Direct Line 's (DLG) core insurance brand, nodding-dog stablemate Churchill and the Green Flag vehicle rescue service continue to attract strong customer loyalty. This helped to lift gross written premiums in the six months to June by nearly 4 per cent as motor policies and rates grew. The only blot, which accounted for the drop in headline profit, was a 17 per cent decline in the net investment return to £92.7m.
Prior-year reserve releases grew by 10 per cent to £236.1m, although set against this was the £24m cost of the Flood Re levy and £13m of higher weather-related claims. This still left the group with operating profit from ongoing operations of £324m, allowing for the dividend increase and a 10p a share special payout, providing a running yield of 6.2 per cent.
Direct Line introduced a three-hour emergency plumber service, the removal of amendment fees, seven-day car repair service and guaranteed hire car. Earnings visibility has been enhanced by a three-year extension to the Home and Private Insurance service in collaboration with RBS. This will allow the group to offer RBS's (RBS) customers a range of tailored products.
The group maintained its combined operating ratio expectations for 2016 at between 93 per cent and 95 per cent. If weather-related claims remain steady, reserve releases should help drive the ratio to the lower end.
Prior to these numbers, JPMorgan Cazenove was forecasting adjusted EPS for the year to December 2016 of 28.6p (from 40.6p in 2015).
| DIRECT LINE (DLG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 388.3p | MARKET VALUE: | £5.34bn | |
| TOUCH: | 388.1-388.3p | 12-MONTH HIGH: | 409p | LOW: 327p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 194p** | COMBINED RATIO: | 89.6% | |
| Half-year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p*) |
|---|---|---|---|---|
| 2015 | 1.54 | 315 | 112 | 4.6 |
| 2016 | 1.58 | 299 | 93 | 4.9 |
| % change | +3 | -5 | -17 | +7 |
Ex-div: 11 Aug Payment: 9 Sep *Not including special dividend of 10p a share **Includes intangible assets of £541m, or 39p a share | ||||
