Dividend bonus as Direct Line saw slump in motor claims in lockdown
INSURER DIRECT Line has given shareholders a double bonus after first- half profits beat expectations due to a slump in motor claims as people drove less during the coronavirus lockdown.
Britain’s biggest car insurer, which has offices in Leeds and Doncaster, raised its interim dividend by 2.8 per cent to 7.4p and said it would also make a special payout of 14.4p per share, making up for a decision in April to cancel its year end dividend due to uncertainties over the impact of the pandemic. Shares in Direct Line jumped to a fivemonth high as the group bucked a trend in much of the insurance sector, where dividends are being held back to conserve cash because of a tide of payouts resulting from the Covid- 19 crisis.
Direct Line, which is yet to reinstate travel insurance cover, kept the impact from the pandemic on travel and business interruption unchanged at £ 25m and £ 10m, respectively.
Finance chief Tim Harris said the estimate relating to the pandemic is not expected to increase.
“As lockdown restrictions gradually ease, we are seeing a return in volume of miles that people are driving back towards pre- lockdown levels, and claims are tracking that, but at the moment not quite up to the level we were experiencing before the lockdown,” he said.
Operating profit in the motor business jumped 43 per cent to £ 220.5m during the first half ended June 30, with claims notifications down 70 per cent at the peak of the stay- at- home orders.
The company, which also owns brands such as Churchill, Green Flag and Privilege, reported an overall operating profit of £ 265m, above an average analyst forecast of £ 239m.
Operating profit of £ 265m was £ 9.4m lower than the first half of 2019 mainly due to increased bad weather costs of £ 30m.
Analyst Alan Devlin at Shore Capital said: “Direct Line reported a solid set of H1 2020 results.”
We are seeing a return in volume of miles that people are driving. Tim Harris, chief financial officer at Direct line