DIRECT LINE INSURANCE GROUP PLC HALF YEAR REPORT 2024

RETURN TO PROFIT

ADAM WINSLOW, CEO OF DIRECT LINE GROUP, COMMENTED:

“In the first half of the year we delivered strong premium growth and returned to profitability. The actions we have taken are beginning to make a difference but there is more to do. We will continue to drive business transformation during the second half of 2024 and into 2025, as our new high calibre management team continues to arrive. We remain committed to the strategy announced in July at the Capital Markets Day and are working to deliver on our targets of at least £100 million of gross cost savings, on a run-rate annualised basis, by the end of 2025 and a 13% net insurance margin in 2026.

"During the period our Motor margins have improved and we have remained disciplined with written net insurance margin estimated to have remained above 10% during the first half of 2024. In Non-Motor, we have delivered above target premium growth at 13.7% and attractive margins at 11.6%.

"Our solvency capital ratio has improved during the first half to a strong 200% pre-dividend, which, alongside positive capital generation, gives us confidence to announce a dividend payment of 2.0 pence per share."

Results summary

Financial summary²

• Gross written premiums and associated fees growth of 53.5%, largely as a result of the Motability partnership which began in September 2023. Excluding Motability, growth of 11.4%, supported by rating action across Motor, Home, Commercial Direct and Rescue.
• In-force policies were 3.1% lower (Motor, 4.8%; Non-Motor, 1.6%) across the first half of 2024 reflecting trading discipline. Across the own brand portfolio Motor was 7.5% lower, while Non-Motor delivered an increase of 0.2%.
• Net insurance margin of 1.8% as a result of a strong margin of 11.6% in Non-Motor, partially offset by a negative 3.0% net insurance margin in Motor, which was impacted by the continued earn through of policies written in H1 2023. Motor written margins estimated to have remained above 10% net insurance margin during the first half of 2024.
• The combination of an improved result in Motor and strong margins in Non-Motor, delivered an ongoing operating profit in the first half of £64 million, £157 million ahead of prior year.
• Group profit before tax increased to £62 million, £138 million ahead of prior year.
• The Group's solvency capital ratio, post dividend³ was a strong 198%. The Group has declared a dividend of 2.0 pence per share.

Refreshed strategy and clear targets

In July, at our Capital Markets Day, we set out our refreshed strategy with a focus on technical excellence to drive for profitable growth and to position DLG as the customers’ insurer of choice.

The key targets announced or reiterated were:

• Motor: Launch Direct Line on price comparison websites ("PCWs").
• Non Motor: Targeting 7% to 10% compound annual growth in gross written premium and associated fees between 2023 and 2026.
• Cost: Deliver at least £100 million gross cost savings by the end of 2025 on a run-rate annualised basis⁵.
• Margin: Target a 13% net insurance margin in 2026⁶.

We expect the delivery of our financial targets to underpin attractive future returns for our shareholders. Our revised dividend policy, announced at the Capital Markets Day, will target a payout ratio of around 60% of post-tax operating profit⁷ for the regular dividend, with the potential for any additional capital returns to be reviewed annually alongside our full year results depending on solvency capital growth over time.

Notes:

1. See glossary for definitions and Appendix A - Alternative Performance Measures for reconciliation of operating return on tangible equity.
2. Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three Run-off partnerships that the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary for definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums, gross written premium and associated fees and in-force policies.
3. Estimates based on the Group’s Solvency II partial internal model.
4. The full year 2023 solvency capital ratio has been represented as explained in the Chief Financial Officer review of this report (previously reported in the Group's full year 2023 preliminary results and Annual Report and Accounts as being 197%).
5. The Group’s total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs, commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.
6. Net insurance margin for ongoing operations, normalised for event weather.
7. Operating profit from ongoing operations after finance costs, coupon payments in respect of Tier 1 notes and tax at the standard rate.

Read the full announcement here.