Direct Line boss says ‘more to be done’ to rebuild car insurer’s profits

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Direct Line reported weaker-than-expected first-half profits as one of Britain’s biggest car insurers moves to repair a business hit by a post-pandemic rise in the cost of claims.

Chief executive Adam Winslow said on Wednesday that the steps the insurer had already taken to improve its performance were “starting to make a difference, but there is more to do”.

Group operating profit from ongoing operations for the first half of the year was £63.7m, below expectations of £85m. Its net underwriting margin — a measure of underwriting profits as a proportion of revenue — was 1.8 percent, compared with forecasts of 3 percent.

In recent years, insurers have increased their prices for auto and home insurance to keep up with rising claims inflation. A series of profit warnings led to the departure of then Direct Line chief executive Penny James last year and forced the company to cancel its dividend.

It then fought off a takeover bid by Belgian rival Ageas, which was announced just days before Winslow took over in March.

While Direct Line’s first-half profits fell short of forecasts, the insurer took in £1.8bn of premiums and associated fees from ongoing operations, up by half from the previous comparable period and beating analysts’ forecasts.

The results come just weeks after Direct Line admitted an accounting error that had painted an overly flattering picture of its solvency ratio.

At the end of June, Direct Line’s solvency ratio was broadly in line with expectations at 200%. The company said it would pay an interim dividend of 2p per share, below the 2.6p expected by analysts.

Direct Line shares were down 3% in early trading.