(Adds details, background, share movement)
By Esha Vaish
May 2 Direct Line Insurance Group Plc
reported a smaller-than-expected hit from the severe floods that
swept parts of Britain in the first quarter, sending its shares
up as much as 4.5 percent.
Shares of Direct Line, one of Britain's biggest home
insurers, were among the top percentage gainers on London's
FTSE-250 Midcap Index in early trading on Friday.
UK insurers have been bracing for large claims from floods
that left some areas of England under water for more than a
month and prompted the government to summon insurers to report
on their progress in tackling the crisis.
Direct Line said home major weather events claims for the
first quarter were 60 million pounds ($101.37 million). The
company had earlier forecast a hit of 70 million to 90 million
pounds from the start of the year to Feb. 22.
Home insurance, which includes flood cover, accounts for
about a quarter of Direct Line's revenue. The company is also
Britain's largest car insurer and offers travel and pet cover.
Tough competition in the UK motor and home insurance markets
contributed to a 5.6 percent decline in Direct Line's
first-quarter gross written premium.
The company, which gets more than 40 percent of its revenue
from motor insurance, said gross written premium fell to 949.3
million pounds ($1.60 billion) in the quarter ended March 31.
Direct Line, as well as other large motor insurers such as
Admiral Group Plc and esure Group Plc, have
been cutting prices to compete with each other in the face of
stiff competition from price-comparison websites.
The price of comprehensive motor policy in the UK has
dropped below 600 pounds, a 19.1 percent year-on-year fall in
first-quarter rates, according to a recent survey by
price-comparison website Confused.com and consultancy Towers
But the average price of motor insurance policies written by
Direct Line in the first quarter fell only 4 percent. Motor
gross written premium was down 10.2 percent, in line with the
company's previous guidance.
Direct Line, whose brands include Churchill, Privilege and
the Green Flag roadside recovery service, said it would continue
to prioritise margins over policy volumes.
The company reiterated its 2014 outlook of achieving a
combined operating ratio from ongoing operations of 95 percent
to 97 percent, provided weather claims were normal. A ratio
below 100 percent means an insurer earns more in premiums than
it pays out in claims.
Direct Line's shares were up 0.6 percent at 249.4 pence at
0912 GMT on the London Stock Exchange, having given up some of
their early gains.
($1 = 0.5919 British Pounds)
(Additional reporting by Richa Naidu in Bangalore; Editing by