Delivering our strategy

We have made good progress in our financial performance in 2012, increasing ongoing operating profit by 9.3% over the prior year. We continued to implement our transformation plan, as demonstrated by our return to underwriting profit. We successfully completed an Initial Public Offering on the London Stock Exchange in partial fulfilment of RBS Group’s European Commission divestment obligation

Performance highlights

  • Maintained our position as the UK’s leading personal lines insurer
  • New and extended partnership arrangements with Sainsbury’s Bank, Nationwide Building Society, RBS and NatWest
  • Extended the presence of Churchill and Privilege Motor and Home products to the four major UK price comparison websites
  • Significant investment in pricing and claims capabilities, contributing to improved financial performance
  • Balance sheet efficiency augmented through the issue of £500 million of subordinated debt following U K Insurance Limited, the Group’s main underwriter, being assigned credit ratings of ‘A’ by Standard and Poor’s and ‘A2’ by Moody’s
  • Successful separation from RBS Group and subsequent Initial Public Offering of 35% of Direct Line Group’s Ordinary Shares in October 2012
  • Announced targets of 98% combined operating ratio in 2013, £100 million of gross annual cost savings in 2014, and an overall target of a 15% return on tangible equity

Financial highlights

2012 Return on tangible equity 11.5% 2012 In-force policies 19.6m 2012 Gross written premium £3,991m 2012 Combined operating ratio 99.2% 2012 Operating profit/(loss) £461.2m 2012 Dividend per share (pence) 8p 2012 Adjusted earnings share (pence) 21.8p 2012 Earnings per share (pence) 12.3
  1. Return on tangible equity is adjusted profit after tax from ongoing operations divided by the Group’s average tangible shareholders’ equity. Profit after tax is adjusted to exclude Run-off operations, and restructuring and other one-off costs and is stated after charging tax (using the UK standard tax rate):
    • Pro forma return on tangible equity is based on the return on tangible equity but assumes that the capital actions taken by the Group (£1 billion dividend payment and £500 million long-term subordinated debt issue) occurred on 1 January 2012.
  2. Ongoing operations. The profit before tax for the year to 31 December 2012 was £249.1 million (2011: £342.9 million).
  3. Earnings adjusted to exclude restructuring and other one-off costs and the result of our Run-off operation.

Customer focused business

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Leading brands and significant scale

Quality products to meet customer needs

We have continued to invest in our leading brands, refreshing our brand advertising campaigns and sharpening the alignment of our brand portfolio to our target customer segments.

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Multi-channel distribution

Ease of purchase

Our multi-brand, multi-channel distribution approach continues to be the central focus for us. Customers can choose from a variety of channels when purchasing our products.

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Direct customer relationships

Good value and quality service

Our direct activity enables us to focus on providing high quality service to customers who value a direct relationship with their insurer.

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Robust balance sheet and financial strength

Peace of mind

Our solid financial position means that we are in a position to provide protection for our customers.