Direct Line (DLG) achieved a 10 per cent rise in motoring gross written premiums in the six months to June 2017, with its eponymous insurance brand leading the way, and shareholders received a surprise rebasing of the ordinary dividend. A half-year dividend of 6.8p a share will represent one-third of the total payout, which implies that the forward yield on the full-year dividend is 5.2 per cent.
With higher premium income and reduced expense and commission ratios, the company achieved an annualised return on tangible equity of 26.1 per cent, up from 23.1 per cent a year earlier. And after taking into account the half-year dividend payment, the Solvency II capital coverage ratio was 173 per cent, at the top end of the 140-180 per cent target range. As the company has indicated that a figure around the middle of the range would be appropriate, this paves the way for the return of special dividends.
Bodily injury claims were lower than expected, while the lowering of the Ogden discount rate used to calculate compensation is not expected to increase claims costs by as much as first thought. This has resulted in a reserve release of £49m, contributing to total prior-year reserve releases of £175m in the reported period, up from £134m in last year's first half.
Analysts at Peel Hunt are forecasting adjusted pre-tax profit for the year to December 2017 of £480m and EPS of 27.5p (from £348m and 20.3p in 2016).
| DIRECT LINE (DLG) | ||||
| ORD PRICE: | 396p | MARKET VALUE: | £5.45bn | |
| TOUCH: | 396-396.2p | 12-MONTH HIGH: | 403p | LOW: 328p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 193p* | COMBINED RATIO: | 88.9% | |
| Half-year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
| 2016 | 1.58 | 299 | 92.7 | 4.9 |
| 2017 | 1.65 | 341 | 93.0 | 6.8 |
| % change | +4 | +14 | - | +39 |
| Ex-div: | 10 Aug | |||
| Payment: | 8 Sep | |||
| *Includes intangible assets of £517m, or 38p a share | ||||
