Insurer employing hundreds of staff in Ipswich issues ‘no deal’ Brexit warning

An insurer with a strong Ipswich presence has warned of the “disruptive and potentially material” effects on its business if Britain crashes out of the European Union (EU) without a deal.

Direct Line, which employs 409 staff in Ipswich, mainly in its Customer Operations division, and owns insurance brands including Churchill, posted a drop in earnings as it announced its annual results.

It reported a 6.4% drop in operating profits to £601.7m for 2018 – and its staff were dealt a blow after it offered no free shares this year. The firm has handed out nearly £1,700 worth of free shares per staff member since its flotation in 2013.

MORE – Insurance broker ‘thrilled’ at ratings successThe group blamed a £75m hit to from claims related to last year’s extreme weather, as well as lower reserve releases and investment returns, for the drop in earnings.

Although predominantly a UK business, the group was exposed to financial markets and imported goods and services in order to fulfil insurance claims, it said. It was therefore monitoring events carefully and proactively and taken steps to mitigate the likely impact of Brexit, amid “considerable uncertainties”.

“In the event of a disruptive Brexit the group will not be immune,” it said.

If Brexit takes place smoothly, such as with a transition period and therefore no significant disruption to the UK economy and to business generally, then any adverse impact on the group would not be expected to be significant, “at least until the end of the transition period and the future trading arrangements between the UK and the EU being clarified”, it said.

“If, however, the UK were to leave the EU in such a way as to involve or lead to significant disruption, as has been conjectured in the event of a ‘hard’ no deal Brexit at the end of March, then the impact on the group could correspondingly also be disruptive and potentially material,” it said.

The group set up a Brexit Working Group with representatives from across the group after the EU referendum result in 2016, which predicted a risk to its growth prospects from issues such as inflation, sterling values and recruitment, it said.

“It was identified that there was a risk that the UK could enter a prolonged period of reduced growth due to Brexit, potentially reducing insurance sales and the value of our investment portfolio,” the report said.