Insurer Direct Line suffers as premiums drop in a competitive market
Shares fell at Direct Line this morning as the insurer faced lower gross written premiums in the first quarter of the year.
The measure fell 2.1 per cent to £753.9m, driven by a 4.2 per cent contraction in the UK’s largest motor insurance unit to £386.9m.
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“The motor market remained highly competitive, with market premiums failing to keep pace with claims inflation. Our response, as usual, was to focus on achieving our target loss ratios and continuing to improve pricing effectiveness,” said chief financial officer and chief executive designate Penny James.
Shares were down around two per cent to 311p his morning, as the company said it was still on track to meet its combined operating ratio target in the of between 93 and 95 per cent, normalised for weather, in the full year.
The group said its pricing initiatives in the motor sector helped mitigate some market pressures.
Claims inflation reached the upper end of its three to five per cent long-term expectations, the company said. This came amid rising bills from third party garages, used by non-customers whose had been damaged by Direct Line motor insurance holders.
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The company also lost 5.7 per cent of its premiums in its home insurance partnerships with other firms, to £44.6m, as a deal with Sainsbury’s has been winding down. However, own-brand insurance for the home rose 0.6 per cent to £96.6m.
“Insurance is an industry where scale matters and Direct Line remains the largest motor and home insurer in the UK. The business is focused on the core market and has advantages over its peers through its network of repair centres and comprehensive offer to customers,” said Shore Capital analyst Paul De’Ath.