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.