Direct Line premiums dip, roadside recovery service unit rebounds

(Reuters) - Motor insurer Direct Line <DLGD.L> on Tuesday posted lower quarterly premiums because of weak car sales due to the COVID-19 crisis, but said premium growth in its roadside rescue and recovery service business Green Flag returned to pre-pandemic levels.

"We are encouraged by our trading performance in Q3 where we saw a return to strong growth in Green Flag and Commercial and some improvement in Motor and Home own brands, particularly in the price comparison website channel as customer shopping activity started to recover," Chief Executive Penny James said.

While premiums have been strained, the company has benefited from a sharp fall in claims due to people driving less during the pandemic, allowing Direct Line to raise its interim dividend and announce a special dividend in August.

The company also estimated weather-related claims to be 38 million pounds, but kept its cost expectation from the global health crisis on travel and business interruption insurance at 25 million pounds and 10 million pounds, respectively.

Direct Line, Britain's biggest car insurer, said its combined operating ratio for the year would be slightly below its target range of 93% to 95%. A ratio below 100% means the insurer earns more in premiums than it pays out in claims.

The company said damage severity in the Motor Insurance business was above its long-term average as the repair industry counted in pandemic-related factors including longer repair times and additional cleaning requirements.

But it added that this was offset by lower claims, which it said were still below pre-virus levels.

Direct Line said its gross written premiums for the third quarter ended Sept. 30 dipped 0.8% to 851.5 million pounds, with its biggest segment - motor insurance - recording a 2.3% drop.

(Reporting by Muvija M in Bengaluru, Editing by Sherry Jacob-Phillips)