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Preliminary results for the year ended 31 December 2016

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Highlights
    • Gross written premium for Ongoing operations1,2 up 3.9% to £3,274.1m (2015: £3,152.4m), driven by growth in Motor and Home own-brand in-force policies (up 4.3%)
    • 2016 results reflect the one-off impact of using the new Ogden discount rate of minus 0.75%. Operating profit from Ongoing operations of £403.5m (pre-Ogden discount rate reduction3: £578.6m; 2015: £520.7m) and profit before tax of £353.0m (pre-Ogden3: £570.3m; 2015: £507.5m). Return on tangible equity1, 2 of 14.2%, (pre-Ogden3: 20.2%; 2015: 18.5%)
    • Combined operating ratio1 from Ongoing operations of 97.7% (pre-Ogden3: 91.8%; 2015: 94.0%) increased as a result of the reduction in the Ogden discount rate, partially offset by improved current-year underwriting performance and favourable weather claims. Adjusted for normal weather and before the Ogden discount rate change, the combined operating ratio was 93.5%, towards the lower end of the target range of 93% to 95%
    • 5.4% increase in final dividend per share to 9.7 pence per share, (2015: 9.2 pence). Total dividends per share for 2016, including special interim dividend of 10.0 pence per share paid in September 2016 following the approval of the Group’s partial internal model, of 24.6 pence per share (2015: 50.1 pence)
    • The Group’s estimated Solvency II capital coverage ratio4 post dividend is 165%, above the middle of the Group’s risk appetite range of 140% – 180% (pre-dividend: 174%)

    Notes:

    1. See glossary on page 42 for definitions.
    2. See appendix A – Alternative performance measures on page 43 for reconciliation to financial statement line items.
    3. See appendix B – Proforma results on page 46 which presents the Group’s results excluding the recent impact of the Ogden discount rate reduction.
    4. Estimates based on the Group’s Solvency II partial internal model for 31 December 2016 and 30 June 2016.
Strategic and operational highlights
  • Direct Line Motor and Home new business growth at the highest annual level since IPO, demonstrating the success of the investment in brand, proposition and customer service
  • Total costs for Ongoing operations of £923.7m broadly flat year on year before non-cash impairment charge of £39.3m, after absorbing £24.1m Flood Re levy and supporting growth in Motor and Home own brands
  • Extended Home and Private Insurance partnership with RBS for a further three years, and implemented faster and easier sales journeys using cloud-based technology making connectivity and future change easier
  • Invested in innovation, including partnership with PSA Peugeot Citroën for telematics extended for 4 more years, introducer role developed with Tesla, and MOVE_UK project brought into data collection stage
  • Received approval from the Prudential Regulation Authority to use the Group’s Solvency II partial internal model
CEO comment

Paul Geddes, CEO of Direct Line Group, commented

“2016 was a successful year for Direct Line Group and I’m proud of the strong own brand growth achieved in a switching market, proving our competitiveness in all our key categories and channels. This positions us well in a market disrupted by the reduction in the discount rate, and allows us to target a 93-95% combined operating ratio in 2017. We will continue to target improved efficiency and invest in customer and technology trends affecting our markets.”

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