Preliminary results for the year ended 31 December 2015

Financial highlights

• Gross written premium from ongoing operations1 up 1.7% to £3,152.4 million, with 4.8% growth in Motor for 2015 and 7.1% in the fourth quarter. Motor and Home own brands in-force policies up 1.4%
• Operating profit from ongoing operations increased to £520.7 million for 2015 (2014: £506.0 million). Combined operating ratio2 from ongoing operations of 94.0% for 2015, an improvement of 1.0 percentage point
• Return on tangible equity3 of 18.5% for 2015 (2014: 16.8%). Profit before tax for continuing operations1 increased to £507.5 million (2014: £456.8 million)
• Results benefited from disciplined underwriting, prior-year reserve releases from ongoing operations of £378.9 million (2014: £397.6 million) which were higher than expected, together with lower costs, partially offset by higher claims from major weather events and lower volumes
• 4.5% increase in final dividend per share to 9.2 pence per share and additional special dividend of 8.8 pence per share. Total dividends for 2015, including special interim dividend of 27.5 pence per share following sale of International division, of 50.1 pence per share (2014: 27.2 pence per share)

 

Strategic and operational highlights

• Investment in brand differentiation through further enhancements, a succession of initiatives to Direct Line proposition and improved trading capability across Churchill and Privilege, particularly on price comparison websites
• Improved customer retention rates for motor and home products, and Net Promoter Score for Direct Line brand
• Reduced total costs4 for ongoing operations by 4.6% in 2015 while investing in technical pricing, claims management and self-service initiatives
• Doubled Motor telematics insurance in-force policies; and growth in Commercial in-force policies through eTrade and direct channels
• Invested in digital capability, including the roll out of new quote and buy journeys for Home and Green Flag insurance products, and development of next generation of customer systems

 

Paul Geddes, CEO of Direct Line Group, commented

“Our customers are benefiting from the many improvements we've been making, including new propositions and enhanced customer service. This has resulted in more customers coming to our brands and renewing with us.

“Growth in own brands policies has contributed to overall premium growth and, alongside lower costs, has again allowed us to deliver an improved financial performance for the year. Operating profits are up and return on tangible equity is well ahead of our target, despite the bad weather at the end of the year. We’ve also continued to grow regular dividends and announced another special dividend.

“To meet our ambition of being at the forefront of the fast-moving, ever-changing insurance landscape, we are focused on building on this momentum by investing in our people, brands and systems.”

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

Notes:

1. Ongoing operations comprise Direct Line Group’s ongoing divisions: Motor, Home, Rescue and other personal lines, and Commercial. It excludes discontinued operations, the Run-off segment, and restructuring and other one-off costs. Continuing operations comprise all activities other than discontinued operations.
2. Combined operating ratio (“COR”) is the sum of the loss, commission and expense ratios. The ratio measures the amount of claims costs, commission and expenses compared to net earned premium generated.
3. Return on tangible equity (“RoTE”) is adjusted profit after tax from ongoing operations divided by the Group’s average shareholders’ equity, less goodwill and other intangible assets and net assets held for sale in the disposal group relating to discontinued operations. Profit after tax is adjusted to exclude discontinued operations, the Run-off segment, restructuring and other one-off costs and the gain on disposal of subsidiary. It is stated after charging tax (using the UK standard tax rate of 20.25%; 2014: 21.5%). RoTE for the comparative period includes the net assets held for sale in the disposal group and profit after tax for discontinued operations, as the International division was managed as part of ongoing operations.
4. Total costs comprise operating expenses and claims handling expenses.

 

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”, “mission”, “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 investment income yield. 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.

Neither the content of Direct Line Group’s website nor the content of any other website accessible from hyperlinks on the Group’s website is incorporated into, or forms part of, this document.

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