Home Business NewsBusiness Direct Line has big problems to fix

Direct Line has big problems to fix

by LLB Reporter
13th Mar 23 9:47 am

After one of its worst years in living memory, Direct Line was forced into the pits a few months ago and is now hoping to get back on the road, albeit likely stuck in the slow lane for a while.

There is a lot to do – it needs to improve its capital strength, rebuild margins and get the business in a shape where it can start paying dividends to shareholders again.

AJ Bell’s Russ Mould said: “Its recent problems have been well-documented. A rise in inflation made it more expensive to fix vehicles and homes when someone claimed on their insurance policy. Unfavourable weather conditions also caused a spike in claims, making matters worse.

“The company realised its capital ratios were on the danger of slipping outside its comfort zone, so half of a share buyback programme and the final dividend for 2022 both went in the bin.

“The financial results for the year are as ugly as can be, with all the key metrics worse than a year earlier. Profits have been wiped out and the company said the value of claims from weather events were more than twice as big as forecast, illustrating the severity of the situation.

“The plan now is to push up motor insurance prices in a similar way to what others including Admiral are doing, as well as improve its solvency position.

“Shareholders will have to wait until the half-year results in August to see when the dividend might be restored.

“Despite clearly laying out its problems and what needs to be done, the market is still doubtful that Direct Line will bounce back quickly, given how the shares have taken another tumble on the results.”

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