Achi news desk-
The 434,000 drop in customer numbers came after the group increased premiums to help offset the sharp rise in claims costs it has faced amid a surge in inflation.
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The average premium paid by existing customers increased by 38% year on year in the quarter to 31 March, to £515 from £373. New customers paid an average of £599, up 25% from £478 in the same period in 2023.
Hargreaves Landdown equity analyst Matt Britzman said such “mammoth” price rises were necessary for Direct Line to get its motor insurance operations back to continued profitability.
He said: “With a new CEO and an improving market, the motor business is finally looking to have a base from which to grow.”
Direct Line was slow to respond to inflationary pressures which former chief executives said had hampered the profitability of its operations.
The company has issued profit warnings in recent years.
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In January last year the group announced that Penny James had resigned as chief executive with immediate effect. That same month it scrapped its final dividend for 2022.
Mr Winslow took over in March after Jon Greenwood served as interim chief executive.
Yesterday Mr Winslow said the group had enjoyed a positive start to the year. Premium rises helped it increase its own-brand motor income by 13% to £400m from £353m.
The group earned £24m of income under an agreement to provide policies for Motability, which has been operational since September. There are approximately 837,000 policies in force under the agreement.
“Motor claims and profit trends continue to develop in line with our expectations,” said Mr Winslow.
Home insurance premium rises offset a 46,000 drop in the total number of customers, to 2,450,000. Home premium income rose to £147.3m by £129m.
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Mr Winslow said the group was confident of achieving the £100m annual cost savings target it announced in March after Belgium’s Ageas took over, and the directors said it did not value the group.
Ageas decided to walk away after raising its offer from 233p per share to 237p per share, which valued Direct Line Group at £3.2bn
Shares in Direct Line Insurance Group closed up 2.4p at 191.1p yesterday afternoon.
Mr Winslow will unveil an “updated” strategy in July and an update on the group’s dividend policy.
“There is still a long way to go if Direct Line wants to return a stable dividend and restore investor confidence,” Mr Britzman told Hargreaves Lansdown.
AJ Bell investment director Russ Mold warned: “Investors remain lukewarm and the longer the shares trade at a low valuation, the more vulnerable the company looks to take over.”
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The total number of customers in Direct Line’s continuing operations increased to 9.268m in the quarter to 31 March from 9.228m in the same period last time. Its operations include the business of cutting the Green Flag.
In March Direct Line announced a dividend of 4p per share for 2023 which it said followed good performance in the home, commercial and vehicle salvage markets.
He said at the time: “The period for judging the sustainability of Motor’s capital generation has been short and as a result this dividend should not be regarded as a resumption of regular dividends.”
The group had operating losses of £190m in 2023 but made a pre-tax profit of £277m with a £520m boost from its commercial broking business to RSA Insurance in September.
Admiral Group profits grew by 23% to £442m in 2023, from £361m in the previous year. Motor customer numbers held at 4.94 million.
