Insurer Direct Line has hiked consumer prices and boosted its gross written premium across its three main divisions as the firm tries to bolster investor confidence in its new turnaround strategy.
On Wednesday, the FTSE 250 firm reported that its gross written premium and associated fees for ongoing operations rose 15 per cent to £706.8m from £614.8m during the first three months of 2024.
The increase was helped by double-digit gross written premium growth across its home and commercial businesses, with the firm’s largest motor division enjoying an 18.3 per cent jump to £424.3m.
Insurers have faced scrutiny for hiking prices since last year. The industry has blamed external factors like inflation, energy prices and the rising cost of repairs. The Financial Conduct Authority wrote to MPs in January predicting that car insurance costs would keep rising in 2024.
Direct Line said its in-force policies fell nearly two per cent to 9.27m from 9.44m. The firm said that motor volumes came in lower, as expected, due to “continued repricing of the motor book”, while policies for its home own brands – Motability and Direct Line – saw “modest growth”.
“Strip out the relatively new partnership with Motability, and Direct Line saw 434,000 motor customers walk out the door,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
“It’s not too hard to see why. The headline figure of a 35 per cent rise in average premiums is somewhat flattered by better rates being offered to new customers. Anyone looking to renew motor insurance over the quarter was whacked with a 38 per cent price hike.”
Direct Line said the first quarter saw “several periods of adverse weather”, resulting in roughly £33m of weather claims in its home business, including £24m event related – compared with Direct Line’s annual event assumption of £54m for the business.
It added that motor claims trends were in line with expectations, with estimated written margins maintained above 10 per cent.
The news comes as Direct Line tries to improve its performance ahead of a capital markets day on 10 July.
Its last chief executive, Penny James, announced last January she would step down in the wake of a profit warning on an unexpected rise in weather-related claims.
New CEO Adam Winslow unveiled a turnaround strategy in March, aiming to save at least £100m in annualised cost savings by the end of 2025 and a net insurance margin, normalised for weather, of 13 per cent in 2026.
Its fresh strategy came shortly after Direct Line fought a £3.2bn takeover attempt from Belgian insurer Ageas, which it said undervalued the group’s future prospects. Last month, the firm appointed Aviva executive Jane Poole as its new chief financial officer, joining her old boss Winslow.
Winslow said Direct Line had “seen a positive start to 2024 trading”, adding that he was confident the firm’s “new leadership team” would help it achieve its new targets.
“I look forward to sharing our refreshed strategy to deliver higher returns and the progress we have made against the immediate priorities to improve performance at our capital markets day,” he said.