora SA Compania de Seguros y Reaseguros

MAD:LDA

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, and welcome to our conference call to discuss September 2022 results. I am [indiscernible], Head of Investor Relations. As usual, our CFO, Carlos Rodriguez [indiscernible] will first walk you through the slides, and then we will be happy to take any questions you may have. Now let me turn the call over to Carlos.

[Carlos Rodriguez, executive]

Good morning. Thank you, [ Beatriz ], and welcome from my side as well. We start as usual with the highlights for the period in Slide #5. Overall, our fundamentals are intact, yet our performance is not immune to inflationary pressures. The unique combination of macro factors has resulted in skyrocketing prices impacting the cost side of the P&L. On the other hand, we are pleased to present a strong performance on the commercial side of the business and on our efficiency metrics. Policyholders grew 3.5% and premiums 4.1%.

By line of businesses, we are displaying very solid development across all segments. Motor grew at 2.9% and with an acceleration in the third quarter, reaching a 3.5% increase in that quarter. Combined ratio stood at 92.9%. Expense ratio stood at an excellent 20.1%. And ratio even better than that of 2021. Solvency ratio as of September was a comfortable 189.1%. And return on equity stood at 24.2%. Moving on, Slide 7 provides our regular update on the Spanish motor market, clearly affected by a record high inflation and hence, a very complex environment. CPI rose to 8.9% in September with underlying inflation rising to 6.2%. These numbers are directly translated into a sharp increase in the cost of claim for the industry, especially in the second and third quarter of the year. Sector premiums are up 3.2% as of September. Average premiums are clearly on the rise, although its positive impact in terms of P&L will be seen in future quarters as gross premiums convert into earned premiums. Turning to Slide #8. Home continues with a positive development. Home sales continue at a good pace, although slowing down due to the increase in borrowing cost. House sales were up 21% in July. Sector revenues grew 5.7% in September, with prices rising across most of the sector. As with regard to the Spanish health market, while the inflow of new customers is slowing. Turnover for the industry continues to report significant growth.

Premiums reflect higher health care costs and hospital tariffs. Let's move on to the main figures for the year. In the complex environment, I just described the company's performance on the commercial side shows a positive trend. Premiums were up 4.1% on the year, 3.5% in this quarter and 5% in September. Customer increased by 3.5%, together with historical retention rates. Our technical result is fully explained by the unprecedented increase in the cost of claims in all lines of businesses and also by higher frequency in motor and home. Financial results include realized gains of [ EUR ] 7.8 million. mainly mutual funds with the aim of reducing P&L volatility prior to the interest in force of IFRS 9 in 2023. We also realized capital gains in foreign currencies in the third quarter on the U.S. dollar rally. Excluding such effect, financial results will have grown 4.5%, driven by higher dividends on the equity portfolio. So all things considered lead to a solid combined ratio of 92.9% and a profit after taxes of [ EUR ] 58 million, down 32.4%. Please turn to Page 12, where you see the breakdown of the policyholders and gross written premiums by line of businesses. The portfolio increased by 3.5%, supported, as I explained before, by excellent retention rates.

Policyholders reached 3.4 million, which -- with solid growth across all segments of the company. Company premiums grew 4.1%. Motor displayed positive momentum with premiums up 2.9%. Home & Health continued their very positive trend. More specifically, if we turn to next page, the Motor segment grew 2.9%. Again, the portfolio recorded a solid growth in a still very competitive environment. Average premiums are clearly on the rise in both new business and the portfolio. This pricing trend will be gradually reflected in the coming quarters. On the technical front, combined ratio stood at a noteworthy 91.9%. Expense ratio, again, was super. The performance of the loss ratio was driven by sharp cost inflation, having a strong impact in the second, but mainly in the third quarter. With the rising day unearned premium reserve, premiums are earned at a lower rate as compared to gross written premiums. Combined ratio is well below the sector 4.5 percentage points. Please bear in mind, we are comparing with the sector latest available data as of June, and we expect the market technical margin to deteriorate sharply in the first 9 months of the year. Moving to the next slide. Home continues its excellent performance during the first 9 months of the year. Premiums keep its very positive trend, up 10.2%, a growth, 4.5 percentage points higher than the market.

