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H1 Results

Direct Line Group Half Year Report for the six months ended 30 June 2014

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Highlights
  • Gross written premium for ongoing operations1 decreased by 5.1% in the first half of 2014 reflecting disciplined underwriting in competitive markets. Motor prices reduced on average by 2% during the second quarter compared with the same period in 2013
  • Operating profit from ongoing operations1 of £249.1 million for the first half of 2014, down 13.1% (first half 2013: £286.6 million) reflecting higher weather claims and lower prior-year reserve releases of £218.0 million (first half 2013: £239.2 million); total Group profit before tax of £225.1 million up 7.8% (first half 2013: £208.8 million)
  • Combined operating ratio2 for ongoing operations1 of 96.6% for the first half of 2014, an increase of 2.0 percentage points (first half 2013: 94.6%) reflecting higher weather claims. Current-year attritional loss ratio of 71.8% (first half 2013: 73.8%)
  • Return on tangible equity3 from ongoing operations1 of 15.8% for the first half of 2014 (first half 2013: 17.3%)
  • Interim dividend per share of 4.4 pence representing growth of 4.8% over 2013 interim dividend, and a special interim dividend per share of 10.0 pence taking total interim dividends to 14.4 pence per share

Note

1. Ongoing operations include Direct Line Group's (the "Group") ongoing segments: Motor, Home, Rescue and other personal lines, Commercial and International. It excludes the Run-off segment and Restructuring and other one-off costs.

2. Combined operating ratio ("COR") is the sum of the loss, commission and expense ratios. The ratio is a measure of the amount of claims costs, commission and expenses compared to net earned premium generated.

3. Return on tangible equity ("RoTE") is annualised adjusted profit after tax from ongoing operations divided by the Group's average tangible shareholders' equity. Profit after tax is adjusted to exclude the Run-off segment and Restructuring and other one-off costs and is stated after charging tax (using the UK standard tax rate of 21.5%; 2013: 23.25%).

CEO comment

Paul Geddes, CEO of Direct Line Group, commented

"We delivered good results in the first half of 2014, despite major weather events and competitive markets, by maintaining our disciplined underwriting approach and from the continued delivery of our strategic initiatives. This continued performance and our strong capital position have enabled us to declare a special interim dividend of 10 pence per share as well as increase the regular interim dividend by 5%.

"Our performance has also allowed us to continue to invest in the future of our business, to enhance our product propositions and improve our customer experience. We have rolled out self-install telematics boxes, which will enable us to reward better driving, and we've made it easier to buy our Motor products on smartphones and tablets."

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