Direct Line Insurance Group PLC (LON:DLG) said it is managing its book of household insurance policies more effectively in the wake of last year’s flooding as it updated on current trading.
“Rate increases, coupled with the underwriting and claims actions taken over the last six months to tackle escape of water claims inflation started to have a positive effect, while weather experience in the period was benign,” it told investors.
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Gross premiums from home insurance fell 3.9% to £217mln in the third-quarter as Direct Line managed its book more efficiently.
The numbers
Digging into the statement from the insurer, it emerged the company may book an impairment charge related to around £100mln it is spending to upgrade its systems.
Direct Line said it would “rework some elements of the original capital expenditure already incurred, aimed at ensuring these initiatives achieve the targeted performance levels”.
Turning to the key numbers, it said total gross written premiums were up 2.8% at £907mln for the three months, with motor the star performer with growth of 7% and home insurance providing the drag.
The combined operating ratio – the litmus test for general insurers – is expected to be in the middle of the 93-95% target range. A figure below 100% means the business is making a profit from underwriting.
The shares dropped 2.16% to 359.07 in the afternoon session.