But commercial business slips back into underwriting loss

PPI complaints surge

Direct Line Group made a profit before tax of £507.5m in 2015, up 11% on the £456.8m it made in 2014.

The insurer’s combined operating ratio (COR) improved by one percentage point to 94% (2014: 95%).

This was despite an estimated £130m claims bill from the December storms which hit the home and commercial businesses. The company had previously said it was expecting a hit of between £110m and £140m from the storms.

The improved underwriting performance also came despite a 4.7% drop in reserve releases to £378.9m (2014: £397.6m).

Commercial loss

While most of Direct Line Group’s businesses improved their COR (see table below), the group’s commercial business, mainly made up of broker-only commercial insurer NIG, slipped back into underwriting loss, reporting a COR of 104.5% for 2015 (2014: 98.8%).

Direct Line Group said the deterioration in commercial performance was mainly caused by the storm claims.

The company also announced that it has lost the contract to write home and motor business for Sainsbury’s. This is in addition to the contract for Nationwide Building Society, which it lost to rival insurer RSA in December.

GWP growth

On a positive note, gross written premiums (GWP) from ongoing operations increased by 1.7% to £3.2bn (2014: £3.1bn).

The company’s motor insurance business, its biggest line, increased GWP by 4.8% to £1.41bn (2014: £1.34bn).

Direct Line Group chief executive Paul Geddes said: “Growth in own brands policies has contributed to overall premium growth and, alongside lower costs, has again allowed us to deliver an improved financial performance for the year.

“Operating profits are up and return on tangible equity is well ahead of our target, despite the bad weather at the end of the year. We’ve also continued to grow regular dividends and announced another special dividend.”

Direct Line Group 2015 COR breakdown

 2015 (%)2014 (%)change (points)
Motor 92.4 96.2 -3.8
Home 92.2 92.7 -0.5
Rescue and other personal lines  91.2 92 -0.8
Commercial 104.5 98.8 5.7
Total 94 95 -1