Direct Line Insurance Group PLC (DLG)

[Dod101]

Thanks for that. Be interesting to see what Admiral has to say. They must be affected in the same way, and that on top of their already flagged drop in profits for this year.

Dod

[idpickering]

Thanks for that. Be interesting to see what Admiral has to say. They must be affected in the same way, and that on top of their already flagged drop in profits for this year.

Dod

You're welcome Dod. I agree with your comments. ADM half year results are out on 10 Aug 22. https://admiralgroup.co.uk/investor-rel ... l-calendar

Ian.

[idpickering]

Direct line down 14% as I type, with Admiral Group down 8%, the later point only mentioned here as a follow-on from my post/chat with Dod in our posts above.

Ian.

[BullDog]

Oh dear. I presume the drop in Admiral and Direct Line is a consequence of no longer being able to charge existing customers more than they charge new customers for the same policy? To be honest, that had to stop. Gouging existing customers is unacceptable. They should be rewarded rather than penalised for staying with the same insurance company for years on end. That's how it used to be.

[monabri]

I'm truly amazed at this.

[simoan]

Oh dear. I presume the drop in Admiral and Direct Line is a consequence of no longer being able to charge existing customers more than they charge new customers for the same policy? To be honest, that had to stop. Gouging existing customers is unacceptable. They should be rewarded rather than penalised for staying with the same insurance company for years on end. That's how it used to be.

That is not what they said if you read the RNS. The word of the day is "claims inflation".

The motor insurance market experienced significant levels of severity inflation in H1, primarily resulting from higher used car prices, and amplified by higher third party claims costs, longer repair times and inflation in the cost of car parts. Market premium inflation has continued to lag the increases in claims inflation.

Whilst the Group has been pricing claims inflation over the last 12 months, experience has been in excess of the levels assumed. The Group now estimates overall motor claims severity inflation for 2022 of around 10%.

Strange times we live in, and I have not read a trading update recently that does not mention the negative impact of inflation on the business.

[Dod101]

Oh dear. I presume the drop in Admiral and Direct Line is a consequence of no longer being able to charge existing customers more than they charge new customers for the same policy? To be honest, that had to stop. Gouging existing customers is unacceptable. They should be rewarded rather than penalised for staying with the same insurance company for years on end. That's how it used to be.

As simoan has said it is not at all to do with that and if you intended your remarks to be taken seriously I suggest that you read the RNS carefully. In fact I have already commented on the actual factors affecting both Direct Line and Admiral. Admiral flagged these matters at its own trading up date I think it was, quite some time back.

Dod

[BullDog]

Oh dear. I presume the drop in Admiral and Direct Line is a consequence of no longer being able to charge existing customers more than they charge new customers for the same policy? To be honest, that had to stop. Gouging existing customers is unacceptable. They should be rewarded rather than penalised for staying with the same insurance company for years on end. That's how it used to be.

That is not what they said if you read the RNS. The word of the day is "claims inflation".

The motor insurance market experienced significant levels of severity inflation in H1, primarily resulting from higher used car prices, and amplified by higher third party claims costs, longer repair times and inflation in the cost of car parts. Market premium inflation has continued to lag the increases in claims inflation.

Whilst the Group has been pricing claims inflation over the last 12 months, experience has been in excess of the levels assumed. The Group now estimates overall motor claims severity inflation for 2022 of around 10%.

Strange times we live in, and I have not read a trading update recently that does not mention the negative impact of inflation on the business.

I guess "inflation" is the new "covid"

[simoan]

Oh dear. I presume the drop in Admiral and Direct Line is a consequence of no longer being able to charge existing customers more than they charge new customers for the same policy? To be honest, that had to stop. Gouging existing customers is unacceptable. They should be rewarded rather than penalised for staying with the same insurance company for years on end. That's how it used to be.

That is not what they said if you read the RNS. The word of the day is "claims inflation".

The motor insurance market experienced significant levels of severity inflation in H1, primarily resulting from higher used car prices, and amplified by higher third party claims costs, longer repair times and inflation in the cost of car parts. Market premium inflation has continued to lag the increases in claims inflation.

Whilst the Group has been pricing claims inflation over the last 12 months, experience has been in excess of the levels assumed. The Group now estimates overall motor claims severity inflation for 2022 of around 10%.

Strange times we live in, and I have not read a trading update recently that does not mention the negative impact of inflation on the business.

I guess "inflation" is the new "covid"

Yes, there's a lot of it about...

[monabri]

Half year Report

https://www.investegate.co.uk/direct-li ... 00095328U/

[Dod101]

Half year Report

https://www.investegate.co.uk/direct-li ... 00095328U/

No worse than was expected I guess after their earlier comments. I do not hold but do hold Admiral which reports next week. Be interesting to see what their numbers look like.

Dod

[monabri]

Half year Report

https://www.investegate.co.uk/direct-li ... 00095328U/

No worse than was expected I guess after their earlier comments. I do not hold but do hold Admiral which reports next week. Be interesting to see what their numbers look like.

