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(Alliance News) - Direct Line Insurance Group PLC on Thursday said it is suspending its share buyback programme as it grapples with the impact of the Covid-19 spread.
The GBP150 million buyback was unveiled earlier in March, when the motor insurer presented its annual results. To date, GBP29 million of shares have been repurchased under the programme.
Chief Financial Officer Tim Harris said: "Given the uncertainty as a result of Covid-19, we've taken the prudent decision to pause our share buybacks until the situation becomes clearer. The Direct Line Group capital position remains strong, and solvency has moved as expected in line with our sensitivity analysis following recent market movements. We hope to be able to resume the share buybacks in due course, but it's right we seek to preserve the group's strong balance sheet during this period of heightened uncertainty."
As of Wednesday, Direct Line said it had an estimated solvency capital ratio of 163%.
In the short term, Direct Line expects lower claims in its Motor unit following UK government advice to limit non-essential travel due to the Covid-19 spread.
However, Travel claims related to Covid-19 surged to GBP5 million on March 15 from GBP1 million on March 3.
Direct Line added: "An increase in claims following further travel restrictions imposed by the Foreign & Commonwealth Office is expected, although it is too early to estimate the potential impact. The group has implemented measures to help mitigate this, including pausing new travel insurance sales and restricting cover for new travel bookings. The group has reinsurance cover totalling GBP18.5 million for Travel claims."
Shares in the company were 5.4% lower at 253.60 pence each in London on Thursday shortly after midday.
By Eric Cunha; ericcunha@alliancenews.com
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