Direct Line dented by falling premiums

Falling home and motor premiums made a dent in insurer Direct Line during the first nine months of the year, it emerged today.

The company said gross written premiums fell 5% to £2.4 billion in the period with the cost of insuring cars continuing to fall, albeit at just 0.1% in the third quarter.

However, the group’s shares rose 0.4p to 282p as it remained on course to hit its targets, including a combined ratio of between 95% to 97%. This measures underwriting profitability, with figures under 100% reflecting a profit.

Boss Paul Geddes said: “Progress in the third quarter means we remain on track to deliver our 2014 financial targets, despite a backdrop of markets that remain highly competitive.

"We are working hard to enhance our propositions and I am particularly pleased with how we are harnessing technology to improve our product features and make it easier for our customers to interact with us.”

Direct Line is in the process of selling its underperforming overseas business to Mapfre for €550 million (£430 million), which it expects to wrap up in the first quarter of next year.

Nick Johnson, an analyst at Numis, said: “The recent trend of reducing in-force policies has slowed in the third quarter, which we take as a positive sign that Direct Line’s pricing and efficiency initiatives are resulting in more-competitive products.

"Although the pricing environment remains challenging we think Direct Line’s earnings and dividends are well supported by stable margins.”