Last month a number of Aviva’s ratings were upgraded by Moody’s Investors Service; now it’s Direct Line’s turn.
The direct insurer – which recently reported a 4.2% increase in gross written premium for the first nine months of 2017 – has more reasons to celebrate, as the rating agency changed a couple of outlooks from stable to positive. The outlook revisions were for Direct Line Insurance Group plc (DLG) and its main operating subsidiary UK Insurance Limited (UKI).
Describing the group’s profitability performance as “robust,” Moody’s affirmed the A2 insurance financial strength rating (IFSR) on UKI, as well as the Baa1(hyb) rating on the backed subordinate notes issued by the parent firm.
“The change in outlook to positive from stable reflects DLG’s track record of reporting consistently strong return on capital (ROC) and underwriting results over the last four years, which Moody’s believes to be sustainable,” explained the rating agency. “Moody’s also expects DLG to maintain its very strong position in the UK personal lines general insurance market and to grow modestly in its major lines of business, including own brands personal motor and home.”
It added: “Notwithstanding the ongoing decline home premiums since 2014 – driven by an overall reduction in in-force polices primarily due to partnerships – the group has successfully grown its own brand motor and commercial businesses, overall exceeding its 2-3% growth target in 2016 and during the first nine months of 2017.”
As for market position, Moody’s cited the group as the largest personal motor and home insurer in the UK, calling the likes of Direct Line, Churchill, and Greenflag “very powerful brands.”
“Despite the very competitive UK P&C (property and casualty) market, in Moody’s view this level of premium growth is sustainable given DLG’s focus on the growing direct SME (small- and medium-sized enterprises) commercial market and product innovation in personal lines, further supported by the group’s investments into risk selection and pricing capabilities,” said the rating agency.
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