7th Nov 2023 11:20
(Alliance News) - Direct Line Insurance Group PLC reported a decent third-quarter, with more progress in its Motor insurance arm.
Shares in the company rose 3.8% to 163.53 pence each in London on Tuesday morning.
The Bromley, London-based motor and home insurer said total gross written premiums and associated fees soared 59% to GBP1.28 billion in the third quarter of 2023, and by 27% to GBP2.97 billion in the first nine months of the year.
"In Motor, we can see the pricing actions we have taken come through...and we believe we are writing profitably, consistent with a 10% net insurance margin," said acting Chief Executive Officer Jon Greenwood.
Greenwood was named acting CEO back in January after Penny James stepped down. Earlier that month, the stock fell by a quarter in one day alone, after it said it would not pay a final dividend due a big increase in weather related claims, pushing the insurer into a loss on underwriting.
In May, it warned claims in its motor division will hurt annual profit for 2023. It suffered "further adverse claims development in respect of late 2022 and early 2023" in its motor arm.
Direct Line has enjoyed a slight reversal in fortunes recently, however. It rose around 15% in one single session in early-September on a well-received outlook delivered in its first-half results.
AJ Bell analyst Russ Mould commented: "Having royally messed up in 2022, Direct Line certainly seems to be getting its act together. Left with a weak balance sheet after a series of setbacks including persistent cost inflation and a spike in claims, Direct Line had no choice but to readjust its business.
"Asset sales have helped to strengthen its finances, a hike in premiums puts more money into the pot and the launch of a no-frills package in motor insurance means it can better compete against players in the cheap end of the market. The weather also seems to be on Direct Line's side, avoiding any out of the ordinary events to trigger another rush of claims beyond what it already expected."
The lack of a dividend is still something shareholders will be mindful of, however, Mould added.
"While management should be happy with the repair job in the business, customers and shareholders won't necessarily share the enthusiasm. The cost of a comprehensive motor insurance policy has gone up a lot while shareholders are currently without a dividend, which is a problem given that the stock's key attraction historically has been its generous income stream," the analyst said.
By Eric Cunha, Alliance News news editor
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