Direct Line (DLG) delivered a workmanlike performance for the year to December 2015, but there was one outstanding feature. Following the sale of its Italian and German operations, which realised a disposal gain of £167m, the insurance group declared another special dividend payment, taking the total payout for the year to 50.1p a share. That's a dividend yield of 12.2 per cent, and the shares rose 6 per cent on the news.
The modest increase in profits was generated by focusing on operational efficiency - total costs fell by 4.6 per cent - and disciplined underwriting, whereas gross written premiums were only just ahead. And in early 2017 the group will no longer be writing new business for J Sainsbury or Nationwide Building Society. In round terms, that will represent gross written premiums of £270m. Predictably, in the low interest rate environment, the investment return fell from £215.1m to £198.1m.
The rise in profits also came despite higher than expected weather-related claims of around £130m, which were offset by a larger than forecast £379m release from prior years' reserves. Overall, the group's combined ratio (of claims to premium income) improved from 95 per cent to 94 per cent.
Prior to these numbers, JPMorgan was forecasting 2016 pre-tax profits of £493m and adjusted EPS of 27p, rising to £565m and 31p in 2017.
| DIRECT LINE (DLG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 411p | MARKET VALUE: | £5.65bn | |
| TOUCH: | 411-411.2p | 12-MONTH HIGH: | 419p | LOW: 306p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 191p** | COMBINED RATIO: | 94% | |
| Year to 31 Dec | Gross premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 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* |
| 2015 | 3.15 | 508 | 198 | 13.8* |
| % change | +2 | +11 | -8 | +5 |
Ex-div: 10 Mar Payment: 19 May *Excludes special dividends of 8p in 2013, 14p in 2014 and 36.3p in 2015 **Includes intangible assets of £525m, or 38p a share. | ||||
