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Direct Line Insurance Group PLC on Tuesday reported a sharp decline in half-year profit, due to challenging market conditions and the implementation of regulations from the Financial Conduct Authority.
For the six months to June 30, the London-based insurance company recorded a pretax profit of £178.1 million, down 32% from £261.3 million.
Gross earned premiums fell 0.6% year-on-year to £1.56 billion from £1.57 billion.
Adjusted gross written premium dropped by 2.1% to £1.52 billion from £1.56 billion.
Direct Line delivered a combined operating ratio of 96.5% in the period, worsening from 84.2%. A combined ratio below 100% indicates a profit on insurance underwriting, so the lower, the better.
The insurer attributed this to challenging market conditions due to the harmful impact of the Covid-19 pandemic on the economy, customer behaviour, and the pricing environment.
Further, it cited the implementation of regulations from the FCA's pricing practices review in Motor and Home.
The pricing practices are rules set by the FCA that aim to improve the way insurance markets function. For instance, the rules ensure that renewing home and motor insurance consumers are quoted prices that are no more than they would be quoted as a new customer through the same channel.
The insurer maintained its interim dividend of 7.6 pence per share.
Looking ahead, Direct Line Insurance expects its annual combined operating ratio to be in the range of 96% to 98%. Its combined operating ratio for 2021 was 90.1%.
For 2023, the company expects a combined operating ratio of around 95%.
Direct Line Insurance hopes to return to having a target range of 93% to 95% ‘over the medium term.’
Shares were trading 0.4% lower at 206.30 pence each on Tuesday in London.
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