Operating profits rose 9.3 per cent to £461m at Direct Line (DLG) last year, after the previous year's underwriting losses of £72.3m were turned into a profit of £28.2m. But headline figures took a jolt after taking in restructuring and other one-off costs of £189m, which left pre-tax profits 27 per cent lower. Underwriting profits were translated into an improvement in the combined ratio (of claims as a percentage of premium income) from a lossmaking 101.8 per cent to 99.2 per cent.
Improvements in risk selection helped to reduce the loss ratio from 70.2 per cent to 67.1 per cent, but this was flattered by a big jump in prior year reserve releases - up from £188.8m to £322m - and, after adjusting for this and exceptional weather related events, the improvement in the attritional loss ratio was less pronounced at 73 per cent, compared with 74.6 per cent in 2011. And while four of the five divisions delivered higher operating profits, home insurance profits slipped back from £112m to £93m as a result of weather-related claims.
Investment income was down from £243m to £199m, but this was before adding in net realised and unrealised gains, which left total returns virtually unchanged at £281.8m.
Investec is forecasting current-year operating EPS of 27.8p, a dividend of 12.4p and a year-end net asset value (NAV) per share of 197.1p.
| DIRECT LINE (DLG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 211p | MARKET VALUE: | £3.17bn | |
| TOUCH: | 210-211p | 12-MONTH HIGH: | 227p | LOW: 175p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 189p* | COMBINED RATIO: | 99.2% | |
| Year to 31 Dec | Gross premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 5.33 | 132 | 366 | nil |
| 2010 | 5.15 | -378 | 322 | nil |
| 2011 | 4.52 | 343 | 282 | nil |
| 2012 | 4.05 | 249 | 282 | 8.00 |
| % change | -10 | -27 | - | - |
Ex-div: 6 Mar Payment: 11 Jun *Includes intangible assets of £422m, or 28p a share | ||||
