Direct Line; premiums up and claims down

Direct Line Insurance Group PLC said Wednesday that gross written premiums were higher in the first quarter.

In the first quarter, ended March 31, the home and motor insurer said total gross written premiums rose 4.7% year-on-year to GBP789.6 million from GBP753.9 million.

Own-brand gross written premiums rose 5.6% to GBP551.9 million.

Motor premiums were up 6.2% to GBP410.9 million. Claims inflation was in line with Direct Line's 3% to 5% long-term expectations. The insurer noted claims were down 70% in April on Covid-19 lockdown restrictions.

Rescue & Personal premiums and Commercial premiums rose 2.8% and 10% to GBP108.3 million and GBP132.6 million, respectively, in the three months to the end of March.

Partially offsetting this, Home written premiums slipped 2.4% to GBP137.8 million. The insurer attributed this to partnership premiums dropping on the continued run-off of some accounts. Own-brand premiums were broadly stable, Direct Line said. 

Direct Line's total in-force policies ended the quarter at 14,696, broadly flat on the same point the year before.

"In these difficult times our focus has been to support our customers, protect our people and do what we can to help the communities we serve. I am grateful to the team for their fantastic response which enabled us to move quickly to home working for almost all our people, except a limited number who are repairing cars for those with essential travel needs," Chief Executive Penny James said. 

She continued: "We expect to incur GBP70 million across a range of measures to offer additional value to our customers with particular focus for those in financial difficulty, to give our people job security and to work with local authorities and charities to target funding towards those supporting the most vulnerable."

Direct Line's estimated Solvency II cover ratio at March 31 stood at 174%, rising to 177% on May 1. The improvement was attributed to cancelling its dividend. 

The insurer noted it will review its current dividend suspension at the end of the first half.

Looking forward, if UK travel restrictions remain in place, Direct Line expects its Travel unit to take a GBP44 million hit, but should claw back GBP18.5 million in reinsurance recoveries.

Direct Line reiterated its combined ratio target range of between 93% to 95%, but said this could change caused by the "uncertainty" from Covid-19.

"We remain focused on a targeted combined operating ratio of 93% to 95% normalised for weather in 2021 and over the medium term, and on improving the current-year contribution to operating profit to at least 50% by 2021, but acknowledge these will inevitably depend on the duration and uncertainties of the Covid-19 pandemic, and the pace of economic recovery and consequential impact on customer behaviour," Direct Line added.

The insurer also noted it remains committed to its strategic and operational transformation programme, continuing to target an operating expense ratio of 20% by 2023.

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