Half-year results for home and motor insurer Direct Line Group (DLG) trumpeted operational efficiencies in a highly competitive market. But the biggest boon to headline numbers was an absence of major weather events in the six months to June; the 2013-14 winter floods resulted in £64m of payouts in the same period last year. Reduced claims helped shave 6.7 percentage points off the combined ratio, which - together with cost cutting - boosted operating profits by £100m.
Headline figures were more subdued when it came to new business, with gross written premiums flat, though there was greater momentum in the second quarter, with gross premiums up 1.6 per cent and the motor division managing an impressive 5.4 per cent uplift to £357m.
Looking ahead, management expect full-year results to be less flattering, with the combined ratio forecast at between 92 and 94 per cent, assuming a normal amount of weather-based home claims. Similarly, the insurer has not moved its full-year expectations for a 15 per cent return on tangible equity, despite booking a 21 per cent return so far this year.
Analysts at Peel Hunt are forecasting adjusted pre-tax profit of £566m and EPS of 23.2p for the year to December 2015, compared to £457m and 23.8p last year.
DIRECT LINE (DLG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 371p | MARKET VALUE: | £5.1bn | |
| TOUCH: | 370.7-371p | 12-MONTH HIGH: | 376p | LOW: 258p |
| DIVIDEND YIELD: | 3.6%* | PE RATIO: | 13 | |
| NET ASSET VALUE: | 218p | COMBINED RATIO: | 89.4% | |
| Half-year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 1.55 | 211.7 | 106 | 4.4 |
| 2015 | 1.55 | 315.0 | 112 | 4.6 |
| % change | +0 | +49 | +5 | +5 |
Ex-div:13 Aug Payment:11 Sep *Excludes special dividends of 10p in 2014 and 27.5p in 2015. | ||||
