Direct Line has cheered progress in its turnaround plan as it targets yearly savings of £100 million while preparing to be bought by rival insurer Aviva.
The insurance group said higher prices helped return its motor division to profitability last year.
It reported an underlying operating profit of £205 million for 2024, swinging from a loss of £190 million the year before.
This was primarily driven by a turnaround in the financial performance of its motor business, through which Direct Line offers insurance and breakdown cover.
Average premiums – which refers to the amount customers pay for their insurance policy – jumped last year, after the company hiked prices to keep up with competitors in the market.
New motor insurance policies rose to £583 from £551 in 2023, while for existing customers the average jumped to £508 from £441.
Gross written premiums, meaning the total amount paid by customers who have an insurance policy, surged by a quarter year-on-year to £3.7 billion.
Chief executive Adam Winslow said that inflation has driven up the cost of claims, particularly in the home and motor market where repair and replacement expenses have surged in recent years.
Insurers have faced the challenging task of balancing affordable premiums while keeping the business profitable, he said.
But the chief insisted the group’s turnaround strategy had “made a marked difference to the company’s performance” since being launched in July.
This has involved making significant cost savings in a bid to simplify the company, with it setting a target to shave up to £100 million off its yearly costs by the end of 2025.
This is partly being achieved through job reductions, with 550 roles being axed at the firm.
Meanwhile, Direct Line is preparing to be taken over by Aviva having agreed to a deal worth £3.7 billion at the end of last year.
The tie-up will create a significant force in the motor insurance sector, estimated to cover more than a fifth of the total market.
Mr Winslow said Direct Line was planning for the takeover, which still needs to be approved by shareholders and the regulators, but would make sure not to “take our foot off the accelerator when it comes to business change” in the meantime.
