- The One City analyst claimed that price increases had caused customers to leave the group.
Direct Line Group saw a drop in own-brand car customers in its first quarter as price increases scared some policy owners away but delivered double-digit premium growth.
In a trading update, the company said its average premium for car and home insurance was £599 for new customers and £515 for returning customers, up from £478 and £373 at the same time a year ago.
Gross written premiums soared 15 per cent to £706.8 million during the period. as excellent growth in motors and homes offset a 1.8 per cent drop in policies in force at group level to 9.3 million.
The group is looking to achieve annualized cost savings of at least £100m by the end of 2025 and has recently hired several new executives in a bid to boost its fortune.
Under pressure: Direct Line boss Adam Winslow looks to cut costs
Matt Britzman, equity analyst at Hargreaves Lansdown, said: ‘Direct Line’s gigantic price rises continued throughout the first quarter.
‘If we leave aside the relatively new partnership with Motabilty, Direct Line saw 434,000 car customers walk out the door.
‘It’s not too difficult to understand why. The headline figure of a 35 per cent increase in average premiums is somewhat flattered by the better rates being offered to new customers. Anyone looking to renew car insurance during the quarter was hit by a 38 per cent price increase.’
Total gross written premiums rose 10.7 per cent to £892.2m, while motor own brand premium sales rose 13.4 per cent to £400.1m.
The FTSE 250-listed company’s gross written premium and associated fees for ongoing trading rose 15 per cent to £706.8m in the period, up from £614.8m during the first three months of 2023.
Direct Line said motor volumes declined, as expected, amid a “continued motor book pricing review”, while policies for its own brands, Motability and Direct Line, saw “modest growth”.
Prices: Direct Line said its average premium for car and home insurance was £599 for new customers.
Adam Winslow, CEO of Direct Line, said: “We have seen a positive start to trading in 2024, with double-digit gross written premium growth across our motor, home and commercial businesses and overall growth for operations in 15 percent course”. Motor claims trends and margins continue to develop in line with our expectations.
The group’s former chief executive, Penny James, announced last January that she would resign following a profit warning about an unexpected rise in climate-related claims. New Chief Winslow unveiled a turnaround strategy in March.
Hargreaves’ Britzman added: “There is still a long way to go if Direct Line is to return a stable dividend and restore investor confidence.”
‘Now that the acquisition frenzy has been taken out of the valuation, it looks like a more reasonable entry point. But there is plenty to do if Direct Line is to challenge some of the best operators in the business. Investors will be eagerly awaiting the next capital market day, now scheduled for July 10.’
Hotline Actions fell 1.17 per cent or 2.2 pence through Wednesday, having risen more than 18 per cent in the last year.