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H1 Results

Direct Line Insurance Group plc Half year results for the half-year ended 30 June 2018

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CEO comment

Paul Geddes, CEO of Direct Line Group, commented:

“This is a good set of results - growing our own brand policies and profits (normalised for weather) in a competitive, albeit to date, rational market - again showing the strength of our business model. We have also made progress on our strategic initiatives which we believe will improve our competitiveness in each of our channels and we are focused on improving our efficiency. This strategic agenda, combined with our disciplined value over volume focus, gives us the confidence in our outlook, for us to reiterate our financial targets.

“As you will have seen from our announcement today, I will step down as Chief Executive Officer in the summer of 2019. I have been privileged to lead the Group over a long period of transformation. As I approach my tenth anniversary, it is right to put a successor in place to lead the company in the years ahead. In the meantime, we have a very busy and exciting agenda, which I look forward to delivering.”

Results summary


H1 2018
H1 20171
Gross written premium 1,610.3 1,694.2 (5.0%)
  Excluding Nationwide and Sainsbury’s2 1,604.6 1,596.6 0.5%
  Of which direct own brands 1,099.0 1,063.9 3.3%
Operating profit 303.1 359.7 (15.7%)
Commission ratio3 6.5% 8.9% (2.4pts)
Expense ratio3 24.4% 24.9% (0.5pts)
Combined operating ratio3 93.0% 88.6% 4.4pts
Profit before tax 293.8 341.4 (13.9%)
Return on tangible equity annualised4 21.8% 26.6% (4.8pts)
Dividend per share – interim (pence)5 7.0 6.8 2.9%
  30 Jun 2018 31 Dec 2017 Change
Solvency capital ratio post-dividend – stimated6 169% 165% 4pts


  1. Results for the period ended 30 June 2018 are based on total Group operations including restructuring and Run-off. Comparative data has been re-presented accordingly to include restructuring costs and Run-off profits within Motor segment.
  2. Nationwide and Sainsbury’s exited Home partnerships.
  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 on page 40 for definitions.
  4. See glossary on pages 40 and 41 for definitions and appendix A – Alternative performance measures on page 42 for reconciliation to financial statement line items.
  5. The Group’s dividend policy states its expectation that one-third of the annual dividend will generally 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.
  6. Estimates based on the Group’s solvency II partial internal model.
Highlights and outlook
  • Direct own brand premiums up 3.3% driven primarily by continued growth in Motor, also up 3.3% compared to H1 2017. Total Group premiums excluding Nationwide and Sainsbury’s grew 0.5% despite reductions in Motor premium rates.
  • Normalised for weather, operating profit was up slightly; H1 2017 also included £49 million of benefit from revised Ogden reserve releases. The headline decline in operating profit of £56.6 million compared to the prior year is driven by higher weather-related claims (H1 2018: £75.0 million, H1 2017: £9.0 million).
  • Expense ratio down 0.5 percentage points as costs remained broadly stable. Commission ratio lower as the Group’s business mix continued to shift towards direct own brands.
  • Continued positive progress with strategic initiatives including the launch of two further Direct Line differentiating propositions, signing of a new Motor partnership deal and, in July, reaching over 500 trades on the Direct Line for Business platform. Programme to deliver latest generation systems benefiting both business and customers on track.
  • Interim dividend of 7.0 pence, in line with the Group’s policy which aims to grow the dividend in line with business growth.
  • Reiteration of the current financial targets for 2018 and over the medium term: of achieving a combined operating ratio in the range of 93% to 95% adjusted for normal weather and assuming no further change to the Ogden discount rate, supported by reductions in expense and commission ratios. For 2018, the Group expects total investment return in the region of £150 million.

Latest result

Direct Line Insurance Group plc ("Direct Line Group") published its 2018 half year report on 1 August at 7am. Management hosted a presentation and conference call for investors and analysts on 1 August at 9am, a replay of the call is available on the results and presentations page.

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