Combined ratio stood at 93.4%, which is 3.1 percentage points above that of 2021. We had a remarkable performance in the expense ratio, which is gradually taking distance from the market average. On the negative side, loss ratio was affected by higher cost of claims and frequency especially in the third quarter. Moving now to the next slide. Health keeps on track. Premiums grew by more than 11%, although we are seeing a slowing growth as economy deteriorates. We continue with a prudent subscription policy and a careful risk selection while making the business more efficient quarter-by-quarter. Please let's move now to Slide #16, where we break down management ratio by line of businesses. Motor loss ratio increased by 7.6 percentage points in a very difficult context of cost inflation and to a lower extent, a rising frequency. Also, the loss ratio in the Home segment increased by 4.9 percentage points. On the other hand, Health is having an excellent performance, improving the loss ratio by almost [ 8% ] points. Expense ratio dropped to 20.1%. It is noteworthy to mention the 17.4% cost ratio achieved in the motor line of business. Overall, these ratios reflects the impact of strong inflation on the claims side and a robust performance on the company expenses. If we move to Slide #17, a consolidated loss ratio was driven by hyperinflation and higher frequency, especially in the motor but also in the home business.

47% of claims expense increase is explained by higher cost of claims for the 9 months of the year and 89% of that increase in the third quarter stand-alone. In addition, fragrancy accounts for 53% of the increase in the first 9 months, which is reduced to 11% in the quarter stand-alone. Loss ratio in Home was also impacted by inflation. As of September 2022, 25% of the year-on-year increase is explained by higher average cost of claims. Frequency was also higher as compared to the previous year. On the next slide, we elaborate on the expense ratio, which again and recurrently was remarkable. We continue with our strategy of efficiency and commitment to technology together with a strong control of overheads. Acquisition expenses are contained, thanks to higher retention rates. Let's please now move to Slide 19. As I mentioned before, in the first 6 months, we used a window of opportunity to realize gains in equities and mutual funds portfolio. We had a very high average returns. In the last quarter, we took advantage of the U.S. dollar rally to realize some gains on foreign currencies. Excluding those gains, investment result will have grown by 4.5% on the back of higher dividend income. On Slide 20, you can see equity mutual funds have fallen from 8% to 7% of the total portfolio composition.

As with regards to investment returns, the overall return of the portfolio stands at 3.5%. 2.7%, excluding realized gains. Moving on to our solvency position. The company's solvency margin stands at 189%. The main impact on eligible own funds was a drop in the mark-to-market of the available-for-sale portfolio, particularly in the fixed income portfolio as a result of rising rates. For Spark, SCR was flat in the quarter. This is largely explained by lower exposure to equities and the symmetric adjustment dropping to minus 8.1% as compared to minus 5.3% in June. To wrap up, I will say that inflation clearly affected this quarter's results and also might have damaged the entire sector. On the positive side, premium development is encouraging. We are confident that our strategy of pricing a strict cost control and high retention rates should and will provide positive performance in the medium and long term. Thank you. I will now hand the call over to [ Beatriz ] to begin the Q&A session.

[Unknown Executive]

Thank you very much for the presentation, Carlos. First, we will begin with the questions received from the conference call.

[Operator]

[Operator Instructions]

And our first question comes from Maksym Mishyn at JB Capital.

[Maksym Mishyn, analyst]

I have 3. The first 1 is on home insurance. Combined ratio almost reached 100%, and I was in the third quarter. And I was just wondering if you could give us a little bit more color on what was the reason? And how do you see the outlook, whether it was some one-offs or at least something is changing in the trend? And then the second is on motor insurance. Do you think that there are chances we get another update on [ Baremo ] next year? The pension inflation is high, and this could be another headwind for the industry. And the last one, there were some news in Spanish present deal made by repair shops and pricing practices for motor insurers. Do you see any risk to the business from this appeal?

[Carlos Rodriguez, executive]

Thank you very much, Maks. First of all, regarding the home insurance, as I tried to explain during the presentation, the evolution of the year was very positive until the third quarter and the combined ratio reflected that. In the third quarter, we have some increase in the frequency, especially due to due to [indiscernible] events and some fires, some rain. My expectation is that the combined ratio for this business will keep on improving looking forward. I mean with the time very much at [indiscernible], I think we are doing a great job on the expense side of the combined ratio. And that is what we have to do. Of course, we have increased our combined ratio this quarter, but I think it should be some isolated event. And my perception is that we will keep on improving that in the expense ratio and hopefully, in the loss ratio, as frequency will start to mile or will start to go back on the same numbers at the first half of the year. Regarding the motor and your question about [ Baremo ], yes, I think we should -- not an update on the [ Baremo ] itself.

