- First-quarter premiums up
- Weather-related claims up
- Focus on cost savings
Shareholders in FTSE 250 motor and home insurer Direct Line (DLG) were unmoved by the latest trading update despite chief executive Adam Winslow talking up the firm’s positive start to the year.
The shares, which touched 240p two months ago after Belgian insurer Ageas (AGS:EBR) made a preliminary offer, drifted 5p or 2.5% lower to 184p.
PREMIUMS UP BUT CLAIMS ALSO UP
The Bromley-based company’s first-quarter update was generally positive, with double-digit increases in gross written premiums in motor, home and commercial insurance and overall growth of 15% in income from ongoing operations to £707 million.
Direct own-brand motor premiums were up 13% to £400 million while own-brand home premiums were up 17% to £110 million and commercial own brands were 15% better at £72 million.
Motor claims trends were in line with the company’s expectations, meaning margins were kept above 10%, but home claims were higher at £33 million due to adverse weather during the quarter, with £24 million of directly event-related claims against the firm’s full-year assumption of £54 million.
FOCUS ON LOWERING COSTS
As well as highlighting the firm’s positive current trading, Winslow drew attention to Direct Line’s recent push to hire in senior industry figures in an effort to reduce costs.
Later this year Craig Thornton, formerly head of general insurance at Lloyds Banking Group (LLOY), will join as managing director of the home and growth division, while Hugh Hessing joins as chief operating from Aviva (AV.) where he held the same role and Martin Milliner joins as director of claims having previously been in the same role at German insurance giant Allianz (ALV:ETR).
‘I am confident that with the new leadership team in place, we can deliver run-rate annualised cost savings of at least £100 million by the end of 2025 and a net insurance margin, normalised for weather, of 13% in 2026’, said the chief executive.
‘I look forward to sharing our refreshed strategy to deliver higher returns and the progress we have made against the immediate priorities to improve performance at our Capital Markets Day on 10th July 2024’, added Winslow.
