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UK insurer Direct Line posts operating loss as it fends off Ageas

Carolyn Cohn
Updated ·2-min read

By Carolyn Cohn

LONDON (Reuters) -Direct Line posted a 2023 operating loss as it grapples high motor claims inflation, but reinstated its dividend as the British home and motor insurer tries to fend off takeover offers from Belgian rival Ageas.

The 189.6 million pound ($242.6 million) operating loss from ongoing operations compares to a loss of 6.4 million pounds in 2022.

The insurer, whose brands also include Churchill, Darwin and Privilege as well as Green Flag rescue policies, has in recent weeks shot down two takeover proposals from Ageas.

Ageas has until March 27 to make a firm offer or walk away, according to British takeover rules. Its latest proposal valued Direct Line at 3.17 billion pounds.

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New Direct Line Chief Executive Adam Winslow, who started earlier this month, declined to discuss the Ageas proposals on a media call.

He said the insurer was completing a "comprehensive strategic review" during the first half of 2024 and would report back to shareholders in July, adding that the company's plans were not "predicated on any disposals".

High inflation and supply chain and labour shortages have hit British motor insurers, pushing up the cost of claims.

But Direct Line rival Admiral posted a 23% jump in profits last week, helped by price hikes and more customers, while smaller peer Sabre this week recorded a 69% rise in profit.

Winslow said that Direct Line's motor business "has turned the corner and shows positive momentum into this year".

The company, which scrapped its dividend in early 2023, said it would pay a dividend of four pence per share.

It set a new target for a 13% net insurance margin in 2026, with run-rate annualised cost savings of at least 100 million pounds by the end of 2025.

KBW analysts described the results as "disappointing", but reiterated their "perform" rating on the stock.

Direct Line's shares were trading at 213.6 pence at 0918 GMT, up 0.95% and compared with Ageas' most recent proposal of 237 pence per share.

($1 = 0.7816 pounds)

(Reporting by Carolyn CohnEditing by Sinead Cruise and Mark Potter)