TIDMDLG
RNS Number : 7491E
Direct Line Insurance Group PLC
10 November 2020
Direct Line Insurance Group plc
TRADING UPDATE FOR Q3 2020(1)
ENCOURAGING TRADING PERFORMANCE, GOOD PROGESS ON STRATEGIC
TRANSFORMATION
10 November 2020
PENNY JAMES, CEO of Direct Line Group, commented:
"We are encouraged by our trading performance in Q3 where we saw
a return to strong growth in Green Flag and Commercial and some
improvement in Motor and Home own brands, particularly in the price
comparison website channel as customer shopping activity started to
recover. This progress is testament to the flexibility and
commitment of our people who have been successfully navigating
through the Covid-19 pandemic, delivering good operational
progress, providing extra support for our customers and helping
local communities.
"Our transformation continues to progress with the recent
migration to a new mainframe platform and our trading and change
teams are now working in a fully agile way. Both are a key part of
our strategy to offer our customers better value and choice by
unlocking our ability to be more innovative and enable us to move
faster to market with our products. Direct Line and Churchill
remain scheduled to start to roll-out on our new motor platform
this year, albeit we are taking a more measured approach to
implementation.
"Whilst still early in the consultation period, the FCA report
into pricing practices has proposed significant changes to the way
the market operates. As we outlined at our Capital Markets Day in
2019, we have been actively reviewing renewal prices over recent
years. There will be uncertainty to navigate during the transition,
however we believe that our market-leading brands and outstanding
customer service, combined with our model of operating across
multiple channels, are fundamental strengths meaning that we are
well placed to deliver success in the future."
Trading summary Q3 2020 Q3 2019(2) Change
GBPm GBPm
====================================== ======= ========== =======
Gross written premium
Motor direct own brands 434.2 440.5 (1.4%)
Motor partnerships 13.0 17.3 (24.9%)
-------------------------------------- ------- ---------- -------
Motor 447.2 457.8 (2.3%)
-------------------------------------- ------- ---------- -------
Home direct own brands 112.8 111.7 1.0%
Home partnerships 43.8 46.9 (6.6%)
-------------------------------------- ------- ---------- -------
Home 156.6 158.6 (1.3%)
-------------------------------------- ------- ---------- -------
Green Flag Rescue 26.2 23.9 9.6%
Other Rescue and other personal lines 85.0 93.5 (9.1%)
-------------------------------------- ------- ---------- -------
Rescue and other personal lines 111.2 117.4 (5.3%)
-------------------------------------- ------- ---------- -------
Commercial direct own brands 44.4 39.5 12.4%
NIG and other 92.1 84.7 8.7%
-------------------------------------- ------- ---------- -------
Commercial 136.5 124.2 9.9%
-------------------------------------- ------- ---------- -------
Total Group 851.5 858.0 (0.8%)
Of which: direct own brands(3) 617.6 615.6 0.3%
30 Sep 30 Sep Change
2020 2019
-------------------------------------- ------- ========== =======
In-force policies 14,644 14,837 (1.3%)
Of which: direct own brands(3) 7,443 7,253 2.6%
====================================== ======= ========== =======
Financial highlights
- Motor own brand in force policies remained flat during Q3 2020
as shopping returned to pre-Covid-19 levels and retention
normalised following the increase in Q2. Average premiums were
lower primarily due to risk mix, arising from a reduction in new
car sales and fewer young drivers entering the market, as well as
modest market premium deflation. This led to a reduction in own
brand gross written premium of 1.4% compared with Q3 2019.
- Motor damage severity was ahead of its long-term average as
the repair industry responded to Covid-19 related factors such as
longer repair times and additional cleaning requirements, however
this was more than offset by lower claims frequency which remained
below pre-Covid-19 levels.
- Home continued to demonstrate improved competitiveness on
PCWs, growing own brand gross written premium by 1.0% compared with
Q3 2019 and in-force policies by 1.5% during the quarter. This was
offset by a 6.6% reduction in partnership gross written premium,
the majority of which was due to the partnership schemes in
run-off.
- Green Flag Rescue premium growth returned to pre-Covid-19
levels in Q3, increasing 9.6% compared to Q3 2019, demonstrating
the brand's competitiveness as new business shopping increased.
Overall, gross written premium in Rescue and other personal lines
was 5.3% lower than Q3 2019, primarily due to reduced Travel
premiums predominantly in the partnership channel.
