The impact of changes to the Ogden discount rate, used to calculate compensation to accident victims, may have reduced Direct Line’s (DLG) underwriting profits last year, but an improvement in attritional losses meant that result came in ahead of consensus expectations. The combined operating ratio – calculated as claims costs as a proportion of premium income – of 92.2 per cent was better than the 93.1 per cent anticipated by market analysts.
The current-year attritional loss ratio – those associated with events outside major catastrophes – declined by one percentage point to 71.6 per cent, helped by more benign weather conditions. However, total in-force gross premiums declined 1.9 per cent, as the insurer attempted to maintain underwriting discipline in favour of motor and home policy growth.
Solid capital generation and higher unrealised mark-to-market gains on the insurer's available-for-sale investments also boosted regulatory capital levels, spurring management to announce a share buyback of up to £150m, expected to complete before the end of July.
Analysts at broker Peel Hunt forecast adjusted net tangible assets of 140p a share at the December 2020 financial year-end, rising to 144p the same time the following year.
| DIRECT LINE (DLG) | ||||
| ORD PRICE: | 330.7p | MARKET VALUE: | £4.55bn | |
| TOUCH: | 330.5-330.7p | 12-MONTH HIGH: | 358p | LOW: 267p |
| DIVIDEND YIELD: | 6.5% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 217p* | COMBINED RATIO: | 92.2% | |
| Year to 31 Dec | Gross earned premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p)** |
| 2015 | 3.11 | 508 | 198 | 13.8 |
| 2016 | 3.20 | 353 | 172 | 14.6 |
| 2017 | 3.34 | 539 | 175 | 20.4 |
| 2018 | 3.31 | 581 | 155 | 21.0 |
| 2019 | 3.20 | 510 | 135 | 21.6 |
| % change | -3 | -12 | -13 | +3 |
| Ex-div: | 9 Apr | |||
| Payment: | 21 May | |||
| *Includes intangible assets of £703m, or 51p a share **Excludes special dividend of 8.3p in 2018 | ||||
