Direct Line Insurance Group plc Trading Update for the first nine months of 2016

Direct Line Group’s Trading Update relates to the nine months ended 30 September 2016, and contains information to the date of publication. Income statement comparisons are to the first nine months of 2015, in-force policy numbers are to 30 September 2015 and balance sheet comparisons are to 31 December 2015, unless otherwise stated.


  • Motor and Home own brands in-force policies up 4.3%, with strong customer retention. Continued growth in Green Flag direct and Direct Line for Business
  • Gross written premium for ongoing operations1 4.2% higher, with continued growth in Motor own brands, up 9.7%
  • Investment income yield of 2.5% in line with full year guidance and no material gains or losses in the quarter
  • Total costs2 of £669.5m up £16.1m from the first nine months of 2015, after absorbing £24m of Flood Re costs in Q2 2016. Q3 total costs 3.3% lower than Q3 2015. In line with previous guidance, full year business as usual costs expected to be no higher than in 2015. However, reported costs may be somewhat higher than in 2015, due to higher non-cash intangible asset impairments than in recent years
  • Combined operating ratio3 for ongoing operations still expected to be towards the lower end of the 93%-95% target range, assuming normal weather

Paul Geddes, CEO of Direct Line Group, commented

“I’m pleased that we have traded well this quarter with good policy and premium growth, particularly for Direct Line, showing that customers like the value, service and brand propositions we offer them. We have achieved this while maintaining our underwriting discipline and reiterate that we expect to be towards the lower end of our 93%-95% combined operating ratio target range”

For further information, please contact:

Andy Broadfield
Director of Investor Relations
Tel: +44 (0) 1651 831022

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


  1. Ongoing operations include 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
  2. Total costs comprise operating expenses and claims handling expenses for ongoing operations.
  3. Combined operating ratio 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


Business update

Direct Line Group (the “Group”) achieved good trading results in the first nine months of 2016 while making progress on delivering its strategy.

Motor and Home own brands in-force policies grew 4.3% since 30 September 2015 helped by continued investment in both brand and proposition. Total in-force policies for ongoing operations reduced by 2.4% compared to 30 September 2015, primarily due to partner volumes in Home and Rescue and other personal lines. Compared to the second quarter 2016, total in-force policies were stable.

The Group’s gross written premium increased by 4.2% compared to the first nine months of 2015 mainly due to a 10.1% increase in Motor, driven by strength in own brands and partially offset by a reduction in Home partnerships of 6.0%.

Motor continued to trade broadly in line with the first half of 2016. In-force policies grew 4.0% since 30 September 2015 and Motor risk adjusted prices increased 10.0%. Claims inflation remained at or slightly above the Group’s long-term expectations of 3%-5%. In these market conditions the Group continued to invest in own brand propositions and in attracting new Direct Line customers.

In Home, own brand risk adjusted prices were up 0.6% compared to the third quarter of 2015. Retention and new business sales remained strong. The Group continued to invest in brand differentiation such as the introduction this year of the three hour emergency plumber service for Direct Line Home Plus customers. This new service aims to improve the claims experience for customers, building on the brand’s point of difference in the market.

Within Commercial, Direct Line for Business (“DL4B”) continued to grow with in-force policies up 6.7% since 30 September 2015, more than sustaining the policy level achieved in the first half, which benefitted from a rise in sales of landlord policies ahead of changes in stamp duty.

In the first nine months of 2016, the Group’s investment portfolio performed in line with expectations. The investment income yield for continuing operations was 2.5%, in line with the expectation previously referred to for the full year 2016. In the third quarter of 2016, there was no material movement in the valuation of the Group’s investment property portfolio, nor any material realised gains or losses.

With the level of change the Group has been making to its IT infrastructure, it expects the annual assessment of the carrying value of intangible assets on the IFRS balance sheet may result in impairments that could be higher than in recent years. In terms of capital, the Solvency II balance sheet does not recognise intangible assets and any such impairments will have no material impact on the Group's capital position, nor on the Group's dividend paying ability.

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