Direct Line's profit jumps 21% amid rate softening

Direct Line Group chief executive Paul Geddes revealed in his company’s nine-month 2013 results that the insurer has cut personal motor rates.

The news comes amid industry-wide concerns that personal motor rates are falling too far, too fast in response to the legal reforms that were introduced in April.

In the results statement, released this morning, Geddes said: “While these results demonstrate our continuing choice to focus on value of business over volume, in motor we were able to reduce average prices for our customers helped by our own claims efficiencies and the benefits of the recent legal reforms.”

On target

Geddes’s comments come as Direct Line Group reported a 21% jump in profit for the first nine months of 2013.

Profit after tax from continuing operations was £298.8m, compared with £247.4m in the same period of 2012.

Operating profit increased 20% to £417.8m (first nine months of 2012: £347.9m) and the combined operating ratio (COR) for continuing operations improved by 4.3 percentage points to 95.4% from 99.7%.

Reserve releases of £311m shaved 11.7 percentage points from the COR. The company said the bulk of the release came from the motor division because of favourable development of bodily injury claims, which it expects to continue.

Return on equity was 16.8%, compared with 10.6% in the first nine months of 2012.

The results mean Direct Line Group is on track to hit its 2013 return on equity target of 15% and COR target of 98%.

Geddes said: “These are good results in competitive markets, Even after allowing for normal weather losses, our performance proves we are delivering our self-help agenda and making good progress towards our strategic targets.”

St Jude hit

The better results came despite continuing reductions in gross written premium (GWP).

GWP dropped 4.3% to £3bn in the first nine months of 2013 from  £3.1bn in the same period last year.

The company said this reflected “competitive market conditions in UK personal lines, partially offset by growth in international and commercial”.  

The company said it is too early to assess the claims costs from the St Jude storm that hit the UK on Monday with any certainty, it expects claims from the event to fall within its claims cost expectation for the entire fourth quarter of £25m.