Shares in Direct Line (FLG) rose 5 per cent on the day these half-year figures appeared, following news of a hefty 10p a share special dividend. Costs fell over 5 per cent, too, and confirmation that management is looking to sell the German and Italian units - rumoured to be worth almost £300m - also helped sentiment.
The payout reflects a decision to return capital that can't be fully utilised in today's competitive market conditions. In the core motor book - responsible for nearly two-fifths of gross premiums - premium rates fell 2 per cent year on year in the second quarter, after a steeper fall in the first. This, however, looks comparatively resilient, given that second-quarter motor rates for the market overall fell 15 per, according to the Confused.com/Tower Watson price index. Meanwhile, the underwriting performance deteriorated modestly - the combined ratio (of claims to premiums) rose two percentage points - largely due to home cover claims relating to poor UK weather.
The investment book improved its return to a still modest 2.8 per cent (annualised) from 2.3 per cent. The portfolio is largely focused on high-quality corporate bonds, but a small book of investment property has helped support performance.
Pending upgrades, broker Numis Securities expects full-year pre-tax profit of £385m, giving EPS of 19.8p (from £424m and 20.8p in 2013) and net tangible assets (NTA) of 147p a share.
DIRECT LINE INSURANCE (DLG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 293.4p | MARKET VALUE: | £4.4bn | |
| TOUCH: | 293.3-293.4p | 12-MONTH HIGH: | 298p | LOW: 200p |
| DIVIDEND YIELD: | 4.4%* | PE RATIO: | 13 | |
| NET ASSET VALUE: | 186p | COMBINED RATIO: | 96.6% | |
| Half-year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£m) | Investment income (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 1.96 | 209 | 105 | 4.2 |
| 2014 | 1.86 | 225 | 119 | 4.4* |
| % change | -5 | +8 | +13 | +5 |
Ex-div: 13 Aug Payment: 12 Sep *Excludes special dividends: 8p in 2013 and 10p at 2014's half-year stage | ||||
