Profit for Direct Line’s motor insurance business fell 36% year on year to £154m ($187.4m) in H1 2019 as premium income dropped and claims reserves were strengthened following the Ogden rate change.
Written premiums fell 4.7% year on year to £800.5m. Direct Line said prior year releases were £32m lower, £16m of which was due to the change to the Ogden rate, which is also known as the discount rate.
Several UK insurers expressed shock at the change to the Ogden rate for personal injury lump sum compensation payments to -0.25% from -0.75%, which is due to take effect from 5 August.
Direct Line Group’s operating profit fell from £305.5m in the first half of 2018 to £274.3m for the same period this year – representing a year on year drop of 10.2%. Gross written premiums were also 2.2% lower year on year.
Lower premiums in the motor insurance line were partially offset by growth in the rescue and commercial segments. Premium income for the rescue and other personal lines rose 3% year on year to £216.5m.
Meanwhile, premiums rose by 1.8% year on year to £274.8m for H1 2019 in the commercial insurance segment.
Home insurance premiums dropped slightly from £290.7m in H1 2018 to £283.3m for the same period this year.
The insurer’s combined operating ratio fell from 92.9% in H1 2018 to 92.5% for the same period this year.
Investment return dropped from £95.4m in the first half of 2018 to £75.7m for the same period this year.
The solvency capital ratio, post dividends, rose 10% year on year to 180% in H1 2019.
Direct Line Group’s chief executive Penny James said: “There remains much to do, but we are successfully removing costs from the business as well as making good progress on transforming the group's IT systems, for example with the initial launch of our new Motor platform.
She added: “We aim to use the faster and more flexible systems to increase the pace at which we transform the business and to enable us to capture the near- and long-term opportunities available to the group."
The infographic below from Insurance Risk Data, the data arm of InsuranceERM, provides gross written premium data (€’000) from 2018, 2017 and 2016 for Direct Line Insurance Group across different business lines.
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