The funeral provider Dignity said business was better than expected during the first three months of the year as the number of deaths rose and more people chose premium funerals.

Shares jumped 16% after the undertaker said a greater-than-expected proportion of customers were still choosing the more expensive full funeral service, even though a price war in the industry resulted in the group slashing the price of its cheapest funerals in January.

Dignity, which has 800 funeral homes, cut the average price of its simple funeral service by 26% to £1,995 in England and Wales and to £1,695 in Scotland, and had expected the proportion of customers choosing this option to rise from 7% to about 20%.

However, in a trading update for the first quarter of 2018, the company said the rise had been limited to 15%, as more people still preferred a full-service funeral, costing an average of £3,800.

The simple option includes a basic coffin and a limited choice on the date and time of a funeral, whereas the more expensive plan includes the option to upgrade the casket, limousine hire and access to the chapel of rest outside normal office hours.

Meanwhile, the number of deaths in the UK increased by 8% to 181,000 between January and March, up from 167,000 over the first three months of 2017 and driving the number of Dignity funerals higher.

“It continues to be a very competitive market and we’ve responded to that by cutting our prices the way we have,” Mike McCollum, the chief executive of Dignity, said. “Overall it’s a positive start to the year and better than people were expecting.”

The favourable start to the year drove revenues in the first quarter of 2018 to £95m, £2m more than in the same period of 2017. Earnings of £37.5m were roughly unchanged but significantly better than the board was expecting.

McCollum said Dignity was still exploring ways to provide the best mix of funerals available to customers, including the possibility of offering a mid-range service that was more expensive than the simple service but cheaper than the full service.

“There are a few changes still to come. During 2018 our objective is to really understand the best relationships between the price, volumes of customers and how much we spend on promotions.”