After a miserable 2022 which saw the insurer bombarded with claims caused by extreme weather conditions and a spike in the cost of fixing problems, Direct Line dusted off its crisis management playbook and got to work addressing its issues.
A share buyback was paused, the dividend was suspended, the CEO was given the boot and it started to push up prices for insurance policies.
AJ Bell’s Russ Mould said: “Sadly, it wasn’t a simple ‘click your finger and everything is fixed’ situation. The adverse claims trend is still intact, which is going to put pressure on earnings in 2023.
“With expectations of high single-digit claims inflation across motor and home policies, Direct Line is no doubt crossing its fingers that we don’t get a hot summer that causes widespread subsidence, nor a brutally cold autumn/winter that freezes up pipes.
“All insurers want a Goldilocks scenario where the weather is not too hot or not too cold, but the impact of climate change would suggest this is a big ask.”