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Direct Line expects Flood Re levy to lead to YOY rise in H1 costs

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Direct Line expects Flood Re levy to lead to YOY rise in H1 costs

reported first-quarter gross written premiums from ongoing operations of £777.8million, up from £746.5 million in the year-ago quarter.

Grosswritten premiums in its motor segment increased to £360.7 million from £326.4million, while in the home segment premiums declined to £202.8 million from£210.0 million. Gross written premiums in the commercial business totaled£117.5 million, compared to £115.1 million in the first quarter of 2015.

Thegroup's total investment return declined on a yearly basis to £33.4 millionfrom £51.8 million. Total group investment holdings stood at £6.93 billion asof March 31, up from £6.82 billion as of Dec. 31, 2015.

Total costs for ongoing operations amounted to £219.4million, compared to £220.7 million in the first quarter of 2015. The insurersaid it aims to reduce total costs in absolute terms in 2016 when compared to2015, but the rate of reduction is likely to be lower in 2016 than in theprevious year, partly due to the cost of Flood Re.

DirectLine noted that its contribution to the annual Flood Re levy is expectedto total about £25 million and will be charged to operating expenses in thesecond quarter. "Total costs therefore in the first half of 2016 will behigher than in the same period last year," the company said.

DirectLine still expects to achieve a combined operating ratio in the range of 93% to95% for ongoing operations for 2016, assuming a normal annual level of claimsfrom major weather events.