Revenues from gross written premiums were marginally higher year on year at £1.58 billion, although the total number of policies in force dipped slightly to 14.63 million.
Underlying operating costs were ‘broadly stable’, while the impact of Covid-19 on operating profits was neutral as higher travel and business interruption claims were offset by lower motor and commercial claims as the roads emptied and shops were shut.
Meanwhile a £30.4 million increase in weather-related costs, which was only partially offset by a reduction in the Ogden rate, meant operating profits were 3.4% lower at £264.9 million.
Despite this dip in earnings, the firm raised its 2020 interim dividend to 7.4p per share from 7.2p and reinstated its special 2019 dividend of 14.4p per share, which pleased investors.
The firm’s plans for the second half include launching Direct Line and Churchill motor new business onto its new platform, to increase the proportion of direct sales rather than using third parties like price comparison websites, and to get costs on track to meet its 20% target by 2023.
For the full year the firm is expecting the net impact of the pandemic on travel and business interruption claims to be £25 million and £10 million respectively, unchanged from its projections at the end of the first quarter.
Although business interruption claims could rise for the industry, depending on the result of the test case being brought by the Financial Conduct Authority (FCA), the good news for Direct Line shareholders is the firm isn’t a defendant and has minimal exposure whatever the outcome.
There is still the matter of the FCA probe into renewal pricing, which has been delayed by the pandemic but hasn’t gone away, and the small matter of Brexit at the end of the year.
While it is predominantly a UK business, the company still has to import goods such as car parts for repairs and it says it has taken as many precautions as it can to mitigate the potential impact but it can’t rule out a ‘disruptive Brexit.’