Direct Line can’t seem to catch a break. After suffering surging weather-related claims last year, rising motoring claims are now proving to be a thorn in the side of the insurance group.
Direct Line said increasing motoring claims, especially those for damage, are ‘expected to put pressure on earnings in 2023’.
Shares in the group were over 5% weaker early on Tuesday.
Total group gross premiums rose 9.7% to £805.7m in Q1 2023.
“The road ahead continues to look bumpy for Direct Line. Just as weather-related claims ease back to more normal levels, there’s little in the way of a let-off for the Motor division as damage-related claims tick higher,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
“Add in claims inflation that continues to run at high single-digit levels, and the outlook for insurance profitability gets a little murky. There was positive news on the pricing front, especially in Motor, where planned rate hikes fed through to higher gross premiums. There’ll likely be more pricing action over the year as Direct Line looks to plump up margins in Motor.”
Solvency remained broadly unchanged from the prior year-end level, which meant an unwind of some of the improvement management saw early in the quarter. Along with pressure on earnings, the lack of solvency improvement could mean the dividend is under some pressure this year.”