(Alliance News) - Moody's Investor Service on Thursday said it is expecting Direct Line Insurance Group PLC to maintain profitability in the face of strong UK motor market competition.
The credit agency noted that most of Direct Line's profit was derived from the "very competitive and highly regulated UK personal motor market", which has experienced increased claims inflation.
Moody's also pointed out that there is a certain level of uncertainty surrounding a regulatory review of pricing practices within the UK motor market.
Nonetheless, Moody's forecast for Direct Line to stay profitable through prioritising "target loss ratios over premium volumes" and said this belief was the reason it had upgraded the financial strength rating on Direct Line's UK Insurance Ltd main operating subsidiary to A1 from A2 in May.
Moody's vice president & senior credit officer Dominic Simpson said: "We expect Direct Line to counter headwinds in the motor and home markets by continuing to prioritize target loss ratios over premium volumes.
"Profitability could get a further boost from an ongoing programme to upgrade its major IT systems."
Shares in Direct Line were up 0.6% at 343.90 pence on Thursday afternoon.
Direct Line (DLG)