Direct Line Group preliminary results announcement
Preliminary results for the year ended 31 December 2013
- Operating profit from ongoing operations1 of £526.5 million for 2013, up 14.2% (2012: £461.2 million); and total Group profit before tax of £423.9 million (2012: £249.1 million)
- Combined operating ratio2 for ongoing operations1 of 96.1% for 2013, an improvement of 3.1 percentage points against 2012 (99.2%), and ahead of the target 98% for 2013
- Combined operating ratio2 for ongoing operations1 in 2013 included higher than expected contribution from prior-year reserve releases of 12.4 percentage points (£435.1 million) compared to 8.7 percentage points in 2012 (£322.0 million)
- Return on tangible equity3 from ongoing operations1 of 16.0% for 2013 (2012: reported 11.5%; pro forma4 2012: 13.4%)
- 5.0% increase in final dividend per share to 8.4 pence per share and second special interim dividend of 4.0 pence per share taking total dividends for 2013 to 20.6 pence per share
- Strong capital position maintained with risk-based capital coverage5 of 148.7% post final and second special interim dividends, towards the upper end of the target range of 125% to 150%
Strategic and operational highlights
- Investment in improved customer focused capabilities and propositions, launch of two telematics products and start of roll-out of smartphone and tablet optimised websites
- Extended efficiency programme particularly in head office functions and announced additional cost savings, targeting a reduced total cost base6 of approximately £1,000 million in 2014
- Completed claims transformation for Motor and Home, extended ClaimCenter to Commercial Motor and Italy, and laid the foundations for DLG Legal Services Limited
- Continued to develop Commercial and International, in particular full roll-out of eTrading and strong growth in Germany
Paul Geddes, CEO of Direct Line Group, commented
“We have continued to make good progress on our strategic priorities, helping us to achieve our 2013 financial targets in highly competitive markets. We increased operating profit from ongoing operations by 14.2%, delivered a combined operating ratio of 96.1% and a return on tangible equity of 16.0%.
“In UK Motor, our improved pricing capability and claims management, as well as benefits arising from recent legal reforms, enabled us to reduce average prices for customers by 3% during 2013. In Home, recent UK weather events have emphasised the importance of insurance. I am proud of our people who have been working tirelessly around the clock to assist customers affected by the floods and storms, both on the phones and on the ground.
“Looking forward to 2014, we will continue to pursue our strategic priorities and self-help agenda to enable us to deliver benefits for our customers and shareholders.”
For further information, please contact:
Director of Corporate Strategy and Investor Relations
Tel: +44 (0) 1651 832183
Director of Communications
Tel: +44 (0) 1651 831686
- 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.
- 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.
- Return on tangible equity (“RoTE”) is 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 the gain on disposal of subsidiary and is stated after charging tax (using the UK standard tax rate of 23.25%; 2012: 24.5%).
- Pro forma RoTE is based on the return on tangible equity but assumes that the capital actions taken by the Group prior to the initial public offering (“IPO”) (£1 billion dividend payment and £500 million long-term subordinated debt issue) occurred on 1 January 2012.
- A measure to show the level of capital held compared to the level that is required, taking into account the risks faced by the business.
- Operating expenses and claims handling expenses from ongoing operations, excluding the Run-off segment and Restructuring and other one-off costs.
Forward-looking statements disclaimer
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”, “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 which are contained in this document specifically with respect to RoTE, the Group’s COR, the COR 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.
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