Shares in blue chip insurer Direct Line (DLG) are flat at 351p as a third quarter update reveals it is on track deliver underwriting profit at the upper end of expectations.

The company is receiving a boost from an increased volume of vehicle sales and rising motor insurance premiums.

Its combined operating ratio for underwriting operations is expected to be at the lower end of its target range of 93% to 95%. The ratio measures the proportion of claims to premiums with anything below 100% implying a profit.

Gross written premiums for ongoing operations are 4.2% higher at £2.5bn, nudging ahead of expectations thanks to the strong growth in the Motor business.

Gross written premiums for the Rescue division have increased by 0.9% as a result of higher Green Flag direct sales.

Direct Line intends to continue investing in its own brand propositions such as Churchill and Green Flag to attract new customers. For the last two years the company has been running a series of ads with actor Harvey Keitel, reprising his Winston Wolf character from Pulp Fiction.


Broker Canaccord Genuity analyst Ben Cohen says that motor and commercial premiums are better than its forecasts. He believes the stock has been weak compared to the sub-sector thanks to concerns linked to rising inflation.

Direct Line graph

The insurer says total costs of £669.5m are £16.1m higher compared to the first nine months of 2015 due to it absorbing £24m of not-for-profit organisation Flood Re's costs in the second quarter of 2016.

Flood Re is a reinsurance company, owned and managed by the industry, which allows insurance companies to insure against flooding losses. It thereby promotes the availability and affordability of flood insurance to homeowners in flood risk areas.

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Issue Date: 08 Nov 2016