Dod

note paragraphs from the CEO opening overview:

"However, the longer-term fundamentals of the business remain strong. Through pricing action, steps taken in our garage repair network and through deployment of enhanced pricing capability, we have now returned to writing at our target margins based on latest claims assumptions.

"We are pleased that all of our other businesses have continued to perform in line with expectations. We remain ahead of our long-term return on tangible equity target despite the challenges, demonstrating the benefit of the Group's diversification. We are announcing an interim dividend in line with 2021 and are confident in the sustainability of our regular dividends as we look ahead to the full year and beyond."

Shareprice response is "flat" (I was expecting a bit of a bounce, but there you go!).

[Dod101]

Half year Report

https://www.investegate.co.uk/direct-li ... 00095328U/

No worse than was expected I guess after their earlier comments. I do not hold but do hold Admiral which reports next week. Be interesting to see what their numbers look like.

Dod

note paragraphs from the CEO opening overview:

"However, the longer-term fundamentals of the business remain strong. Through pricing action, steps taken in our garage repair network and through deployment of enhanced pricing capability, we have now returned to writing at our target margins based on latest claims assumptions.

"We are pleased that all of our other businesses have continued to perform in line with expectations. We remain ahead of our long-term return on tangible equity target despite the challenges, demonstrating the benefit of the Group's diversification. We are announcing an interim dividend in line with 2021 and are confident in the sustainability of our regular dividends as we look ahead to the full year and beyond."

Shareprice response is "flat" (I was expecting a bit of a bounce, but there you go!).

Judging by past experience I would expect Admiral to be at least as on top of matters as Direct Line and I think their share price has suffered more than Direct Line so we might get a bounce of relief if Admiral's results are not too bad. Admiral though might well cut their overall dividend and that will not please the market.

Dod

[idpickering]

Trading Update for Q3 2022.

PENNY JAMES, CEO OF DIRECT LINE GROUP, COMMENTED

"Trading across the Group was broadly in line with our expectations given the challenging market backdrops in Motor and Home, whilst we continued to deliver strong growth in Commercial. The pricing actions we have taken to restore margins in Motor led to a reduction in new business sales; however, we were encouraged to see this improve steadily across the quarter as the market hardened. Having restored our Motor targeted written loss ratios, based on our claims assumptions, we maintained these throughout Q3, with inflation developing in line with our expectations.

"We continued to work on the actions we set out at our H1 results to restore the resilience of our balance sheet, including reducing our exposure to credit risk in our investment portfolio, reducing costs and considering the use of strategic reinsurance. We have also made good strategic progress with the deployment of further pricing capability in Motor. In Q4, we will launch a new product for customers challenged by the cost of living crisis and start rolling out more advanced digital claims capability.

"In these challenging economic conditions, the business is strong and actions we have taken continue to underpin the Group's future earnings power."

Group trading update

We traded throughout the third quarter with care, taking actions to negotiate the uncertain economic environment, especially in relation to inflation. In Motor, we saw reduced new business early in the quarter as we increased prices to restore margins, based on our claims assumptions, however our market position improved through the quarter as we saw premium rate increases in the market accelerate. In Home, retention remained strong whereas the new business market conditions remain very challenging. We are deploying our multi-brand strategy thoughtfully as we focus on maintaining portfolio value.

Outside Home and Motor, Green Flag direct was broadly stable year to date and Commercial continued its strong growth across all channels. Overall, Group adjusted gross written premium was 3.5% lower than for the first three quarters of 2021.

Claims and costs

Motor inflation is tracking closely to our expectations of around 10% for 2022. There remains pressure in the supply chain elongating repair times, especially for third party repairs, whereas used car prices have come off their peak. In Home and Commercial, inflation has been slower to emerge to date and we have priced for this to increase over the coming year. In addition, we have experienced a modest increase in subsidence claims in Home, which is within our annual weather expectation.

As we have previously disclosed, claims are taking longer to settle, for example due to court backlogs, and this is slowing down the recognition of prior-year reserve releases, particularly from Motor large bodily injury claims. The measure used to inflate the majority of periodic payment orders was published in early November4 and was within the range covered by our reserving assumptions.

We continue to make progress on improving the Group's efficiency and expect operating expenses (excluding restructuring and one-off costs) to be around £700 million, a reduction compared to 2021 notwithstanding the inflationary backdrop.

Capital and Investments

As we said we would at our half year results, in August we reduced our exposure to credit risk in the investment portfolio, which has reduced our sensitivity to credit spreads by an estimated 33% and increased our solvency capital ratio by around 6 percentage points. This was achieved by the sale of £670 million of US dollar investment grade bonds which incurred a realised loss of £19 million.

The investment markets continue to be volatile. The impact of interest rate movements is expected to be broadly neutral to capital coverage, in line with our disclosed sensitivity. We expect to see some downward fair value adjustments to our investment property portfolio, in line with market indices.

