Direct Line costs rise after Flood Re charges

Direct Line Group posted a trading update for the nine months to 30 September on Tuesday, with gross written premium for ongoing operations 4.2% higher,and the company claiming continued growth in Motor own brands, up 9.7%.

The FTSE 100 firm said motor and home own brands in-force policies were up 4.3% year-on-year, with strong customer retention and continued growth in Green Flag direct and Direct Line for Business.

Its total costs of £669.5m were £16.1m higher than the first nine months of 2015, after absorbing £24m of Flood Re costs in Q2 2016.

Q3 total costs were 3.3% lower than Q3 2015, and in line with previous guidance, full year business as usual costs are expected to be no higher than in 2015.

However, the board said reported costs may be somewhat higher than in 2015, due to higher non-cash intangible asset impairments than in recent years.

Investment income yield was 2.5% for the period, in line with full year guidance with no material gains or losses in the quarter.

Direct Line’s combined operating ratio for ongoing operations is still expected to be towards the lower end of the 93%-95% target range, assuming normal weather.

“I'm pleased that we have traded well this quarter with good policy and premium growth, particularly for Direct Line, showing that customers like the value, service and brand propositions we offer them,” said CEO Paul Geddes.

“We have achieved this while maintaining our underwriting discipline and reiterate that we expect to be towards the lower end of our 93%-95% combined operating ratio target range.”