But I think the cost will increase due to the inflation impact on some of the indemnities. So my perception is that the Baremo year will also have an impact, probably less than this year because it will only affect the new business, but my perception is that, yes, the Baremo will increase next year. And regarding the repair shops issue, Well, it is true. I have read the same news that you are telling us. Well, in that case, I mean, we'll see what happens. What I can say is that we are 1 of the few companies that we own our own repair shops that they manage close to 20,000 cars years. So we have a lot of cost control there and that is an advantage for us. Keep in mind, as I would say, that we buy directly from the suppliers as we don't allow our repair shops to buy supply. So with that, we think even with that news that we are able to cope with that. Let me say 1 thing. I mean, even that -- even though the loss ratio has increased in the motor insurance and the inflation had really an impact on the evolution of repair costs. Looking at the market, I mean, the positive gap on cost on the repair side of the business of Línea Directa is still there I mean what has happened to Línea Directa is the same thing I probably happen to the market. But when I look at the numbers of average cost per repair, [indiscernible] it is still well below the market.

[Operator]

Our next question from [indiscernible] at Alantra.

[Unknown Analyst]

And I wanted to focus on the relative performance, more than the absolute one on the particular the motor insurance business. So first, the average premium for the sector is up over 2% in the first 9 months, as you mentioned in the slide. For Línea Directa is less than 1% -- up. So I wonder if you can elaborate on what you are seeing in terms of average premium prices for Línea Directa and for the sector in general, both for the new business and for the retention of the portfolio because it seems to me that you are slower in the adjustments to the higher inflation environment. And second, on the combined ratio in motor to 97% -- the sector was 96% in the second quarter. So I wonder -- how do you see the traditional gap that you have maintained of the combined ratio versus the sector if you feel that you will be able to maintain that this cycle or not? And in particular, how do you feel that your frequency and severity of claims in motor is performing relative to the sector?

[Carlos Rodriguez, executive]

Thank you very much, [indiscernible]. Nice to talk to you, first of all, in terms of average premiums. Well, it is true. I mean, in our case, probably the price on the average premiums has happened more in the second half of the year than in the first half of the year, especially in the third quarter, I mean, we have seen our average premiums going up, that should be the trend. I mean maybe I'm lagging a little bit about the overall average market, but this is an average. I mean, if we compare to many of the companies, we are rising average premiums above. But it is true that first quarter average premiums, they were more or less flat. I think I explained that in my first call of the year. Second quarter, they start to increase, but really, really the hit on the up price has been in the third quarter. You should expect that to keep on going on the fourth quarter. And of course, you should expect that average premiums will keep on rising in 2023. In our case, we started with the new business, but now we are rising also average premiums on the portfolio. So even though we might were a little bit slower than some competitors, we are in that trend and that should be positive for the fourth quarter and for [ 2023 ]. The second question was...

[Unknown Executive]

Yes, it relates to the combined ratio.

[Carlos Rodriguez, executive]

The combined ratio -- well, we'll see what happens. I mean you will see numbers coming up next week. You will see market numbers coming up on November. My perception is that what has happened to Línea Directa in terms of inflation, which is really the bulk of the hit on the combined ratio motor business is something that is going to happen to the market to the same extent or even worse, because I think we manage costs much better. So my expectation is that our positive gap in terms of combined ratio will remain with the market. I mean I remember that in the June numbers of the industry, many companies that were already above a 100%. So we'll see what happens. So comparing to the market, I'm very positive that our combined ratio will be very competitive. And the third question was on frequency, frequency on the business. Frequency during summer has not been -- well, it has been very bad, I mean, for the entire industry. Even if you take a look at the number of people that in the roads and been the worst July in the history. September frequency came down. My expectation is that the last quarter is going to be milder.

I'm not saying that it's going to be a frequency similar to COVID periods, but I think fourth quarter frequency will be milder. So -- so in that regard, I am concerned but I'm not as concerned as on the cost side of the business. Frequency will tend to stabilize. And you know our numbers on frequency, we have seen on the last quarter that the weight of the frequency in the cost has been much less than in previous -- in July and August. So my expectation is positive.

