- Motor insurance remains tough
- On track to make £100 million cost savings
- Around 550 job cuts
Insurer Direct Line (DLG) said it plans to cut around 550 jobs as part of a series of initiatives aimed at simplifying the business and delivering at least £100 million of cost savings by the end of 2025.
While third quarter gross written premiums fell amid ‘challenging’ conditions in motor insurance, CEO Adam Winslow insisted the group was in the early stages of a ‘significant’ turnaround which is yet to be reflected in current trading.
The shares ticked up 0.3p or 0.2% to 165.5p, and trade near the lows for the year, equating to a fall of around 11% compared with a gain of 6% for the mid-cap FTSE 250 index.
HOW THE COMPANY PERFORMED
Despite the dip in the current quarter, for the nine months to the end of September group revenue from continuing operations increased 11.8% to £2.54 billion, driven by double-digit growth in motor, home and commercial direct.
Higher average premiums in own brand motor insurance contributed to growth of 2.9% leading to a drop in the number of policies in-force, but the company noted the rate of decline slowed while the comparison site channel delivered 3% growth.
Non-motor premium growth was strong at 12.9% as home own brands delivered 21.6% growth and a fourth consecutive quarter of policy count growth.
Looking ahead, Direct Line said it continues to target 7% to 10% compound annual growth in gross premium and associated fees between 2023 and 2026 in non-motor insurance and reiterated a net insurance margin target for ongoing operations of 13% in 2026.
EXPERT VIEW
AJ Bell investment director Russ Mould commented: ‘It may have made some progress in putting 2023’s annus horribilis behind it but insurer Direct Line is still finding life tough judging by its latest update.
‘The company is looking to streamline the business, an obvious response at times of corporate strife, but it also has work to do to shore up its customer base in its core motor division with many balking at the level of increases they have faced on their insurance premiums. A new management team is at the wheel and initiatives like launching the brand on comparison sites may help.
‘It’s worth noting that while motor accounts for more than half of revenue, that still leaves a significant portion of the business including its Green Flag rescue services and home division which is chalking up reasonable growth in premiums and seeing a much lower rate of decline in the number of policies.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
