2nd May 2014 07:48
LONDON (Alliance News) - Direct Line Insurance Group PLC Friday reiterated its combined operating ratio target for 2014 but said first-quarter gross written premium for ongoing operations decreased as a result of competition in UK personal lines, partially offset by growth in commercial lines and in Germany.
In a statement, the insurer, which was fully divested by Royal Bank of Scotland Group PLC earlier this year, reiterated that it is still targeting a combined operating ratio in the range of 95% to 97% for ongoing operations, assuming a "normal" level of claims from weather events. It is targeting a combined operating ratio of less than 100% for its commercial division, also assuming a "normal" level of claims from weather-related events as well as an absence of large losses.
An insurer's combined ratio is a measure of underwriting profitability, with anything below 100% representing a profit.
First-quarter gross written premiums decreased to GBP949.3 million from GBP1.01 billion a year earlier, with currency movements partly to blame. Direct Line's cost base fell to GBP255.2 million from GBP266.7 million, while investment return increased to GBP62.9 million from GBP40.4 million, due to an increase in both realised gains and investment income.
Direct Line said the gross premium reduction was a reflection of a competitive market, particularly in UK motor and home, together with maintaining underwriting discipline. Amidst highly competitive UK motor and home markets, Direct Line said it will continue to prioritise targeting "appropriate" margins, even if it comes at the expense of policy volumes.
Motor prices were reduced on average by 4.0%, supported by a "positive claims trends" and technical pricing initiatives.
Home claims from UK major weather events were about GBP60.0 million, lower than the previously announced estimate of GBP70.0 to GBP90.0 million. Commercial claims from weather-related events for the same period were approximately GBP20.0 million, in line with the preliminary estimate.
Direct Line said it continued to experience reserve releases in the quarter, driven by positive claims trends. Assuming these trends continue, Direct Line said it expects a significant contribution from prior-year reserve releases in 2014, albeit at a lower level than in 2013.
"It was another busy quarter for us as we continued to progress strategic initiatives throughout the business. We have improved our digital capability, developed customer propositions and extended our product offering. We are also excited by the launch of a new self-install telematics product," Paul Geddes, chief executive, said in a statement.
"It's a robust, cheaper alternative to black-box technology, and it enables us to offer the benefits of telematics to a wider group of customers. We plan to continue investing in initiatives that improve how we interact with customers and boost our competitiveness in what remains a highly competitive market," Geddes added.
In a Thursday report, ratings agency Fitch said UK motor insurance is poised to benefit from telematics - devices fitted to cars that collect data on driving behaviour so that insurers can tailor individual policies.
Direct Line shares were Friday quoted at 254.60 pence, up 2.7%.
By Samuel Agini; [email protected]; @samuelagini
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