Direct line shares up after Q3 update shows strong premium growth in key segments

Investing.com — Shares of Direct Line Group (LON:) rose on Monday (NASDAQ:) following the company’s third-quarter 2024 trading update, which reported a period of mixed progress as it navigated challenging market conditions in motor insurance while posting premium growth across several segments.

“We are in the early stages of a significant turnaround and our Q3 trading is not yet fully reflective of the actions we have taken,” said Adam Winslow, chief executive at Direct Line Group.

In motor insurance, Direct Line faced a competitive landscape but managed to increase policy counts on price comparison websites, boosted by a new Direct Line brand presence on these platforms. 

The company reported a rise in large bodily injury claims during the quarter, which contributed to continued pressure on profitability in this segment. 

Nonetheless, motor own-brand premiums rose by 2.9% year-over-year, aided by higher average premiums, even as overall policy growth showed signs of slowing.

Direct Line saw a strong performance in its non-motor categories, with home insurance premiums up 21.6% and a fourth consecutive quarter of policy count growth, demonstrating resilience in its home insurance sector. 

Premium growth was also observed in the commercial direct and rescue sectors, which increased by 11.8% and 0.7%, respectively. 

This growth aligns with the company’s targeted improvements in non-motor segments, where it aims for 7% to 10% compound annual growth in gross written premiums through 2026.

As part of its broader strategy, Direct Line has also committed to a £100 million gross cost-saving target by the end of 2025, with around £50 million in savings anticipated next year from measures such as procurement enhancements, technological consolidation, and organizational streamlining. 

While Direct Line remains optimistic about its restructuring progress, Winslow noted that current trading conditions, particularly in motor insurance, could temper immediate performance metrics. 

“We continue to target 7% to 10% compound annual growth (“CAGR”) in gross written premium and associated fees between 2023 and 2026 in Non-Motor, and we reiterate our net insurance margin target for ongoing operations, normalised for event weather, of 13% in 2026,” the company said in a statement.