Insurer Direct Line said its earnings outlook remains “challenging” due to the soaring cost of claims – despite ramping up prices across its motor and home policies.
The group said it was seeing a further impact of the rising cost of motor repairs due to inflation, which is expected to put pressure on earnings this year.
In response, it said it was hiking car cover prices, which pushed up average motor renewal premiums by nearly a fifth – 19% – year-on-year in the first quarter.
This led to a 2.5% fall in policies in the quarter, but premium price rises helped the motor division’s gross written premium lift 3.3% to £358.7 million.
It is guiding for claims inflation at “high single digits” across motor and home, although the car market has been hit particularly badly by surging repair costs, for both parts and labour.
Overall, it said gross written premiums rose to £805.7 million from £734.3 million year-on-year in the first three months of 2023.
Jon Greenwood, acting chief executive of Direct Line Group, said: “Trading has been positive over the first quarter with premium growth across motor, home and commercial, and this trend has continued into April.”
He added: “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.”
The group has had a tumultuous start to the year, with former boss Penny James quitting in January after it saw shares plummet in the wake of a profit warning and move to scrap its shareholder dividend.
It blamed the impact of freezing weather and the rising cost of motor cover claims.
Direct Line has since admitted it under-priced policies for inflation, while the weather costs left the group unusually exposed compared with its rivals.
Mr Greenwood stepped in to replace Ms James on an interim basis and the group continues to search for a permanent chief executive.
