Direct Line Insurance Group has announced that its pretax loss for the first half of the year has increased due to lower motor business earnings. The nonlife insurer reported a pretax loss of £76.3 million ($95.4 million), compared to a restated pretax loss of £11.1 million in the previous year. This resulted in an operating loss of £78.3 million, contrasting with a restated profit of £197.0 million, primarily due to reduced earnings in the motor business.
Gross Written Premiums Increase
Despite the challenging financial results, Direct Line saw a growth in gross written premiums, which rose by 9.8% to £1.615 billion. This indicates positive performance in terms of revenue generation.
Combined Operating Ratio and Solvency Capital Ratio
Direct Line’s combined operating ratio, a measure of the proportion of revenue consumed by losses and expenses, stood at 106.4% for H1 2022. This is a significant increase from the previous year’s ratio of 88.7%. However, a consensus estimate from Visible Alpha had predicted a lower combined operating ratio of 104.6%. It is worth noting that a ratio below 100% suggests profitable underwriting.
The insurer’s solvency capital ratio, a crucial indicator of balance-sheet strength, remained unchanged at 147% compared to the previous year.
No Interim Dividend Declared
Direct Line’s board has decided not to declare an interim dividend for the current financial period. This decision follows the declaration of an interim dividend of 7.6 pence in the previous year.
Outlook and Future Profitability
Considering the impact of previously written motor business on the company’s operating profit for the full year, Direct Line anticipates adverse effects. However, it remains optimistic about future prospects, as improved motor margins are expected to drive enhanced operating profit through to 2024.
