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Annual report

Delivering for our customers and shareholders

We achieved good results in 2015 while making progress on implementing our strategy. We remained focused on operating efficiency and disciplined underwriting which helped us to improve operating profit from ongoing operations.

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Financial highlights
  • Gross written premium from ongoing operations up 1.7% to £3,152.4 million, with 4.8% growth in Motor for 2015 and 7.1% in the fourth quarter. Motor and Home own brands in-force policies up 1.4%
  • Operating profit from ongoing operations increased to £520.7 million for 2015 (2014: £506.0 million). Combined operating ratio from ongoing operations of 94.0% for 2015, an improvement of 1.0 percentage point
  • Return on tangible equity of 18.5% for 2015 (2014: 16.8%). Profit before tax for continuing operations increased to £507.5 million (2014: £456.8 million)
  • Results benefited from our disciplined underwriting, prior-year reserve releases from ongoing operations of £378.9 million (2014: £397.6 million) which were higher than expected, together with lower costs, partially offset by higher claims from major weather events and lower volumes
  • 4.5% increase in final dividend per share to 9.2 pence per share and additional special dividend of 8.8 pence per share. Total dividends for 2015, including special interim dividend of 27.5 pence per share following sale of International division, of 50.1 pence per share (2014: 27.2 pence per share)
Strategic and operational highlight
  • Investment in brand differentiation through further enhancements, a succession of initiatives to Direct Line proposition and improved trading capability across Churchill and Privilege, particularly on price comparison websites
  • Improved customer retention rates for motor and home products, and Net Promoter Score for Direct Line brand
  • Reduced total costs for ongoing operations by 4.6% in 2015 while investing in technical pricing, claims management and self-service initiatives
  • Doubled Motor telematics insurance in-force policies; and growth in Commercial in-force policies through eTrade and direct channels
  • Invested in digital capability, including the roll out of new quote and buy journeys for Home and Green Flag insurance products, and development of next generation of customer systems
Being a great retailer

Throughout 2015 we have focused on differentiating our brands and improving our propositions. Customers have responded well to the Direct Line brand’s new positioning and propositions and helped strengthen our retention rates, which are over 80%.

We also refreshed the Churchill brand, emphasising the ‘depend on the dog’ strapline in new TV advertisements. The refresh also highlighted its protective nature, such as the promise to pay a claim even if our customers are hit by an uninsured driver.

Additionally, we have improved our trading capability. This boosted our competitiveness significantly, including on PCWs. Together, this activity has led to us improving performance, with Motor and Home in-force policies up 1.4% in 2015 in our own brands.

Operating as a smart and efficient manufacturer

We know that staying efficient and flexible is key to increasing our competitiveness and improving our customers’ experience. Everyone working together to improve efficiency reduced our costs by 4.6% this year. Furthermore, our strategic leaders are spearheading a programme that will get the entire organisation thinking differently about how we spend our money.

We have also simplified and improved our claims services. For example, customers can now upload images of damage in their homes for assessors; track vehicle repairs on an online portal; and use Direct Line’s seven-day car repair service.

Additionally, we invested in our pricing capabilities across our Personal Lines and Commercial businesses. This is aimed at broadening our footprint and improving our competitiveness.

Leading and disrupting our marketplace

We have a strong heritage in leading and disrupting our marketplace, and we want to build on our strong market positions. We will do this by identifying and investing in market developments that we believe can drive future growth.

We have continued growing our telematics offering, more than doubling our policy numbers in 2015. Our work analysing data for over 400 million miles of motoring is giving us pricing insights, which we expect will benefit us and our customers.

Within Commercial, we have been recognised for our leading capabilities in eTrade and direct. To meet our customers’ evolving needs, we have launched Professional Indemnity cover for Direct Line for Business and a cyber insurance product through NIG.

We believe we are making great progress, but know we have more to do to stay at the front of our markets.

Investing in data and technology

Consumers are surrounded by emerging technologies. So we want to make sure our systems can support future developments. We have now essentially finished the migration of our IT systems from RBS Group. This has been a complex and challenging programme, and we are still working to improve the performance of our IT systems across the board. At the same time, we are building the next generation of systems that can help us interact with our customers in a digitally efficient way. Furthermore, like businesses worldwide, we are increasing our focus on cyber security.

Developing our culture and capability

Our people continue to be a foundation of our business. They have been instrumental in delivering the changes we needed to realise our goals. In 2014, to mark three years since our IPO and recognise their dedication, we told our employees that they would receive free shares, on top of the shares they received at the time of the IPO. In view of our performance in 2015, we made a further award of around £250 of free shares to all eligible employees. We are pleased that overall our people are engaged in developing our business and can share in its success.

Our latest total engagement levels have risen to 60%, which is a 15 percentage points rise compared to 2014. We have a series of action plans evolving, so we will continue gathering feedback from our people to ensure we are focusing on areas where we need to improve.

We have also invested in training and developing our customer-facing employees, helping them interact with customers in a new and refreshing way. This is delivering good results and resonating well with our customers. Our satisfaction rating tool, MyCustomer, has shown an improvement of 23% and our Net Promoter Score for the Direct Line brand has increased by 7.5 points, a good reflection of this success.

Our people are working hard and providing benefits for our business and customers. We have continued recognising their outstanding achievements through our Chief Executive Awards. We also introduced a new initiative which rewards employees for proposing ideas that reduce Group costs or make insurance easier for customers. This has generated excitement throughout the organisation and, to date, we have received over 4,000 entries.

Strategic priorities for 2016

Following the rearticulation of our strategy in 2015, many of our 2016 priorities build on initiatives begun in 2015. Improving customer experience remains key, with a focus on cross channel distribution, while reducing complaints and improving the customer renewal process. We will continue to strive to improve operating efficiency.

Annual report & accounts 2015

Annual Report 2015


Strategic report


Directors' remuneration report


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