[Operator]

Our next question comes from Carlos Peixoto at CaixaBank.

[Carlos Peixoto, analyst]

So that's my question, sorry. So the first question would actually be related with the combined ratio evolution and the cautionary pressures in the quarter. So I guess at the first half presentation, you were guiding towards a combined ratio of 91% to 92% for the full year. What should be the plated guidance on that front? And my question would be, in what extent this inflation surprise in the quarter? Because I'm assuming price whether there is some specific areas within the repair costs that are hurting you the most?

And are there ways to back out? And then the second question would be a bit of a follow-up on non-transition question on the premium. My question would be what type of increase should you aiming for to have on the average premium over the coming days -- over the coming quarters, I mean, or if you want it in another way, how much of the inflationary pressure do you expect to be able to pass through to clients?

[Carlos Rodriguez, executive]

Well, in terms of the combined ratio, Carlos, my forecast is that we are going to be by the end of the year by that 93% that I explained the last time we talked. I mean, still [indiscernible] in September has not been very good in terms of combined ratio, but I still think that we will reach that number in the neighborhood of 93%, [ 92 ]%. We see the evolution of inflation. We'll see the pollution of the frequency business. Again, frequency on September was much better than in summer. So yes, we should be that in that 93%. And in terms of average premiums, I don't have a number of how much we're going to rise average premiums. I can explain the strategy of the company, which is, of course, based the increase in average premiums based on the risk premium of the business of each individual, and we will adjust average premiums.

Of course, with inflation heating so hard, the cost side of the business. Our intention is not only to increase average premiums in the new business, but also keep on increasing those in the portfolio. The thing is that the increase in average premiums, the translation of that into the P&L, it takes time while the translation of the cost side is immediately. But again, I mean, third quarter increases -- they were more than on June on July and August, and that should be the pace. So yes, and I think it's going to be a market allele intention to raise average premiums. We'll see what happens with combined ratio, but my expectation is that the motor sector in Spain is going to be very close to 100%.

[Operator]

We will now move on to our next question from Freya Kong at Bank of America.

[Freya Kong, analyst]

I've got 3, please. First one, could you provide some rationale for continuing to push for growth in the motor and home insurance markets given how difficult the backdrop is? And at what point in the market, at what point do you think that growth doesn't look sensible anymore for Línea? Second question for Home. Could you give us how much atmospheric events contributed to the weakness in Q3? I think you usually provide a call out for this. The split would be helpful to understand underlying versus one-offs. And third question on solvency. You have had a significant drag this quarter from rising interest rates, which is beyond your control. If rates keep going up, this could see your solvency levels dip below 180%. How should we think about this and the safety of the dividend?

[Carlos Rodriguez, executive]

Well, the rationale -- I mean the rationale for growth in motor is that motor represents 85% of our business. I mean we are a multi-insurance company. But of course, we have a lot of focus on the motor insurance. What -- what we have to do is to keep on growing. I think when the market is in difficult times, which I think is now in difficult times, the competitive advantage for Línea Directa is clear.

We have grown our average premium in 2.9% coming from a flat year in 2021 [indiscernible]. The number of clients, I think they have increased by 2.4%. So -- so our intention is to keep growing in this business, growing with higher average premiums and trying to grow our market share in the business. I think it's the first time this quarter this for the last few years that we have increased our market share from 6.7 to 6.8. So that's a good indicator. We like the motor insurance business. We know it's a difficult business, especially this year because of inflation, but I think the fundamentals of the company are there, are intact, and our intention is to keep on growing while our competitors will be focusing more on how they manage the cost side of the business. Regarding the home insurance atmospherics, I think that has a number. One of before telling you the number of atmospheric really, really had an impact on September and late August. Before that, the year was very good on frequency. But here, [indiscernible] is not a matter of how much is a matter of when it happens because normally, more or less, it's the same figure every year.

[Unknown Executive]

This is [indiscernible]. Loss ratio excluding atmospheric events, would have been 58%. So you have 3 percentage points of atmospheric included in the loss ratio for home insurance.

