Direct Line Insurance Group plc Preliminary results for the year ended 31 December 2012
- Operating profit from ongoing operations1 of £347.9 million for the nine months to 30 September 2012, up 3% (nine months to 30 September 2011: £337.8 million)
- In-force policies of 20.1 million, up 4% since the beginning of the year (31 December 2011: 19.4 million) with Motor and Home broadly stable and growth in Rescue and other personal lines
- Combined operating ratio2 for ongoing operations of 99.7% for the nine months to 30 September 2012, an improvement against the nine months to 30 September 2011 (101.9%) driven principally by a significant improvement in the loss ratio
- Annualised return on tangible equity3 (“RoTE”) from ongoing operations of 10.6% for the nine months to 30 September (proforma RoTE: 13.5%4)
- Operating profit from ongoing operations for third quarter 2012 of £123.7 million, down 4% compared with third quarter 2011 reflecting lower investment returns partially offset by a better underwriting result; the third quarter 2012 combined operating ratio of 96.9% compared with 100.5% for third quarter 2011, driven by improvements in both the loss and expense ratios
- Net asset value per share of 187.2 pence and tangible net asset value per share of 159.7 pence per share (31 December 2011: 240.9 pence and 216.5 pence, respectively)
- Successful separation from RBS Group and subsequent IPO of Direct Line Group in early October
- Steps announced to deliver approximately 50% of the 2014 target of £100 million gross annual cost savings5
- Continued rollout of claims transformation plan with over 400,000 Motor and Home claims now on the new claims system. Benefits from plan contributing to prior year reserve releases.
Paul Geddes, CEO of Direct Line Group, commented
“These are our first quarterly results as a listed company and we are pleased to report continued progress on our strategy. Against the backdrop of a competitive market and subdued investment returns, we continue to focus on disciplined pricing and underwriting, delivering claims improvements and lowering our expenses through our cost savings initiatives. This together with the improved capital structure and performance helped to increase our proforma return on tangible equity to 13.5% for the first nine months of 2012.
We continue to make good progress on the initiatives that will deliver our previously announced target of reducing gross annual costs by £100 million in 2014. As part of these initiatives, we have undertaken a significant simplification of our head office, including the loss of around 70 senior leadership roles. These changes, combined with previous actions, mean we have now announced approximately 50% of our 2014 cost saving target.”
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(1) Ongoing operations
Ongoing operations include Direct Line Group’s (the “Group”) ongoing segments: Motor, Home, Rescue and other personal lines, Commercial and International. It excludes Run-off and Restructuring and other one-off costs.
(2) Combined operating ratio
Combined operating ratio is the sum of net insurance claims, commission and other operating expenses expressed as a percentage of net earned premium. The ratio excludes instalment income, other operating income and investment income.
(3) Return on tangible equity (“RoTE”)
Adjusted to exclude Run-off operations and Restructuring and other one-off costs; based on average tangible invested equity, adjusted for the weighted average value of dividends paid in the period and using UK standard tax rate.
(4) Proforma RoTE
Assumes that the capital actions taken by Direct Line Group (£1 billion dividend payment and £500 million Tier 2 debt issued) occurred on 1 January 2012.
(5) £100 million gross annual cost savings
Cost savings expected to be recognised in operating costs for ongoing operations and claims handling expenses in 2014.
NIG is the broker facing brand of the Commercial segment of the Group.
Certain information contained in this announcement including any information as to the Group's strategy, plans or future financial or operating performance constitute "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "aims", "anticipates", "believes", "estimates", "expects", "intends", "may", "plans", "predicts", "projects", "seeks", "should", “targets” or "will" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Directors concerning, amongst other things: the Group's results of operations, financial condition, prospects, growth, strategies and the industry in which the Group operates.
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