Chief financial officer John Reizenstein says the company is well-protected by reinsurance
Direct Line Group’s recent increase in large bodily injury claims is a one-off rather than a trend, according to chief financial officer John Reizenstein.
The insurer announced in its interim management statement this morning that it had seen higher than expected large bodily injury claims in the first nine months of 2014, although this was partly offset by a lower level of small bodily injury claims.
Speaking to Insurance Times following the release of the interim management statement, Reizenstein likened the spike to a one-off weather event or large fire. He said: “You don’t get those kinds of big losses very often. We think it is a blip, and it is not going to be reflected in our long-term inflation views on reserving.
“But it is going to hit us this year a little bit.”
Reizenstein declined to say how much the claims spike would cost Direct Line Group, but he said that the company’s current- year motor loss ratio for the second half would now be roughly the same as the 87.2% reported in the first half, despite expectations that it would be better.
He added: “How much it hits us is fortunately mitigated by the fact that we are more heavily reinsured than we used to be, so we are quite well-protected against it.”
Direct Line Group also warned in its interim management statement that its reserve releases in future years may be lower than the levels seen in 2014.
Direct Line relies heavily on reserve releases for its underwriting profitability. It did not give reserve release figures for the first nine months of 2014, but in the first half it released £218m of reserves, which shaved 13 percentage points from its loss ratio.
Reizenstein said that reserve releases would still be “significant” in future years, but added: “We wouldn’t want people to assume we can always maintain a very high level. We won’t be able to continue it forever. We are going to be working on our current year and cost ratio to make sure we hold our profit and do our best.”