[Carlos Rodriguez, executive]

And finally, on the -- and finally, on the solvency question, it is true what you're saying, I mean, we depend very much on the evolution of our portfolio and the evolution of interest rates. I mean they hit this quarter, this year -- this quarter has been 19%, [ EUR ] 90 million. Well, we are close to [ 190 ]. We work very much on not only on the own funds, but also on the SCR. -- theirs has been flat, and we manage that by reducing the equity portfolio, but reducing a little bit the liquidity of the company. So -- our goal is to be over 180, and I don't see that, that number is somewhat parties. I mean we maintain that expectation, and we should be above 100 -- even if we pay dividends, we should be about 180. Still today, I don't see a problem there.

[Freya Kong, analyst]

Okay. Just to clarify, that loss ratio for home ex atmospherics was 58% in Q3.

[Unknown Executive]

Yes. That's for the accumulated figures. If you want Freya, I can give you the stand-alone figures for the quarter.

[Freya Kong, analyst]

Okay. Okay. 58% for 9 months.

[Unknown Executive]

For the 9 months, yes.

[Operator]

Our next question comes from Thomas Bateman, Berenberg.

[Thomas Bateman, analyst]

Could you just give us a quick update on any contract renewals that are coming out, particularly in motor over the rest of the year and maybe early into 2022 that could potentially, I guess, add to the inflationary concerns. And just on the home insurance, thank you for that figure for the loss ratio excluding store. What's like a normal run rate for Línea Directa across the quarters? Yes. And final question, just on the -- actually, the third question on motor, please. And I guess there's been quite a pickup in inflation -- and you seem to suggest this is all kind of core underlying inflation with no one-offs. Is that right? And maybe if you could just confirm that, it seems to be quite a big pickup in the quarter. And finally, just on -- you said you benefited from the U.S. [indiscernible] Valley. Can you just explain a little bit the actions you took on the investment portfolio to mean that you can benefit from that?

[Carlos Rodriguez, executive]

Well, on the contracts renewal, I assume loom on the contract renewal, I assume we are talking more on the on the supplier side of the business. Well, when we manage -- we've been managing that for the entire year. It's true that on the first quarter, on the first quarter, it was very mild.

But of course, I mean, suppliers, I guess, when they realize that inflation was here to stay, while they put a lot of personnel pricing. I mean, we have a very close relationship with providers with suppliers, but it's true that we have to cope with this situation. So -- looking forward, I mean, this year, all the contracts are already renewed. Of course, what we have tried is to increase the average duration of the contracts. I mean, not signing only 1-year contract, but also trying to get a comfortable contract for the coming years. So the inflation will hit the company on a continuous basis, but inflation if it's on the 8% or 6% underlying next year is also going to have an impact. My perception is that going to be milder than this year because we have -- we got a real hit on inflation. But again, I mean, suppliers if there are cost increases, they try to translate that to you. We manage that as we can on -- and my perception is that next year will be better in terms of rising of cost, but anybody is still there with an underlying inflation of 6%. Regarding the home insurance -- the home insurance, I'm not sure about the question.

[Unknown Executive]

I think he's asking about the loss ratio. I mean what can we expect going forward on home insurance.

[Carlos Rodriguez, executive]

Sorry, sorry, Okay.

[Thomas Bateman, analyst]

Yes. What's the other -- but also what's the normal run rate for atmospheric across the year?

[Carlos Rodriguez, executive]

Well, home insurance, loss -- I mean, if we take a look at the combined ratio of the home insurance, I'm very happy about the combined ratio, especially on the expense ratio -- of the business. I mean we keep on improving that. We are much better, I think, than the market. The market is in 35, so we are in 32. So happy on that. And then on the loss ratio, Well, again, it was not a very good quarter for us in terms of frequency.

My expectation is that we should improve a little bit in the fourth quarter, but probably the loss ratio should be more or less stable by the end of the year, and you should expect a number very similar as the 1 we have the 1 we have some atmospherics. If we don't have some atmospherics, I think it will improve. But we'll see what happened on auto because normally, at the end of the year is not very good in terms of atmospherics.

[Unknown Executive]

Yes. The next question, Tom was referring to, if we have really a pickup in inflation, particularly in this 3 -- third quarter?

[Carlos Rodriguez, executive]

Yes. I think you could say that. I mean, the third quarter really has been the pickup of inflation. Of course, as I explained before, I think at the beginning of the year, everybody was waiting to see whether this is inflation on our price was going to be there for good or it was on stores.

