Direct Line Group first quarter results to 31 March 2013
Interim Management Statement for Direct Line Insurance Group plc
Results for the first quarter to 31 March 2013
Direct Line Group’s Interim Management Statement relates to the first quarter ended 31 March 2013 and contains information to the date of publication.
- Operating profit from ongoing operations1 of £107.5 million for the first quarter 2013, up 32.9% (first quarter 2012: £80.9 million)
- Gross written premium for ongoing operations 4.5% lower reflecting competitive market conditions in UK personal lines, partially offset by growth in International
- Combined operating ratio2 for ongoing operations of 98.0% for the first quarter 2013, an improvement of 6.5 percentage points against the first quarter 2012 (104.5%) driven by continued prior year reserve releases and lower claims from weather events
- Annualised return on tangible equity3 from ongoing operations of 12.3% for the first quarter 2013 (first quarter 2012: 7.7%; pro forma4 full year 2012: 13.4%)
- Net asset value per share of 195.3 pence and tangible net asset value per share of 166.0 pence (31 December 2012: 189.1 pence and 161.0 pence, respectively). Tangible net asset value per share of 158.0 pence after deducting the 2012 final dividend of 8 pence per share
Strategic and operational highlights
- Continued momentum in pricing and claims initiatives, contributing to improved underwriting result, including significant prior year reserve releases
- Actions relating to the £100 million gross annual cost savings in 2014 on track. Continue to pursue initiatives to improve efficiency further
- New customer propositions and refreshed advertising campaigns for Direct Line, Churchill and Green Flag
- Good growth in the International division, particularly Germany, and Commercial full-cycle eTrading now live
Paul Geddes, CEO of Direct Line Group, commented
“We continue to make progress towards achieving our financial targets with an increase in our ongoing operating profit of 33% to £107.5 million compared to the first quarter of 2012.
“The UK market remains competitive, particularly in motor. We made some deliberate choices in the quarter that had the effect of reducing our motor premiums. We believe these choices achieved an appropriate balance between managing risk and protecting value.
“Momentum across our five strategic pillars was sustained, and independent control of our cost base continues to present us with opportunities to improve efficiency.
“We continue to monitor and support the implementation of motor legal reforms, the impact of which we expect to be at least net neutral in the medium term. Reduced claims arising from these reforms should, over time, contribute to lower premiums for motorists, especially young drivers.”
For further information, please contact:
Director of Corporate Strategy and Investor Relations
Tel: +44 (0) 1651 832183
Director of Communications
Tel: +44 (0) 1651 831723
1. Ongoing operations include Direct Line Group’s (the “Group”) ongoing segments: Motor, Home, Rescue and other personal lines, Commercial and International. It excludes the Run-off segment and Restructuring and other one-off costs.
2. Combined operating ratio (“COR”) is the sum of the loss, commission and expense ratios. The ratio is a measure of the amount of claims costs and expenses compared to net earned premium generated.
3. Return on tangible equity (“RoTE”) is annualised adjusted profit after tax from ongoing operations divided by the Group’s average tangible shareholders’ equity. Profit after tax is adjusted to exclude the Run-off segment and Restructuring and other one-off costs and is stated after charging tax (using the UK standard tax rate).
4. Pro forma RoTE 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.
This document has been prepared for, and only for, the members of the Company as a body, and no other persons. The Company, its Directors, employees, agents or advisers do not accept responsibility to any other person to whom this document is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.
Certain information contained in this document, including any information as to the Group’s strategy, plans or future financial or operating performance, constitutes “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 document and include statements regarding the intentions, beliefs or current expectations of the Directors concerning, amongst other things: the Company’s results of operations, financial condition, prospects, growth, strategies and the industry in which the Group operates. Examples of forward-looking statements include financial targets which are contained in this document specifically with respect to RoTE, the Group’s COR, the COR for the Group’s Commercial business, and cost savings. By their nature, all forward-looking statements involve risk and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future or are beyond the Group’s control. Forward-looking statements are not guarantees of future performance. The Company’s actual results of operations, financial condition and the development of the business sector in which the Group operates may differ materially from those suggested by the forward-looking statements contained in this document including, but not limited to, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities (including changes related to capital and solvency requirements or the Ogden discount rate), the impact of competition, currency changes, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulation in the jurisdictions in which the Group and its affiliates operate. In addition, even if the Company’s actual results of operations, financial condition, and the development of the business sector in which the Group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods.
The forward-looking statements contained in this document reflect knowledge and information available as of the date of preparation of this document. The Company and the Directors expressly disclaim any obligations or undertaking to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable law or regulation. Nothing in this document should be construed as a profit forecast.