Direct Line profits get huge boost

Direct Line Group reported profits up by more than a half and a substantial improvement its key ratios for 2017, boosted by a strong motor and commercial performance.

Operating profit from ongoing operations rose to £611m from £404m in 2016, while the combined operating ratio improved to 91.8% from 97.7%. Adjusted for normal weather the COR was at the lower end of the group’s target range of 93%-95%.

“2017 is the fifth successive year in which we have delivered a strong financial performance,” said chief executive Paul Geddes.

“We have seen significant growth in our direct own brand policies as more customers respond positively to the many improvements we have made to the business.

“Looking to the future, this success enables us to continue investing in our technology and customer experience, supporting our plans to grow the business whilst improving efficiency. Together with our track record of delivery, these give us the confidence to continue to target a combined operating ratio of 93% to 95% over the medium term.”

Motor in-force policies rose 3.8% to 4.0 million and premiums grew 8.5% to £1.67bn.

Motor current-year loss ratio improved to 79.7% (2016: 84.1%) as the group priced to reflect the higher costs of the lower Ogden discount rate and benefitted from having renewed its reinsurance arrangements at the beginning of the year, before the Ogden discount rate change.

Motor also benefitted from a £49m reserve release related to the Ogden rate cut. In 2017 the group’s claims experience was better than expected.

In home, the group grew direct own brand in-force policies by 2.0% to 1.8 million and premiums by 1.2% to £410m. However, this was more than offset by the continuing fall in the partnership channel where in-force policies declined by 10.2% and premiums declined by 9.4%.

The change in distribution of home’s insurance business from partners to price comparison websites continued in 2017, increasing market price competitiveness and commoditisation.