Once they have seen that it doesn't look any good for the year, we really have the hit on the third quarter. We will still have some inflation impact on the fourth quarter, but really, really the hit what has been on the third quarter. And again, I think frequency on the fourth quarter will be better, that will mean less repair cost for the business. So hopefully, we'll be there. But in terms of combined ratio being very efficient on the cost side of the business. My expectation is that the combined ratio of the motor insurance by the end of the year should be in the neighborhood of 93%.

[Unknown Executive]

Yes, in the foreign.

[Carlos Rodriguez, executive]

The [ action ] in the foreign currency. Well, we have a very small position on the home insurance business on the foreign currency, sorry, in the fixed portfolio. And what we see is that dollar pickup, the rally of the dollar was very good. And what we decided is to make some capital gains on the fixed income portfolio.

Nothing fancy. I mean we are not talking about big numbers, but it's the management of the portfolio when we see that -- our position in the dollar was very positive. We decided to realize capital gains. Anyhow, if you take the look at the investment portfolio and the evolution of it. I mean I think we posted EUR 26 million in investment income. And normally, we move on a yearly basis, very close to EUR 30 million. If you take back a low cost [ 2017 ] to [ 2022 ], normally, that is the number. So you should expect those numbers by the end of the year. I mean, we are not doing anything to increase our investment income. We basically take opportunities when we see there is an opportunity. And I think with the dollar situation, it was a good opportunity to reduce our dollar position. But again, nothing fancy in the small numbers.

[Operator]

Our next question comes from [indiscernible].

[Unknown Analyst]

Two follow-up questions, please, if I may. First one is on the solvency ratio. I mean you mentioned the 180 target is still a target and above that, you will be paying dividends. What actions you contemplate in order to protect this -- your target? Because if the markets continue this volatility, I've seen that you have marginally increased the equity exposure, and we don't know yet what way it will end. But what other actions could be taken by the company to protect this 180 target. So this is 1 question. The other question is regarding the health insurance. So I've seen the growth rate is very good and the pace is amazing. I wonder if you could refresh the target growth rate and target market shares that you have for this segment, please.

[Carlos Rodriguez, executive]

Thank you, Fernando, and welcome. On the solvency ratio, well, it's to that Solvency too, it doesn't give you a lot of tools to manage your solvency position, I mean, because it is very much regulated. The only thing you can do is, of course, work on the -- work with very, very few tools. One of the things that normally is what we are seeing with volatility [indiscernible] adjustment of the symmetric adjustment. You know that [ EPA ], they could manage this adjustment by plus 10, minus 10, We are in minus 8, coming from a minus 5. I think that is the way the regulators the try to help the insurance sector, the insurance sector in terms of volatility of the solvency ratio.

Of course, we do some things in order to help to have that. We have reduced a little bit of our equity portfolio. We have reduced a little bit our liquidity in order to help that. But there are very few tools besides the help of [ Yopa ]. Again, keep in mind that we are in EUR 190 million after paying EUR 22 million in dividends by the end of September. If you take our mortalities in the sector, I think the solvency ratio is way below that 190. So I'm still comfortable that we are always looking at the evolution of the market. It is true that September was a very bad month in terms of the -- the portfolio performance due to the interest rates. But still, we are kind of comfortable in the numbers that we are. But again, tools, managing a little bit the portfolio. You know -- and of course, with this volatility, I expect [indiscernible] to keep on maintaining that adjustment in the neighborhood of 8% -- and on Health, we don't have any targets on that. I mean we are happy with the evolution of not only on the premium side of the business. We are also happy on the evolution on the on the combined ratio. We are really doing an effort there in terms of risk profiling and you can see that on the evolution of the 9 months compared to the prior year.

And in terms of growth, I mean, I think we posted 7,000 new clients or 8,000 new clients with an increase of 11%, and we want to keep on track on that growth. It is true, as I explained during the presentation that what we are getting the feeling is that the market is not growing as fast as it used to during COVID times. I think the market is slowing down. It's still growing. I think it's growing 7.7 in gross premiums, but I think it is slowing down. So we'll see what happened. Our objective, again, is try to go to breakeven as soon as possible. our objective there is to keep on growing on clients and on premiums and of course, being very careful on the risk side of the business.

