Direct Line stuck to its full-year targets after premiums fell and motor claims were subdued in a first quarter affected by the Covid-19 lockdown.
Gross written premiums declined 4.7% to £752.3m in the three months to the end of March, led by a 10.6% drop in motor business to £367.3m. This more than offset a 1.8% increase in home premiums to £140.3m and a 16.1% rise in commercial premiums to £154m.
Motor premiums were affected by low sales of new cars and fewer drivers entering the market, causing deflation. This also led to lower claims than normal, the FTSE 250 insurer said.
Direct Line said the reduction in motor premiums was less severe than the wider market and that motor premiums appeared to stabilise in April.
Rescue and other personal lines premiums fell 16.3% to £90.7m, mainly because of reduced travel partnership premiums with overseas travel limited. Green Flag was affected by reduced shopping levels during lockdown, leading to a 1.5% reduction in premiums to £19.4m.
Penny James, Direct Line’s chief executive, said: “The first quarter saw similar motor market trends to those at the end of 2020, namely subdued claims frequency, low levels of new car sales and fewer new drivers entering the market. This led to further motor market premium deflation in the quarter. Against this backdrop, we maintained our disciplined underwriting.”
Direct Line restated its target for a combined operating ratio between 93% and 95% in 2021 and over the medium term and said it was on track for current-year operating profit to be more than half total operating profit.
