Competition in the UK home and motor insurance market put downward pressure on premium rates last year, so insurer Direct Line (DLG) did well to push profits ahead. This was achieved despite a fall in gross premiums written, as the company maintained strict underwriting discipline and avoided the temptation to maintain volumes by chasing uncompetitive business.
For shareholders, the icing on the cake was news that a second special dividend of 4p would be paid, on top of the 10p a share paid last year. The group is also proposing to pay out a further dividend from the £430m proceeds of the sale of its international division. Even without this, however, the company will have paid out 27.2p a share for last year - a yield of over 8 per cent on the current share price.
While premium deflation hit the motor insurance business in 2014 - written premiums fell by 5.6 per cent - there was evidence of an early recovery in the fourth quarter, when gross written premiums rose by 2.5 per cent. The group's combined operating ratio of costs to income also improved marginally to 95 per cent, smack in the middle of the 94-96 per cent range targeted for the current year.
Prior to these numbers, Canaccord Genuity were forecasting EPS for 2015 of 25.5p.
| DIRECT LINE (DLG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 328p | MARKET VALUE: | £4.9bn | |
| TOUCH: | 328.1-328.2p | 12-MONTH HIGH: | 337p | LOW: 220p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 188p | COMBINED RATIO: | 95% | |
| Year to 31 Dec | Gross premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 5.15 | -378 | 322 | nil |
| 2011 | 4.52 | 343 | 282 | nil |
| 2012 | 4.05 | 249 | 282 | 8.0 |
| 2013 | 3.23 | 407 | 198 | 12.6* |
| 2014 | 3.10 | 457 | 215 | 13.2* |
| % change | -4 | +12 | +9 | +5 |
Ex-div: 12 Mar Payment: 17 Apr *Excludes special dividends of 8p in 2013 and 14p in 2014. | ||||
