Update on 2015 weather events

RNS Number : 5187L

Direct Line Insurance Group PLC

12 January 2016

 



Update on 2015 weather events

12 January 2016

Direct Line Insurance Group plc ("Direct Line Group" or the "Group") announces an update on the recent weather events. In December 2015, the UK experienced a prolonged period of adverse weather including storms Desmond (5-6 December), Eva (24 December) and Frank (28-29 December). These storms resulted in severe flooding across a number of locations, including in Cumbria, Yorkshire and southern Scotland.

From the onset of the first storm, the Group quickly enacted its emergency action plans, with its severe weather response mobile office deployed to provide immediate onsite advice and help to customers. Almost 200 claims advisers and adjustors have been on the ground visiting customers in the affected areas. Approximately 90% of the first damage assessment visits have been completed and all customers who can no longer reside in their homes have been placed in alternative accommodation.

Whilst the events are recent and the position continues to develop, the Group has made an initial estimate of the insured losses. Based on current information, the Group estimates total claims from the three storms in the range of £110 million to £140 million. The actual amount of insured losses will not be known with certainty for some while, and accordingly these figures are current estimates only.

Claims are expected to be incurred in both its Home and Commercial divisions. Home claims from the three storms are estimated in the range of £80 million to £100 million and this compares to a normal annual level of claims from major weather events of approximately £80 million. Prior to these storms no claims from major weather events had been incurred during 2015. Claims will be incurred across both own brands and partners and due to profit share arrangements the Group expects a proportion to be offset through reduced profit share being payable to partners. 

Claims in the Commercial division from the three storms are estimated in the range of £30 million to £40 million. Taken together, Commercial weather related claims and other large claims during 2015 are estimated to be approximately £15 million to £25 million more than expected in an average year.

The Group's per event retention under its property catastrophe reinsurance contract is £150 million and therefore the Group does not currently expect to make any recovery under this contract. For the avoidance of doubt, the Group can aggregate claims incurred over a 504 hour (21 day) period to assess whether a reinsurance recovery can be made. Furthermore, the Group's Commercial division has a retention of £4 million for individual property risks.

The Group reiterates its 2015 target of achieving a combined operating ratio of 92% to 94% normalised for claims from major weather events.

The Group will report its preliminary results for 2015 on 1 March 2016.

For further information, please contact:

Neil Manser

Director of Corporate Strategy and Investor Relations

Tel: [phone]

Jennifer Thomas

Head of Financial Communications

Tel: [phone]

Direct Line Insurance Group plc

Direct Line Group is headquartered in Bromley. Through its number of well known brands the Group offers a wide range of general insurance products to consumers. These brands include Direct Line, Churchill and Privilege. The Group also provides insurance services for third parties through its partnerships division, Brand Partners. In the commercial sector, the Group's NIG and Direct Line for Business operations offer insurance products for businesses distributed through brokers or direct, respectively.

 

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