Direct Line’s operating profit undershot expectations for the first half of 2024 as the firm shed more than a quarter of a million motor insurance customers following price hikes.
Direct Line reported an ongoing operating profit of £63.7m for the six months, according to a company-compiled consensus, which fell short of analysts’ forecasts of £85m.
Still, the figure marked Direct Line’s return to profitability following a £93.7m operating loss in the first half of 2023.
Overall, the company’s gross written premiums jumped 53.5 per cent to £1.84bn “largely as a result of the Motability partnership, which began in September 2023.”
Excluding the partnership, premiums grew 11.4 per cent across the business.
The group declared an interim dividend of 2p per share.
Its latest results sent the FTSE 250 insurer’s shares down 1.7 per cent in early trading on Wednesday.
The company has aggressively raised prices to combat high claims inflation in recent times, pushing some customers towards its rivals.
Direct Line’s in-force policies fell 3.1 per cent over the first half of 2024, to 8.95m from 9.24m, with the largest reduction in its motor segment at 4.8 per cent.
Meanwhile, the firm’s own-brand motor policies fell to 3.12m from 3.37m over the half-year, with 254,000 customers walking out the door.
After firing out two profit warnings in two years, new chief executive Adam Winslow is trying to strengthen the company’s bottom line.
He has restored the firm’s dividend and is targeting at least £100m in annualised cost savings by the end of 2025. Direct Line announced a 2p dividend on Wednesday.
Direct Line’s net insurance margin improved to 1.8 per cent from negative 8.8 per cent over the half year. The firm was weighed down by a negative three per cent margin in its motor business, compared to a 11.6 per cent margin in non-motor.
Winslow is targeting a net insurance margin, normalised for weather, of 13 per cent in 2026.
“In the first half of the year we delivered strong premium growth and returned to profitability,” Winslow said on Wednesday.
“The actions we have taken are beginning to make a difference but there is more to do. We will continue to drive business transformation during the second half of 2024 and into 2025, as our new high calibre management team continues to arrive.”