Direct Line Group continues to motor ahead in Q1, reiterates guidance

Business at Direct Line Group continued to motor ahead during the first quarter of the year, driven by demand for its own brand motor insurance, with the company reiterating its guidance for key metrics in fiscal year 2017 despite a challenging home market.

Gross written premiums from ongoing operations were 4.2% during the first three months of the year in comparison to the same period of 2016, with growth at its Motor own brands jumping 11.2%.

The insurance outfit also reported growth at its Motor and Home own brand in-force policies for a fourth successive quarter, posting increases of 5.9% and 2.0%, respectively.

"We have delivered particularly strong results in Motor and this performance has more than offset the challenging home market. Direct Line for Business and Green Flag have also performed well," said Paul Geddes, CEO of Direct Line Group.

Growth slowed in the home market, as the group has been raising prices for several quarters now in an effort to stem inflation in home claims, which continued to rise past the firm's long-term expectations in the first quarter.

As expected by analysts, the Group continues to target a 2017 combined operating ratio in the range of 93% to 95%, assuming normal levels of claims from major weather-related events.

Combined ratios are the key metric for assesing insurance outfit's financial performance, comparing their incurred losses and expenses in relation to earned premiums.

The above also assumes no more changes to the Ogden discount rate, which was recently lowered by the Chancellor; although that had little impact on the first quarter, Direct Line did increase its prices in response.

Management also believes it is on course to cut its commission and expense ratios this year.

Business at Direct Line Group's continued to motor ahead during the first quarter of the year, driven by strong demand for its own brand motor insurance, with the company reiterating its guidance for key metrics in fiscal year 2017 despite a challenging home market.

Gross written premiums from ongoing operations were 4.2% during the first three months of the year, with growth at its Motor own brands jumping 11.2%.

The insurance outfit also reported growth at its Motor and Home own brand in-force policies for a fourth successive quarter, posting increases of 5.9% and 2.0%, respectively.

"We have delivered particularly strong results in Motor and this performance has more than offset the challenging home market. Direct Line for Business and Green Flag have also performed well," said Paul Geddes, CEO of Direct Line Group.

Growth slowed in the home market, as the group has been raising prices for several quarters now in an effort to stem inflation in home claims, which continued to rise past the firm's long-term expectations in the first quarter.

As expected by analysts, the Group continues to target a 2017 combined operating ratio in the range of 93% to 95%, assuming normal levels of claims from major weather-related events.

Combined ratios are the key metric for assesing insurance outfit's financial performance, comparing their incurred losses and expenses in relation to earned premiums.

The above also assumes no more changes to the Ogden discount rate, which was recently lowered by the Chancellor; although that had little impact on the first quarter, Direct Line did increase its prices in response.

Management also believes it is on course to cut its commission and expense ratios this year.

ShoreCap's Eamonn Flanagan reiterated his 'Sell' recommendation on the stock following this latest set of numbers, pointing to a total in-force policy count which was flat versus the last quarter of 2016, ongoing pressures on the claims environment within motor and regulatory headwinds around its ancillary and instalment income lines.

No special dividends are likely given Ogden's shenanigans, Flanagan adds.