27 February 2018Insurance

Direct Line 2017 results jump on Ogden change

UK-based Direct Line has seen its operating profit in the motor business more than double in 2017 after UK’s Ogden personal injury discount rate change, boosting overall results, but reinsurance cost also increased at January 2018 renewals.

In September 2017, the UK government revealed a proposal for the Ogden discount rate which implying a real rate of 0 percent to 1 percent.

The move came after earlier in February the government had reduced the Ogden discount rate to -0.75 percent from 2.5 percent, which hit both insurers’ and reinsurers’ profits.

Direct Line’s motor current-year loss ratio improved to 79.7 percent from 84.1 percent in 2016 as the group priced to reflect the higher costs of the lower Ogden discount rate and benefitted from having renewed its reinsurance arrangements at the beginning of the year, before the Ogden discount rate change.

Motor also benefitted from a £49 million reserve release after a detailed review in the first half of the group’s Ogden provision within case reserves. Other prior-year releases were lower year on year, albeit large bodily injury claims developed favourably. In addition, in 2017 the group’s claims experience was better than expected.

The operating profit in motor grew to £364 million in 2017 from £149 million in 2016. The improvement in motor boosted Direct Line’s pre-tax profit which increased 52.7 percent year on year to £539.0 million in 2017. Gross written premium grew 3.6 percent £3.39 billion in 2017.

“We have seen significant growth in our direct own brand policies as more customers respond positively to the many improvements we have made to the business,” said Paul Geddes, CEO of Direct Line Group.

The motor excess of loss reinsurance programme renewed on 1 January 2018 at a somewhat increased cost reflecting the reduction in the Ogden discount rate. The group renewed all layers, but retained 10 percent of the first risk layer (£2 million excess £1 million).

Direct Line stated its ambition to be the partner of choice for motor manufacturers. The group already has a partnership with PSA Finance UK (part of Groupe PSA, owners of the Peugeot and Citroën brands) and an introducer relationship with Tesla, and the group has recently signed a letter of intent for a partnership arrangement intended to be for five or more years with Volkswagen Insurance Service (Great Britain) covering Volkswagen, Audi, Seat, Skoda and Volkswagen Commercial Vehicles.

Join us at Intelligent Automation in Insurance - London 2018.  Book by Feb 28th and you could save £300.

More of today's news

Allianz invests in fintech business C2FO

Barclays backs insurtech Nimbla

Reinsurance profitability to rise in 2018: Moody’s

Don't miss our insurtech email newsletter - sign up today

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Insurance
18 October 2019   Some 1.4 million dogs across the UK have been injured by a stick, reveals new research by Direct Line Pet Insurance, which urges dog owners to use a safe, specially designed eco-friendly throw toy instead.
Insurance
17 October 2019   Insurance claims in England and Wales from landlords whose properties have been converted into illegal cannabis farms account for a third of the total value of all malicious damage claims received, reveals new research from business insurance provider Direct Line for Business.
Insurance
7 September 2017   The UK government’s new proposal for the personal injury Ogden discount rate could mean reserve releases for re/insurers of up to £2.5 billion, according to consultancy firm EY.