- Commercial direct own brands delivered 12.4% growth in
premiums in Q3 driven by a recovery in small to medium enterprise
("SME") trading on the Direct Line for Business platform which
reached a peak in July following the easing of lockdown
restrictions. Commercial's Churchill brand also delivered strong
growth as it now trades across all four main PCWs, contributing to
a 65% increase in gross written premium compared with Q3 2019. Our
direct Commercial businesses were recently recognised at the
National Insurance Awards as Direct Line for Business won
Commercial Lines Insurer of the Year and the Churchill brand was
awarded Growth Company of the Year.
- NIG and other delivered a strong quarter; gross written
premium grew 8.7% in Q3 compared to Q3 2019, supported by growth
across all categories as the book continued to benefit from
improvements in Van pricing and its award-winning electronic
trading platform.
- The Group estimates weather event claims as a result of the
flooding in Q3 to be around GBP7 million in Home. In Commercial the
weather event claims in Q3 were offset by favourable development of
weather event claims in the first half. Total weather events for
the Group are now estimated to be GBP38 million in 2020 to the end
of Q3, compared to an annual budget of GBP64 million.
Strategic and operational highlights
- We have made good progress on our strategic transformation
agenda, having migrated to a new mainframe platform and moved our
trading teams to agile ways of working.
- Our people have adapted well to home working and service
levels have remained strong despite moving operational capacity to
support our Travel customers.
- In Q3 we launched a new mileage moneyback proposition in
Direct Line Motor which offers customers a more flexible approach
to managing the mileage on their car insurance.
- We are taking a more measured approach to the implementation
of Direct Line and Churchill on our new motor platform although
remain on track to start the roll-out later this year.
Financial Conduct Authority ("FCA") General Insurance Pricing
Practices
- On 22 September the FCA published its General Insurance
Pricing Practices Final Report which sets out remedies seeking to
improve outcomes for long-standing customers. With a consultation
period running until 25 January 2021, it remains too early to
outline the impact on the Group, however we believe our
market-leading brands and outstanding customer service, combined
with our diversified business model, are fundamental strengths
meaning that we are well placed to deliver success in the
future.
Covid-19 update
- There is no change to the Group's net estimate of the impact
of Covid-19 disruption on business interruption and travel claims
of GBP10 million and GBP25 million respectively.
- We continue to support our customers, our people and society
through a range of initiatives and our current estimate of the cost
of this investment remains at around GBP90 million.
Outlook
- We are currently on track to deliver a combined operating
ratio slightly below our target range of 93% to 95% in 2020,
normalised for weather. We also reiterate our medium-term combined
operating ratio target, however we acknowledge this will inevitably
depend on the duration and uncertainties of the Covid-19 pandemic,
the impact of Brexit, the FCA pricing practices report and any
consequential impact on customer, market and regulatory
approaches.
- We are reiterating our expense ratio target of 20% by 2023. As
outlined at our half year results, our trajectory to get there has
been impacted due to the impact of the Covid-19 pandemic.
For information: gross written premium for the 9 months to 30
September 2020
9 months 9 months Change
2020 2019(2)
GBPm GBPm
====================================== ======== ======== =======
Gross written premium
Direct own brands 1,213.1 1,212.1 0.1%
Partnerships 39.4 46.2 (14.7%)
-------------------------------------- -------- -------- -------
Motor 1,252.5 1,258.3 (0.5%)
-------------------------------------- -------- -------- -------
Direct own brands 306.4 305.4 0.3%
Partnerships 126.3 136.5 (7.5%)
-------------------------------------- -------- -------- -------
Home 432.7 441.9 (2.1%)
-------------------------------------- -------- -------- -------
Green Flag Rescue 65.4 61.9 5.7%
Other Rescue and other personal lines 255.9 272.0 (5.9%)
-------------------------------------- -------- -------- -------
Rescue and other personal lines 321.3 333.9 (3.8%)
-------------------------------------- -------- -------- -------
Direct own brands 123.0 113.1 8.8%
NIG and other 302.8 286.0 5.9%
-------------------------------------- -------- -------- -------
Commercial 425.8 399.1 6.7%
-------------------------------------- -------- -------- -------
Total Group 2,432.3 2,433.2 -
Of which: direct own brands 1,707.9 1,692.5 0.9%
-------------------------------------- -------- -------- -------
For further information, please
contact
PAUL SMITH LISA TREMBLE
INVESTOR RELATIONS DIRECTOR Group corporate affairs and sustainability
director
Tel: +44 (0)1651 831756 Tel: +44 (0)1651 834211
Mobile: +44 (0)7795 811263 Mobile: +44 (0)7795 234801
Notes:
1. Direct Line Group's Trading Update relates to the three
months and nine months ended 30 September 2020 and contains
information to the date of publication.
