Direct Line Group PLC Preliminary Results 2021

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"I am delighted by the Group’s strong performance and proud of the way we have navigated the complexities of a challenging market. Operating profit has increased to £582 million, own brands policies grew as our Home, Commercial and Rescue businesses performed strongly, whilst in Motor we steered a smart path through another uncertain period as the market sought to predict the impact of Covid-19. We are pleased to declare a final dividend of 15.1 pence per share, up by 2.7% over 2020, and also announce a further share buyback programme.

"2021 has been a year of significant strategic progress - we’ve successfully completed the main elements of our technology build and data capability, both key enablers of future growth. Our new motor platform is improving our competitiveness, we’ve announced a new partnership with Motability Operations that is expected to see over 640,000 customers join us in 2023 and we’ve extended our Home partnership with NatWest Group until 2027.

"I can’t thank my colleagues enough. This year’s success is due to the sheer dedication of our brilliant people who have continued to deliver despite the challenges of a pandemic. This is a fantastic business, with great brands, a customer obsessive mindset and an exceptional claims service where we are harnessing the best of technology to meet customer needs. The capability we have built is already delivering improved competitiveness and we believe there is plenty more to come in 2022."

Results summary

  FY 2021 (£m) FY 2020 (£m) Change
In-force policies (thousands) 14,565  14,615   (0.3%)
Of which: direct own brands1 (thousands) 7,529  7,454  1.0% 
Gross written premium 3,171.6 3,180.4  (0.3%)
Of which: direct own brands1 2,207.6 2,225.6  (0.8%)
Operating profit2 581.8 522.1 11.4%
Combined operating ratio2,3 90.1% 91.0% 0.9pts
Profit before tax 446.0 451.4 (1.2%)
Return on tangible equity² 23.6%  19.9% 3.7pts
Dividend per share – interim (pence)4 7.6 7.4  2.7%
Dividend per share  – final (pence)4 15.1  14.7  2.7%
Dividend per share – special (pence)5 —  14.4 n/a
Solvency capital ratio post-dividends and share buyback6 176%  191% (15pts)
Adjusted solvency capital ratio7 160% 172% (12pts)

Financial highlights

  • Direct own brands in-force policies grew 1.0% with growth across Commercial direct (7.5%), Green Flag Rescue (5.8%) and Home (2.3%). Motor direct own brands in-force policies were stable in H2 2021 with a reduction of 1.9% over the year. Direct own brands gross written premium was 0.8% lower and grew 0.7% in H2 2021.
  • Operating profit increased to £581.8 million (2020: £522.1 million) driven by an increase in underwriting profit and a strong investment return result. Current-year contribution to operating profit, normalised for weather, was 53% (2020: 65%), in line with the Group’s 2021 target of at least 50%.
  • Combined operating ratio improved to 90.1% (2020: 91.0%). Normalised for weather, the combined operating ratio was 91.1%, ahead of our medium-term target of 93% to 95% and in line with the expectation of between 90% and 92% for 2021 we stated at half year.
  • Profit before tax of £446.0 million was £5.4 million lower than 2020 as the increase in operating profit was offset by a £62.1 million increase in restructuring and one-off costs primarily reflecting restructuring of the property portfolio, including the purchase of the Bromley office in early 2021 as previously announced.
  • Proposed final ordinary dividend of 15.1 pence per share, making a total of 22.7 pence per share, an increase of 2.7% over the 2020 total ordinary dividend, and announcing a £100.0 million share buyback programme. Strong capital position with an adjusted solvency capital ratio of 160%.


Strategic highlights

In 2021, we made great progress on our path to building the insurance company of the future – technology and data-led with a customer obsessive mindset. We completed the main elements of our technology build and continued to make progress across all six of our strategic objectives:

  • Best at direct: Our main direct brands, Direct Line and Green Flag, continued to deliver great customer service with high net promoter scores across a broad product range. For Direct Line customers we continued to offer mileage-based savings, we helped make the transition to electric vehicles easier and we extended our product range. In Green Flag we delivered a new cloud-based policy platform for digital sales and relaunched the way we operate enabling us to offer more services alongside our great value recovery service.
  • Win on Price Comparison Websites: We have built on the success of Churchill in the PCW channel by rolling out our new Motor platform which allows us greater pricing sophistication, use of third-party data and speed to market. We saw some initial benefits of this in improved Motor competitiveness in the second half of the year. We have already launched further pricing enhancements in 2022 with machine learning techniques due to be deployed in Q2. This is complemented by the success of Darwin in this channel, which grew its in-force policy count by 150% in 2021 to over 135,000 policies.
  • Extend our reach: We announced a new partnership with Motability Operations, demonstrating our core strengths in delivering great customer service and efficient car repair. The partnership shows how we can leverage our capability into wider customer groups and is anticipated to increase Motor gross written premium by around £500 million each year from H2 2023. We also agreed a long-term extension to our Home partnership with NatWest Group until 2027, where we currently provide Home insurance to its customers.
  • Nimble and cost efficient: We reduced our operating expense base by £18 million in 2021, despite the inflationary backdrop, and reiterate our target of a 20% expense ratio in 2023. These savings evidenced the benefits from our transformation programme and have arisen across technology, property, operations and head office. We have taken action to reduce our office footprint by over 30%, compared to pre-pandemic levels, and are digitalising customer and back-office processes, with customers now able to register 100% of new motor and home claims online. 
  • Technical edge: We have expanded our claims expertise with the acquisition of our 22nd auto services repair centre and investment in a car technology centre. These actions support our double-digit repair cost advantage in Motor and we continue to invest in our capability to repair more advanced vehicles.
  • Great people: We have refreshed our leadership with an Executive Committee team with the brilliant mix of digital, customer, data, insurance and agile skills we need to grow our business, levering the technology we have built. We believe we have some of the best people in the industry and we continue to invest in skills vital for the future including digital, data, engineering and pricing. We are also recruiting talent from other consumer industries who are attracted by our inclusive culture and improving agility.

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  1. 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.
  2. See glossary for definitions and appendix A – Alternative performance measures for reconciliation to financial statement line items.
  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. 2020 special dividend paid in lieu of the cancelled 2019 final dividend.
  6. Estimates based on the Group’s Solvency II partial internal model.
  7. Adjusted solvency capital ratio excluding Tier 2 debt which can first be called from 27 April 2022. See appendix A – Alternative performance measures for reconciliation to financial statement line items.