Direct Line Insurance Group plc Half Year Report for the first half of 2015

Direct Line Group’s Half Year Report relates to the six months ended 30 June 2015 and contains information to the date of publication.

Financial highlights

  • Gross written premium from ongoing operations1 up 0.4% to £1,552.0 million (first half 2014: £1,546.0 million). Motor and Home own brand in-force policies broadly stable
  • Operating profit from ongoing operations increased to £335.8 million for first half of 2015 (first half 2014: £235.7 million). Combined operating ratio2 from ongoing operations of 89.4% for the first half of 2015, an improvement of 6.7 percentage points
  • Return on tangible equity3 of 21.2% for the first half of 2015 (first half 2014: 14.9%). Profit before tax for continuing operations1 increased to £315.0 million (first half 2014: £211.7 million)
  • Results benefited from an absence of claims from major weather events and higher than expected reserve releases together with improved operating efficiency. Underlying trends remain broadly in line with prior expectations
  • Interim dividend per share of 4.6 pence representing growth of 4.5% over 2014 interim dividend


Strategic and operational highlights

  • Investment in brand differentiation through further enhancements to Direct Line proposition and improved Churchill positioning
  • Improved customer retention rates and Net Promoter Scores in Personal Lines
  • Reduced total cost base4 for ongoing operations by 7.6% in first half of 2015, while building on technical pricing and claims management initiatives
  • Growth in eTrade and direct Commercial channels and continued momentum in telematics motor insurance in-force policies
  • Sale of International division completed with substantially all of the net proceeds returned as a special interim dividend of 27.5 pence per share paid on 24 July 2015, following shareholder approval of an 11 for 12 share consolidation


Paul Geddes, CEO of Direct Line Group, commented

"Our first half performance shows the benefits of the many improvements that we continue to make to our business. Customers have reacted positively to the refreshed propositions for Direct Line and Churchill, as well as better customer service. This has led to increased retention rates and, in particular for the Direct Line brand, improved Net Promoter Scores. Together, this has helped us to hold our gross written premium flat in competitive markets.

"At the same time, our efforts on efficiency have improved our expense ratio, while improvements in claims and pricing continue to support strong reserve releases from previous years and a good loss ratio so far this year. Action on our investment portfolio has contributed to improving our yield, despite the low interest rate environment.

"With the completion of the International disposal, we are now totally focused on UK general insurance, and our capital and reserves remain strong. We are busy improving our efficiency, propositions and technology to make insurance much easier and better value for our customers."

For further information, please contact:

Neil Manser
Director of Corporate Strategy and Investor Relations
Tel: +44 (0) 1651 832183

Jennifer Thomas
Head of Financial Communications
Tel: +44 (0) 1651 831686


1. Ongoing operations include Direct Line Group’s (the “Group’s”) ongoing divisions: Motor, Home, Rescue and other personal lines, and Commercial. It excludes discontinued operations (the Group’s former International division), the Run-off segment and restructuring and other one-off costs. Continuing operations include all activities other than discontinued operations.

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 discontinued operations, the Run-off segment and restructuring and other one-off costs, and is stated after charging tax (using the UK standard tax rate of 20.25%; 2014: 21.5%).

4. Operating expenses and claims handling expenses from ongoing operations. It excludes discontinued operations, 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”, “aspire”, “believes”, “continue”, “could”, “estimates”, “expects”, “guidance”, “intends”, “may”, “outlook”, “plans”, “predicts”, “projects”, “seeks”, “should”, “strategy”, “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, risk-based capital coverage ratio, the Group’s COR, and cost reduction. 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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