Direct Line in £100mln buyback as low motor claims boost underwriting

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Direct Line PLC (LON:DLG) said bad weather offset the benefit of a reduced number of claims from people driving less during COVID-19 lockdowns.

The FTSE 100 insurer posted reduced operating profits of £522mln (£546mln) in the year to end-December.

Weather payments rose to £46mln (£6mln), though this was below company expectations of a £64mln cost.

Motor‘s loss ratio improved by 14.6 percentage points to 66.6% with claims frequency falling to around half normal levels during the peak of the lockdown period. Extra costs for delays in getting repairs done due to COVID-19 restrictions did push costs up, said Direct Line.

Pre-tax profits were also affected by restructuring costs of £39.4mln.

“Despite the many challenges we faced in the year as a result of the COVID-19 pandemic, we traded well and prioritised support for our customers, our people and local communities. Own brands policies grew by 2.2%, and our model of disciplined underwriting delivered a combined operating ratio of 91.0%,” said Penny James, chief executive.

Direct Line proposed a final ordinary dividend of 14.7p per share, up 2.1%, and a share buyback programme of up to £100mln, which it said reflected its strong financial position and a solvency ratio of 191%.

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