Direct Line unveils £100m buyback after profit drop

Direct Line increased its dividend and announced a £100m share buyback as the insurer reported a 4.5% drop in annual profit.

Operating profit fell to £522.1m from £546.9m in the year to the end of December as gross written premiums dipped 0.7% to £3.18bn. The FTSE 250 insurerr increased its final dividend by 2.8% to 14.7p a share and said it would buy back up to £100m of shares.

Profit fell mainly because of an increase in major weather costs to £43m from £6m. Covid-19 was a modest net benefit as lower motor and commercial claims were partly offset by the impact on Direct Line's travel business, the cost of protection against the disease and lower investment returns.

Chief Executive Penny James said: "Despite the many challenges we faced in the year as a result of the Covid-19 pandemic, we traded well and prioritised support for our customers, our people and local communities. Turning to the year ahead, we feel confident that we can build on the momentum we've created and become a tech and data driven insurance company of the future with our customers at its heart."

James said profitability was improving in the current year through higher prices and better underwriting in commercial and improved counter-fraud measures at the motor business. She said Direct Line had launched a property strategy to rethink how it uses its offices in light of the pandemic.