Last checked at (Sharecast News) - Insurer Direct Line said it expected to take a gross hit of £44m, or £25m net, in travel claims from the impact of the coronavirus pandemic, offset by a 70% fall in motor claims as people made fewer car journeys.
The UK's biggest motor insurer said on Wednesday that it also expected to incur around £70m of costs including supporting customers in financial difficulty, pausing all redundancies until at least the autumn and providing all NHS workers with free breakdown services.
Direct Line added that it reported a 4.7% rise in first-quarter gross written premiums to £789.6m.
Direct Line last month pulled its final 2019 dividend and said it would make no changes to staffing until at least the autumn, as it assessed the damage that government shutdowns were having on the insurance industry. On Wednesday it said it would review the position at its half year results.
The company said its estimated solvency capital ratio at March 31 2020 was 174% increasing to an estimated 177% on 1 May 2020, towards the top of its 140% - 180% risk appetite range.
"Subject to uncertainties arising from Covid-19, we reiterate our targets of achieving a combined operating ratio in the range of 93% - 95% normalised for weather in 2020, improving our operating expense ratio to 20% by 2023 and our long-term target of achieving at least a 15% return on tangible equity per annum," Direct Line said.
The company's motor insurance division recorded a 6.2% increase in gross written premiums to £410.9m despite a slowdown in new business as the lockdown took effect. The fall in claims was expected to be offset by slightly higher costs as repairs take longer to complete and car rental hire costs increase.
Analysts at Shore Capital estimated that a net 50% reduction in motor claims would save Direct Line around £45m a month "hence a three month shut down would be a £135m saving, more than offsetting the £25m higher travel claims and £70m additional costs".
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