Direct Line Group – price hikes force 434,000 own-brand motor customers out the door

• Total gross written premiums up 10.7% to £892.2mn
• Motor own brand premiums up 13.4% to £400.1mn
• Total in-force policies down 1.8% to 9.3mn

Matt Britzman, equity analyst, Hargreaves Lansdown: “Direct Line’s mammoth price hikes continued over the first quarter. Strip out the relatively new partnership with Motabilty, and Direct Line saw 434,000 motor customers walk out the door. It’s not too hard to see why. The headline figure of a 35% rise in average premiums is somewhat flattered by better rates being offered to new customers. Anyone looking to renew motor insurance over the quarter was whacked with a 38% price hike. These are necessary for Direct Line to get its motor insurance operations back to sustained profitability, and with a new CEO and an improving market, the motor business looks to finally have a footing from which it can grow. But that’s little consolation to policyholders.

There’s still a long way to go if Direct Line wants to return a stable dividend and restore investor confidence. With takeover frenzy now backed out of the valuation, it looks like a more reasonable entry point. But there’s a lot to do if Direct Line wants to challenge some of the best operators in the sector. Investors will be eagerly awaiting the upcoming capital markets day, now set for 10 July.”