[Operator]

Our next question comes from Patrick Lee at Santander.

[Patrick Lee, analyst]

It's Patrick from Santander. I just have 2 questions, 1 on expenses and 1 on the frequency. Firstly, on expenses, expenses was pretty much flat this quarter and has been flat for many quarters, which is obviously a very strong cost control from your side.

As the inflation eventually having an impact, do you think you can still hold that cost flat in the coming quarters? Or so far, have you had to hold back investment costs, IT expenses and advertising costs, things like this to keep that flat expense, which, at some point, could create some catch-up cost pressure. And secondly, just to a bit detail on the frequency point. Looking at the immediate few quarters ahead, there's Austria seasonal in the quarter, the seasonality factors, which after the summer months should be helped in the fourth quarter. But apart from that, in the context of higher inflation, higher fuel prices, are you seeing any observable change in consumer behavior in terms of using the car less, driving slower to save costs or using public transport more, which of these things in mind could help your cost of claims in the coming quarters?

[Carlos Rodriguez, executive]

Thank you, Patrick. Well, on the expense ratio, the only thing I can tell you is that we are very happy with the evolution of the expense ratio, given the inflation situation, which also affects the general and administrative expenses of the company.

So I mean, posting at 10.1%. If you compare our expense ratio to that of 2019 is very similar, 20.1% versus 19.9%, I think, having put into the company more than 300,000 new clients. So we are very happy. We are not improving our expense ratio by cutting costs on IT, cutting costs on marketing, the other way around, I mean, we are investing even more on marketing. I mean, the evolution of the expense ratio of the company is basically due to the strategy of the company being very digital, keeping in on improving our digital proposition to clients. And my expectation or my goal is to post a full year numbers even better than the ones you have seen very comfortable on the expense ratio. And I think we need to even improve that expense ratio, I mean, and you should expect that to happen by the end of the year. And on the frequency, well, we are not seeing the signs on that. I mean, I think the entire market is expecting that the fourth quarter in terms of frequency will slow down due to the economic situation and people taking public transportation with all the subsidies that the government is providing. But today, we are not seeing that. I mean October numbers are coming out good, but everybody is expecting a frequency [ to ] mile. Of course, frequency is not going to be the same as a summer because I think this year, same has been creating in Spain, especially on the mix of -- in the month of August.

But still today, we don't see that positive evolution on the frequency because people mobility or people choosing public transportation will reduce the frequency. And still, we don't see that.

[Operator]

At this time, we have no further telephone questions. I would now like to pass over to Beatriz for any [ back ] of questions.

[Unknown Executive]

Okay. Thank you. Now we continue with the questions received through the webcast. The first question comes from [indiscernible]. Thanks for the presentation, Carlos. He has 2 questions from his side. The first 1 is related to the fourth quarter dynamics. What should we expect in terms of cost increase? And how are policyholders assuming the price increases? And the second question is related to cross-selling. And how is current -- the current economic situation affecting cross-selling between business lines? Thank you very much.

[Carlos Rodriguez, executive]

Well, I will start with the last question. I mean, the cross-sell. I think the evolution of cross-selling is in a very, very positive trend. I mean if you take a look at the weight of home insurance in terms of policyholders, it weights 22% of the entire company, and that is a big number coming from a 15%, 16% the previous year. So cross-selling is working is working quite well. Is the economic situation impacting that. Well, we don't see people retrenching from buying home sales. I mean, the evolution of the home selling business is very good. And in terms of the motor insurance is mandatory -- so we don't see that even we don't see any still change in the mix of the insurance in the motor insurance. Still, we have the same numbers on fully -- comprehensive third parties. I think the market is moving a little bit that mix. But in the case of Línea Directa will maintain that. So cross-selling in general terms is working quite well for the company. And the first question was on the fourth quarter dynamics on the cost. Well, I think it's going to be a difficult year on the cost side of the business, especially because of the inflation -- in the repair side of the business.

On the general and administrative, you should expect improvements on the last quarter. On the repair cost, we will suffer also in the fourth quarter.

[Unknown Executive]

Thank you, Carlos. It seems there are no further questions. So this concludes our meeting, and thank you very much for your time. Bye.

[Carlos Rodriguez, executive]

Thank you, and drive carefully.