Insurer Direct Line has notched up a hike in half-year profits amid a slump in motor claims as the pandemic saw fewer drivers on the road.
Britain’s biggest motor insurer, which owns the Direct Line and Churchill brands, posted a 10.5% hike in pre-tax profits to £261.3 million for the six months to June 30.
It said motor claims slumped in the first quarter, with lockdowns and remote working keeping people off the roads, alongside falling new car sales and fewer new drivers entering the market.
While motor insurance prices fell steeply across the market, Direct Line held off from hefty cuts, which saw it lose some business to rivals, with gross written motor premiums down 6.2% to £755.6 million.
This is an exciting and pivotal point for the business
But it said these trends began to reverse in the second quarter as restrictions eased, with the fall in gross written premiums narrowing from 10.6% in the first three months to 1.5% in the second quarter.
The group hailed a robust performance across its home insurance arm, commercial division and the roadside rescue business including Green Flag.
Its results showed that earnings jumped by 40% to a better-than-expected £369.9 million thanks also to fairly stable weather conditions, and the release of cash put aside for reserves in the previous year.
Penny James, chief executive of Direct Line Group, said: “We returned to growth in the second quarter, which is testament to our diversified business model, with commercial, home and rescue performing strongly.”
The first half also saw the group largely finish a technology overhaul, with a new online platform launched for its largest motor brands – Direct Line and Churchill.
“This is an exciting and pivotal point for the business, we’ve completed the majority of our tech transformation, and we’re starting to reap the benefits of what the new systems offer us,” added Ms James.
Direct Line unveiled a 7.6p a share interim dividend, up 2.7% on 2020 on the back of the half-year profits boost, which helped shares rise 3% in early trading.
William Ryder, equity analyst at Hargreaves Lansdown said: “Direct Line looks in a reasonable place to us, but general insurance is still a really tough market.
“Competition is always tough, especially on price comparison websites.
“While Direct Line is doing a lot of the right things, like investing in technology to improve underwriting efficiency and control costs, competitors are doing the same.”