2. Commercial direct own brands include Direct Line for Business
and commercial products sold under the Churchill brand that were
previously reported within NIG and other. Prior periods have been
re-presented accordingly.
3. Direct own brands include in-force policies for Home and
Motor under the Direct Line, Churchill, Darwin and Privilege
brands, Rescue policies under the Green Flag brand and Commercial
under the Direct Line for Business and Churchill brands.
Forward-looking statements disclaimer
Certain information contained in this document, including any
information as to the Group's strategy, plans or future financial
or operating performance, constitutes "forward-looking statements".
These forward-looking statements may be identified by the use of
forward-looking terminology, including the terms "aims",
"ambition", "anticipates", "aspire", "believes", "continue",
"could", "estimates", "expects", "guidance", "intends", "may",
"mission", "outlook", "over the medium term", "plans", "predicts",
"projects", "propositions", "seeks", "should", "strategy",
"targets" or "will" or, in each case, their negative or other
variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not
historical facts. They appear in several places throughout this
document and include statements regarding the intentions, beliefs
or current expectations of the Directors concerning, among other
things: the Group's results of operations, financial condition,
prospects, growth, strategies and the industry in which the Group
operates. Examples of forward-looking statements include financial
targets and guidance which are contained in this document
specifically with respect to the return on tangible equity,
solvency capital ratio, the Group's combined operating ratio,
percentage targets for current-year contribution to operating
profit, prior-year reserve releases, cost reduction, reductions in
expense and commission ratios, investment income yield, net
realised and unrealised gains, capital expenditure and risk
appetite range. By their nature, all forward-looking statements
involve risk and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future
and/or are beyond the Group's control. Forward-looking statements
are not guaranteeing future performance. The Group's actual results
of operations, financial condition and the development of the
business sector in which the Group operates may differ materially
from those suggested by the forward-looking statements contained in
this document, for example directly or indirectly as a result of,
but not limited to:
- United Kingdom ("UK") domestic and global economic business
conditions;
- the direct and indirect impacts and implications of the
coronavirus Covid-19 pandemic on the economy, nationally and
internationally, on the Group, its operations and prospects, and on
the Group's customers and their behaviours and expectations;
- the outcome of discussions between the UK and the European
Union ("EU") regarding the terms, following Brexit and the end of
the transition period, of any future trading and other
relationships between the UK and the EU;
- the terms of future trading and other relationships between
the UK and other countries following Brexit;
- the impact of the FCA pricing practices report and any new
rules and regulations arising as a result of that report and of
responses by insurers, customers and other third parties;
- market-related risks such as fluctuations in interest rates,
exchange rates and credit spreads;
- the policies and actions of regulatory authorities and bodies
(including changes related to capital and solvency requirements or
the Ogden discount rate or rates or in response to the Covid-19
pandemic and its impact on the economy and customers) and changes
to law and/or understandings of law and/or legal interpretation
following the decisions and judgements of courts;
- the impact of competition, currency changes, inflation and
deflation;
- the timing, impact and other uncertainties of future
acquisitions, disposals, partnership arrangements, joint ventures
or combinations within relevant industries; and
- the impact of tax and other legislation and other regulation
and of regulator expectations, interventions and requirements and
of court, arbitration, regulatory or ombudsman decisions and
judgements (including in any of the foregoing in connection with
Covid-19) in the jurisdictions in which the Group and its
affiliates operate.
In addition, even if the Group's actual results of operations,
financial condition and the development of the business sector in
which the Group operates are consistent with the forward-looking
statements contained in this document, those results or
developments may not be indicative of results or developments in
subsequent periods.
The forward-looking statements contained in this document
reflect knowledge and information available as of the date of
preparation of this document. The Group and the Directors expressly
disclaim any obligations or undertaking to update or revise
publicly any forward-looking statements, whether because of new
information, future events or otherwise, unless required to do so
by applicable law or regulation. Nothing in this document
constitutes or should be construed as a profit forecast.
Neither the content of Direct Line Group's website nor the
content of any other website accessible from hyperlinks on the
Group's website is incorporated into, or forms part of, this
document.
LEI: 213800FF2R23ALJQOP04
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