Direct Line, the FTSE 250 insurer, swung to an annual loss for 2022, taking a hit from its biggest ever amount of claims relating to bad weather and the rising cost of repairing cars.
The December big freeze was the biggest driver of £149 million in weather-related claims, with the £95 million in claims from the cold snap alone more than the total of £73 million the company budgeted for the whole of the year. It was the most Direct Line paid out for weather-related claims since it listed on the London stock market over a decade ago.
Rises in the cost of claims were most acute in its motor insurance business, where inflation hit 14% and above the levels the Croydon-based group incorporated into its pricing. It also said that “capacity constraints in the repair industry” meant the outlook for claims inflation “remains uncertain”, alongside “continued settlement delays in third party claims and potential care cost inflation.”
Nonetheless, the company said “restoring performance” in its motor business will be its “main operational focus” for 2023.
Direct Line last month became the first FTSE 350 company of the year to part ways with its chief executive, Penny James, who left suddenly two weeks after it issued a profit warning and scrapped its dividend.
Its acting chief executive, John Greenwood, called 2022 a “tough year” and Direct Line’s performance “disappointing” as it swung to a loss of over £45 million from profit of £446 million a year earlier.
He added: “The fundamentals of our business remain strong and we are now fully focused on rebuilding our margins, further improving our capital strength and generating attractive sustainable returns for shareholders.”
Richard Hunter, head of markets at Interactive Investor, said: “There is precious little in these numbers to assuage the concerns which investors had previously identified.
“The higher level of claims were part of an annus horribilis for the group, with regulatory reforms and the uncertainty of finding a new CEO to tackle the overall issues adding to the woes which Direct Line is facing.”
Shares in the company fell over 11p to 157p, a drop of over 6%.
