Direct Line Group Half Year Report 2022



2 August 2022


"As we announced in our 18 July trading update, uniquely complex motor market conditions during the first half, due to significant regulatory changes, heightened claims inflation and macroeconomic uncertainty, have challenged our short-term profitability.

"However, the longer-term fundamentals of the business remain strong. Through pricing action, steps taken in our garage repair network and through deployment of enhanced pricing capability, we have now returned to writing at our target margins based on latest claims assumptions.

"We are pleased that all of our other businesses have continued to perform in line with expectations. We remain ahead of our long-term return on tangible equity target despite the challenges, demonstrating the benefit of the Group's diversification. We are announcing an interim dividend in line with 2021 and are confident in the sustainability of our regular dividends as we look ahead to the full year and beyond."


  H1 2022 £m H1 2021 £m Change
Adjusted gross written premium¹ 1,523.1   1,556.5 


Of which: direct own brands2  1,017.6 



Operating profit




Combined operating ratio1,3




Profit before tax  178.1 



Return on tangible equity annualised¹




Dividend per share – interim (pence)4  7.6 


 0.0 %

  30 Jun 2022

31 Dec 2021


In-force policies (thousands)5




Of which: direct own brands2 (thousands)




Solvency capital ratio post dividends and share buyback6




Solvency capital ratio (as above) / adjusted solvency capital ratio1,7




Financial summary

Group gross written premium of £1,523.1 million was 2.1% lower than H1 2021 as we navigated challenging market conditions and the implementation of the regulations coming out of the FCA pricing practices review in Motor and Home. Commercial continued to see the benefits of its transformation and delivered double-digit growth.

The UK motor market experienced significant levels of severity inflation in H1 2022. Market premium inflation has continued to lag behind the increases in claims inflation and we now estimate overall motor claims severity inflation for 2022 to be around 10%. As a result, our Motor current-year attritional loss ratio increased to 86.4%. We have taken action to mitigate the short-term impact of this and we have now returned to writing at our target margins based on latest claims assumptions.

Our other business lines are performing largely in line with expectations, demonstrating the benefit of the Group's diversified business model. Alongside higher weather costs and lower prior-year reserve releases, this delivered an operating profit of £195.5 million for the half year and a combined operating ratio of 96.5%. Operating profit was £174.4 million lower than H1 2021, a period which experienced below normal levels of claims frequency due to Covid-19 lockdowns.

We have maintained an interim dividend of 7.6 pence per share. Our solvency ratio after dividends was 152%, which is within our risk appetite range of 140% to 180%.

As we announced earlier this month, we have revised our 2022 combined operating ratio target range, normalised for weather, to 96% to 98%. The actions we have taken to restore margins, including increasing prices and deploying new pricing capability, mean we expect our 2023 combined operating ratio to improve to around 95% and we reiterate our medium-term combined operating ratio target range of 93% to 95%.


Strategic and operational progress

Notwithstanding the short-term impact of inflation, we continue to develop the capabilities required to deliver customer propositions for the future.

In Motor we have delivered significant pricing capability during H1 with the launch of our new risk pricing models which are materially more advanced than anything we have had before and critical in navigating a changing market. The early impact of these changes is encouraging with an estimated 5 to 7 percentage point improvement in our written loss ratios. Together with other pricing actions, this has helped us return to writing at our target margins based on latest claims assumptions and looking forward gives us the tools to enhance our market competitiveness.

This improvement in competitiveness will be supported by our latest Direct Line superhero marketing campaign, which underlines our strong customer proposition, as well as a pipeline of compelling brand marketing scheduled for H2.

We continue to increase the breadth of our propositions and we made good progress towards our aim to be the insurer of choice for electric vehicle customers. Our Direct Line electric vehicle proposition has delivered strong conversion and was expanded to include Churchill customers in Q2.

With a material increase in customer adoption of digital journeys, we are continuing to make good progress in our aim to deliver a digital first experience for our customers. Our digital capabilities have been rated as industry leading by consumers in a recent benchmarking survey, and in Motor we saw more customers using their online account than calling us. We continue to target greater customer adoption as part of our focus on improving efficiency and reducing costs while serving customers in their channel of choice.

In Commercial, our transformation has continued to help deliver double-digit growth alongside improving margins across both its two main businesses, NIG and Commercial direct own brands. Commercial direct continues to grow the direct to SME market, with 60% gross written premium growth during the first half in Churchill's business brand. NIG benefited from improved pricing sophistication and growth on its award-winning electronic trading platform.

The transformation of Green Flag Rescue has continued and in the first half it expanded its range of products and services with the launch of a vehicle check service and the option for customers to buy a range of motor accessories from the new Green Flag shop. As it continues to disrupt the rescue market we were delighted that it was recently ranked the top Rescue brand and second best service brand for customer service in the UK8.

As part of our work to ensure we deploy our capital as efficiently as possible we are also prioritising high growth, high return partnership opportunities. We look forward to welcoming over 640,000 Motability customers, expected in Q3 2023, in a capital-efficient structure9, we have renewed our Home NatWest partnership serving half a million customers and have taken the decision to reduce our exposure to packaged bank accounts where they do not meet target levels of return and are no longer required for operational scale.


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1.     See glossary for definitions and appendix A – Alternative performance measures for reconciliation to financial statement line items.

2.    Direct own brands include in-force policies for Home and Motor under the Direct Line, Churchill, Darwin and Privilege brands, Rescue policies under the Green Flag brand and Commercial under the Direct Line for Business and Churchill brands.

3.    A reduction in the ratio represents an improvement as a proportion of net earned premium, while an increase in the ratio represents a deterioration. See glossary for definitions.

4.   The Group’s dividend policy includes an expectation that generally one-third of the regular annual dividend will be paid in the third quarter as an interim dividend and two-thirds will be paid as a final dividend in the second quarter of the following year.

5.    The reduction in in-force policies principally relates to the removal of travel insurance cover from a partner's bank account proposition.

6.    Estimates based on the Group’s Solvency II partial internal model.

7.    Adjusted solvency capital ratio as at 31 December 2021 excluded £250 million Tier 2 debt which was redeemed on 27 April 2022. See appendix A – Alternative performance measures for reconciliation to financial statement line items.

8.   The UK Customer Satisfaction Index is created by the Institute of Customer Service and is based on 45,000 responses from over 10,000 people.

9.    As reported previously, we expect 80% to be reinsured.