- Q3 gross written premiums from ongoing operations rose 68.3% to £1.1bn
- In-force policies from ongoing operations rose 447,000 quarter-on-quarter (own brand motor lost 166,000)
- Motor own brand premiums up 37% from last year
Matt Britzman, equity analyst at Hargreaves Lansdown:
“There’s no let-up for drivers as Direct Line continues to push through higher prices. A 37% increase in the cost of average motor insurance from this time last year is mammoth, but it’s been a necessary evil. The industry’s been under immense pressure since drivers took back to the streets post lockdowns, with inflation on the cost side and a spike in the number of claims weighing on performance. It’s good to hear that a recent spell of bad weather hasn’t upset the apple cart, and assumptions of claims inflation remain at the high-single-digit level for the year. The bad news for consumers is that there’s not really any let-up on prices, Direct Line raised average prices another 14% over the quarter.
It takes time for higher prices to feed through to better results, so don’t expect to see profit shoot higher anytime soon. But the promising news is that new business looks like it’s being written at profitable levels. That’s something management pointed to back at the half-year mark and a trend that needs to continue as the market dynamics continue to improve.
The flip side of pumping prices is it forces customers to hit up price comparison sites in search of the very best deals. That trend’s obvious to see by looking under the hood at Direct Lines policy numbers. At the headline level, policies grew 4.9% over the quarter. But, digging into the motor division, 166,000 own-brand policyholders jumped ship over the quarter.
Today’s update continues to support the argument that things are turning around at Direct Line. Writing profitable insurance and getting solvency levels back on track with the sale of its brokered commercial business are both steps in the right direction. But the outlook remains murky, with declining trends in motor policy numbers, an unknown return date for the dividend and a big question mark around what actions the incoming CEO will put forward next year.”
