Shares in Direct Line Insurance Group PLC (LON:DLG) surged in early deals following the release yesterday evening of a trading update and strategic review.
For once, the decision to release a statement after the market closed was not a tell-tale sign of bad news (except, perhaps, for Direct Line employees) as the company announced plans to improve its operating expense ratio to 20% by the end of 2023, sending its shares surging 5.9% to 291p this morning.
Direct Line said it expects to boost the ratio through a mixture of automation and process improvement, self-service and digitalisation.
The group expects to incur restructuring and other one-off costs of around £60mln in 2019 and 2020.
Management expects to reduce its annual capital expenditure to less than £100mln from 2022 onwards as it brings major technology assets into use; this year, it expects capital expenditure to be in the region of £175mln.
As for current trading, Direct Line said trading since the middle of the year has shown signs of improvement.
Gross written premiums in the third quarter rose 0.4% to £858.0mln from £854.5mln in the corresponding period of last year.
The motor insurance business held its own, with gross written premiums (GWP) up 0.3% year-on-year to £457.8mln while rescue and other personal lines saw GWP improve by 3.5% to £113.4mln.
In contrast, GWP from home insurance fell 4.9% to £158.6mln, which the group attributed to the running down of partnership agreements.
Direct Line Group partners with car subscription service Drover... https://t.co/VXYpg1JbcD #Insurers #InsurTech #Insurance
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"I'm encouraged with the group's performance in Q3 [third quarter], with motor returning to modest growth, helped by some improvement in market conditions. Although we are only halfway through Q4 the improving trends have continued,” revealed Penny James, the chief executive of Direct Line.
"We are starting to conclude a phase of high capital expenditure aimed at bringing our technology to the forefront of the industry. We are in the process of rolling out much of this technology now, and while there remains more to do, we are pleased with the progress so far. We expect capital expenditure to begin to decline from its peak in 2019 and for all our major IT platforms to be substantially rolled out by the end of 2021,” she added.