Motor-focused insurer Direct Line (DLG) saw full-year profits soar, largely reflecting better-than-expected reserve releases on the back of improving claims trends. It also announced a second 4p special dividend (on top of December's 4p special payout), mostly supported by disposal proceeds from the sale of its life and stolen-vehicle businesses.
But the good news largely ends there. First, Direct Line’s motor rates slipped 3 per cent amid highly competitive conditions and, worryingly, management think motor gross premiums could slide as much as 10 per cent during 2014's first quarter. Then there are the weather-related losses. Recent UK storms and flooding weather will inflict a £70m-£90m hit on the home division, possibly with a further £20m loss at the commercial unit. That is no calamity, but it is another earnings drag.