Insurer’s costs could be higher than in 2015
Direct Line Group brought in gross written premium (GWP) of £2.5bn in the first nine months of 2016, up 4.2% on the £2.4n it wrote in the same period of 2015.
The growth mainly came from the insurer’s personal motor book, where GWP increased by 10% to £1.18bn (nine months 2015: £1.07bn).
Direct Line Group nine months 2016 GWP
|Nine months 2016||Nine months 2015||Change (%)|
|Rescue and other personal lines||305.7||300.7||1.7|
The company also enjoyed 2.8% GWP growth in commercial business and 1.7% growth in rescue and other personal lines business (see table).
This offset a 3.7% drop in home GWP to £629.1m (nine months 2015: £653.6m), mainly caused by a 6% reduction in partnerships business. GWP for Direct Line Group’s own-brand home business fell by 1.3%.
Direct Line Group’s partnership with building society Nationwide will close for new business at the end of June 2017.
The insurer also revealed that it could face higher costs for the full year of 2016 than it did in 2015, despite continuing cost-cutting efforts.
The company said business-as-usual costs would be “no higher” than 2015, but reported costs may be “somewhat higher” because of higher impairments of intangible assets, which the company said was because of the level of change it is making to its IT infrastructure.
The company stressed, however, that the increase would have no material impact on its capital position under Solvency II.
Total costs increased by £16m to £669.5m in the first nine months of 2016 (nine months 2015) as the company partly offset the £24m Flood re levy it paid in the second quarter.
Direct Line Group chief executive Paul Geddes hailed the results.
He said: “I’m pleased that we have traded well this quarter with good policy and premium growth, particularly for Direct Line, showing that customers like the value, service and brand propositions we offer them. We have achieved this while maintaining our underwriting discipline and reiterate that we expect to be towards the lower end of our 93%-95% combined operating ratio target range.”
Direct Line Group increased its motor rates by 10% in the third quarter of 2016, above the 3-5% claims inflation that the insurer says it is seeing.
The company put up home rates by a more modest 0.6%. It said that home pricing showed stability for the second successive quarter after a period of “significant deflation”.