The increase in interest rates has improved reinvestment rates and we currently estimate a net investment income yield of 2.1% in 2022 increasing to 2.8% in 2023.

https://www.investegate.co.uk/direct-li ... 00055968F/

Ian.

[monabri]

Not exactly a brilliant update, both it and Admiral down quite a bit.

[idpickering]

Trading update.

Penny James, Chief Executive Officer, said:

"We have seen a volatile and challenging operating environment in the fourth quarter. We have seen a significant increase in claims as a result of the prolonged period of severe cold weather in December and I am proud of the way that we have supported our customers during this period. These claims, combined with further increases in motor inflation, have had a significant impact on our underwriting result for 2022. We have also seen reductions in the valuations of the commercial property holdings in our investment portfolio in line with movements in the broader property market.

As a result the Board no longer expects to declare a final dividend for 2022. The Board recognises the importance of the dividend to our shareholders, and continues to take actions to restore balance sheet resilience and dividend capacity as a priority, consistent with our track record of delivering returns for shareholders.

Despite the impact of these external factors, we continue to make good progress, including enhancing our technological capabilities, introducing new products and improving our efficiency. We have taken actions to respond swiftly to further inflation in motor claims and will continue to navigate market volatility as it arises."

https://www.investegate.co.uk/direct-li ... 00083658M/

Ian.

[Dod101]

As I have just said on the HYP Board, no Final. That will be a bit of a shock to anyone holding them. monabri appears to have read the tea leaves correctly back in November.

I wonder now about Admiral.

Dod

[idpickering]

Publication of 2022 Annual Report and Accounts

Direct Line Insurance Group plc (the "Company") has, today, published its Annual Report and Accounts for the year ended 31 December 2022 ("Annual Report") on the Company's website at https://www.directlinegroup.co.uk/en/investors .

A copy of the Annual Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at:

https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

Copies of the Annual Report and the Notice of the 2023 Annual General Meeting will be posted or otherwise made available in due course according to shareholders' communication preferences.

This notification has been prepared in accordance with Disclosure Guidance and Transparency Rule 6.3.5.

https://www.investegate.co.uk/direct-li ... 30011546U/

Ian (No holding).

[idpickering]

DIRECT LINE INSURANCE GROUP PLC TRADING UPDATE FOR Q1 2023.

During the quarter we continued to take pricing action in Motor to improve our margins and made good progress towards target margins across the Motor portfolio. As a result, average renewal premiums in Q1 increased by 19% compared to Q1 2022, reflecting premium rate increases during 2022 and in Q1 2023. Focusing on margin led to a reduction of in-force policies of 2.5% across the quarter and despite this gross written premium increased by 3.3% in Q1 2023.

In Commercial, the strong premium growth seen in 2022 continued in Q1 2023 with gross written premium growth of 27.6% in Q1 driven by both direct own brands and NIG and other. In Home, we observed significant price increases across the market. Our Home gross written premium grew by 2.1% with policy count stable across Q1.

Claims and reserving

We have experienced further adverse claims development in respect of late 2022 and early 2023 in Motor (including Commercial Motor) particularly in relation to damage. This is expected to put pressure on earnings in 2023 including from prior-year reserve releases.

We incurred modest weather event claims during the first quarter, well within the 2023 full year assumption of £80 million.

Our forward view of claims inflation remains unchanged at high single digits across Motor and Home, albeit there continues to be a range of potential outcomes depending on future economic conditions.

Investments

Group total investment return was £70.9 million in Q1 of which £37.0 million related to net investment income and £33.9 million related to the movement in realised and unrealised gains. The annualised investment income yield was 3.2% as at the end of March 2023.

Capital

The Group's estimated solvency capital ratio on 31 March was broadly unchanged compared with year end, as the majority of credit spread narrowing early in the quarter unwound during March. As previously set out, we expect to benefit from several capital tailwinds, including a reduction in ineligible capital on the adoption of IFRS 17 and the pull to par effect on our bond portfolio, which are now expected to be recognised over the remainder of 2023. In addition, self-help actions continue to be explored, as we set out with our full year results.

JON GREENWOOD, ACTING CEO OF DIRECT LINE GROUP, COMMENTED

"Trading has been positive over the first quarter with premium growth across Motor, Home and Commercial and this trend has continued into April. Our focus continues to be on restoring the capital strength of the Group and improving Motor margins, where we have made good progress. Whilst 2023 earnings outlook continues to be challenging, the Group has many strengths, and we continue to take the actions required to drive business performance. Our ambition over time to generate a net insurance margin of above 10% remains."

https://www.investegate.co.uk/announcement/7516872

Ian (No holding).

[idpickering]

Response to press coverage.

Direct Line Insurance Group plc (the "Group") notes recent press coverage regarding the past business review of motor total loss claims which the Group is undertaking. The review covers claims settled between 1 September 2017 and 17 August 2022. An estimate of potential payments the Group will make as a result of the review was provided for within the Group's 2022 financial year end claims reserves. The Group does not expect the review to have a material financial impact in 2023.

https://www.investegate.co.uk/announcem ... ge/7601715

Ian.