British motor insurer Direct Line cut profit estimates and postponed the second leg of its share buyback programme, mainly due to inflation and increased market volatility.
The company highlighted that the motor insurance market in the first half of the year showed “significant” levels of claims inflation, mainly due to higher used car prices, longer repair times and inflation in the cost of parts.
The company’s stock is down 12%.
“As a result, we are revising our 2022 combined operating target range to 96%-98%,” CEO Penny James said.
In May, the company highlighted that its target was 93%-95% for the year. A figure closer to 100% indicates reduced profitability.
“We have already taken steps, including raising prices and developing a new pricing capability to restore margins, which means we expect our combined operating ratio to improve to around 95% and we are restating our mid-term target of 93% -95%”, added the managing director.
Direct Line said it was “confident” about the sustainability of its regular dividends, but the d.s. decided not to launch the second tranche of a £50m share purchase of the £100m total announced earlier in the year.
Source: Capital
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