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H1 Results

Direct Line Insurance Group plc Half Year Report for the first half of 2015

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Highlights
  • Gross written premium from ongoing operations1 up 0.4% to £1,552.0 million (first half 2014: £1,546.0 million). Motor and Home own brand in-force policies broadly stable
  • Operating profit from ongoing operations increased to £335.8 million for first half of 2015 (first half 2014: £235.7 million). Combined operating ratio2 from ongoing operations of 89.4% for the first half of 2015, an improvement of 6.7 percentage points
  • Return on tangible equity3 of 21.2% for the first half of 2015 (first half 2014: 14.9%). Profit before tax for continuing operations1 increased to £315.0 million (first half 2014: £211.7 million)
  • Results benefited from an absence of claims from major weather events and higher than expected reserve releases together with improved operating efficiency. Underlying trends remain broadly in line with prior expectations
  • Interim dividend per share of 4.6 pence representing growth of 4.5% over 2014 interim dividend

Notes:

1. Ongoing operations include Direct Line Group’s (the “Group’s”) ongoing divisions: Motor, Home, Rescue and other personal lines, and Commercial. It excludes discontinued operations (the Group’s former International division), the Run-off segment and restructuring and other one-off costs. Continuing operations include all activities other than discontinued operations.

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 discontinued operations, the Run-off segment and restructuring and other one-off costs, and is stated after charging tax (using the UK standard tax rate of 20.25%; 2014: 21.5%).

4. Operating expenses and claims handling expenses from ongoing operations. It excludes discontinued operations, the Run-off segment and restructuring and other one-off costs.

CEO comment

Paul Geddes, CEO of Direct Line Group, commented

"Our first half performance shows the benefits of the many improvements that we continue to make to our business. Customers have reacted positively to the refreshed propositions for Direct Line and Churchill, as well as better customer service. This has led to increased retention rates and, in particular for the Direct Line brand, improved Net Promoter Scores. Together, this has helped us to hold our gross written premium flat in competitive markets.

"At the same time, our efforts on efficiency have improved our expense ratio, while improvements in claims and pricing continue to support strong reserve releases from previous years and a good loss ratio so far this year. Action on our investment portfolio has contributed to improving our yield, despite the low interest rate environment.

"With the completion of the International disposal, we are now totally focused on UK general insurance, and our capital and reserves remain strong. We are busy improving our efficiency, propositions and technology to make insurance much easier and better value for our customers."

Upcoming results

Third quarter 2015 interim management statement on 3 Nov 2015

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