8th May 2024 14:14
(Alliance News) - Direct Line Insurance Group PLC on Wednesday said gross written premiums grew in the first quarter of 2024, with analysts remarking the insurer was rebuilding after a tough 2023.
The Bromley-based insurance company said gross written premiums and associated fees in the first quarter of 2024 were up 15% to GBP892.2 million from GBP805.7 million the year before.
Direct Line said this was driven by strong growth in its Motor, Home and Commercial businesses. Peel Hunt said these increases were "primarily due to the rate adjustments pushed through in 2023".
"We have seen a positive start to 2024 trading, with double-digit gross written premium growth in our Motor, Home and Commercial businesses and overall growth for ongoing operations of 15%. Claims trends and Motor margins continue to develop in line with our expectations," said Chief Executive Officer Adam Winslow.
AJ Bell said Direct Line is "looking to rebuild after a very difficult 2023".
In the first half of 2023, pretax loss widened to GBP76.3 million from GBP11.1 million a year earlier, although gross written premiums and associated fees increased to GBP1.62 billion from GBP1.47 billion.
It recovered in the second half, however. Across the full-year, Direct Line reported a pretax profit of GBP277.4 million, swinging from a loss of GBP301.8 million in 2022. Gross written premium and associated fees climbed 27% to GBP3.11 billion from GBP2.44 billion, with 46% growth in the second half.
"The company is looking to win back credibility with the market and the insurer's first-quarter trading update saw it reaffirm cost-cutting targets," said AJ Bell analyst Russ Mould.
"However, investors remain lukewarm and the longer the shares trade at a depressed valuation the more vulnerable the company looks to takeover attention – having batted off an approach from Ageas earlier this year."
In March, Ageas said it withdrew a proposed bid for Direct Line after failing to secure the backing of its UK peer. The Belgian insurer had made two proposals to buy Direct Line and home financial services group, but its advances were rejected.
Shares in Direct Line were down 0.4% to 188.01 pence each in London on Wednesday afternoon.
Peel Hunt rates Direct Line at 'add', setting a target price of 230.0p per share. "Overall, it appears that the UK Motor market has reached a pause, and we expect that the strong rate increases from 2023 will begin to yield results in 2024," said analyst Andreas Van Embden.
Jefferies rates Direct Line at 'buy' setting a target price of 240.0p per share. It said the rise in gross written premiums are largely driven by Motor, "which has benefited from strong pricing, as well as the inclusion of the new Motability partnership, which commenced in [the second half of] last year".
"In-force policy count on ongoing operations continues to shrink, 1.8% lower versus [the fourth quarter of] 2023, largely driven by Motor direct own brands, [down] 4.1%, due to the continued repricing of the book, which is the only disappointing takeaway from the [first quarter] update in our view," said Jefferies analysts James Pearse, Phillip Kett and and Nairah Majid.
"DLG has stated that claims trends and motor margins continue to develop in line with expectations, with estimated written margins maintained above 10%, which after recent updates is reassuring. Motor direct own brand average premiums are [up] 35% [year-on-year] in [the first quarter], which remains well ahead of claims inflation expectations (high single digits)."
By Greg Rosenvinge, Alliance News senior reporter
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