Financial Services

UPDATE 1-Insurer Direct Line's profit falls, warns on hard Brexit


(Reuters) – Britain’s largest motor insurer Direct Line Insurance Group Plc reported lower 2018 earnings on Tuesday, hit by a fall in insurance prices, and warned that it would not be immune to a “disruptive Brexit” despite steps taken to mitigate the impact.

Like its rivals, Direct Line has been hit in 2018 by steep claims stemming from extreme weather in Britain, including the hottest summer in living memory following a late winter freeze, as well as increasing competition.

Direct Line — whose brands include Churchill, Green Flag and Privilege — said in August Paul Geddes would step down in 2019 after a decade at the helm and named Chief Financial Officer Penny James as its CEO last week.

The FTSE 100 firm’s operating profit fell to 601.7 million pounds ($791.54 million), for the year ended Dec. 31, from 642.8 million pounds, while gross written premiums was 5.3 percent lower at 3.21 billion pounds.

Motor premiums in 2018 were pushed down by changes in the Ogden rate, used to calculate compensation for personal injuries, and the Civil Liability Bill, which includes reforms likely to reduce claims for whiplash injuries.

Direct Line said it considered it appropriate to maintain a prudent solvency capital ratio towards the upper end of 140 percent to 180 percent range, for the time being, after taking into account the political and economic uncertainties including Brexit.

The underwriter’s combined operating ratio, a measure of underwriting profitability, was 91.7 percent in 2018 compared with 90.8 percent it reported a year earlier. A level below 100 percent indicates an underwriting profit.

Reporting by Muvija M and Noor Zainab Hussain in Bengaluru; Editing by Shounak Dasgupta



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