Direct Line Group Half Year Report for the six months ended 30 June 2014
Direct Line Group's Half Year Report relates to the six months ended 30 June 2014 and contains information to the date of publication.
- Gross written premium for ongoing operations1 decreased by 5.1% in the first half of 2014 reflecting disciplined underwriting in competitive markets. Motor prices reduced on average by 2% during the second quarter compared with the same period in 2013
- Operating profit from ongoing operations1 of £249.1 million for the first half of 2014, down 13.1% (first half 2013: £286.6 million) reflecting higher weather claims and lower prior-year reserve releases of £218.0 million (first half 2013: £239.2 million); total Group profit before tax of £225.1 million up 7.8% (first half 2013: £208.8 million)
- Combined operating ratio2 for ongoing operations1 of 96.6% for the first half of 2014, an increase of 2.0 percentage points (first half 2013: 94.6%) reflecting higher weather claims. Current-year attritional loss ratio of 71.8% (first half 2013: 73.8%)
- Return on tangible equity3 from ongoing operations1 of 15.8% for the first half of 2014 (first half 2013: 17.3%)
- Interim dividend per share of 4.4 pence representing growth of 4.8% over 2013 interim dividend, and a special interim dividend per share of 10.0 pence taking total interim dividends to 14.4 pence per share
Strategic and operational highlights
- Improvement in personal lines trading capability through new smartphone and tablet optimised websites for Motor, delivery of a number of pricing projects and implementation of further claims initiatives
- Development of telematics with launch of self-install proposition in Motor and extension to Commercial
- On track to achieve total cost base4 target of approximately £1,000 million in 2014 with 5.4% reduction in the first half of 2014 to £496.0 million (first half 2013: £524.1 million). Restructuring and other one-off costs reduced by approximately 60% compared with the first half in 2013
- Strategic review of International, with potential disposal being explored
- Reiterate 2014 aim to achieve a combined operating ratio in the range of 95% to 97% for ongoing operations, assuming a normal level of weather claims
Paul Geddes, CEO of Direct Line Group, commented
"We delivered good results in the first half of 2014, despite major weather events and competitive markets, by maintaining our disciplined underwriting approach and from the continued delivery of our strategic initiatives. This continued performance and our strong capital position have enabled us to declare a special interim dividend of 10 pence per share as well as increase the regular interim dividend by 5%.
"Our performance has also allowed us to continue to invest in the future of our business, to enhance our product propositions and improve our customer experience. We have rolled out self-install telematics boxes, which will enable us to reward better driving, and we've made it easier to buy our Motor products on smartphones and tablets."
For further information, please contact:
Director of Corporate Strategy and Investor Relations
Tel: +44 (0) 1651 832183
Head of Financial Communications
Tel: +44 (0) 1651 831686
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, commission 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 of 21.5%; 2013: 23.25%).
4. Operating expenses and claims handling expenses from ongoing operations, excluding the Run-off segment and Restructuring and other one-off costs.
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 forwardlooking statements may be identified by the use of forward-looking terminology, including the terms "aims", "anticipates", "believes", "continue", "could", "estimates", "expects", "guidance", "intends", "may", "outlook", "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, among other things: the Group'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: return on tangible equity, the Group's combined operating ratio, the combined operating ratio for the Group's Commercial division, 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 Group'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, for example directly or indirectly as a result of, 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 and deflation, the timing impact and other uncertainties of future acquisitions, disposals, joint ventures 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 Group'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 Group 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.