Insurer almost doubles profits as good weather and gains in motor bolster results
Direct Line Group has posted a profit after tax of £151.8m for the first half of 2013, up an impressive 83% from the £82.8m the company recorded over the same period last year.
The group’s combined operating ratio for H1 improved by 6.5 points to 94.6%, down from 101.1% last year, and the group recorded an underwriting profit of £95.9m, up from a loss of £20m over the first half of 2012.
The group attributed improvements to an absence of claims from major weather events in 2013. In comparison, DLG paid out approximately £90m of claims in the home insurance division over the first half of 2012, due to floods and freezing weather.
Direct Line Group chief executive Paul Geddes said: “These are a good set of results, even allowing for the benign weather in the period. Our transformation plan continues to deliver strong benefits to our home and motor businesses, and the total operating profit from our commercial and international businesses doubled compared with the first half of 2012.”
Total gross written premiums for H1 2013 decreased slightly, to £1,975.9m, down 4% from the £2,058.4m the company recorded last year.
In commercial, the insurer continues to run at a loss, recording a combined operating ratio of 105.3%, nonetheless an improvement on the 112.7% recorded for the first half of 2012.
The company says the improvement is primarily due to lower fire losses and reduced weather related claims, but that the division continues to experience significant reserve releases.
The combined operating ratio for personal lines motor improved by 6.6 points to 95.8%, down from 102.4% for H1 last year, while in home, the ratio fell to 86.3% in the first half of 2013, down from 103.4% in the same period in 2012.
The group attributed the gains in motor to improved pricing and better risk selection, while benign weather helped improvements in home.
The combined operating ratio for rescue and other personal lines of 92.2% was worse than the 75.7% the company recorded for the first half of 2012, but remained profit making. The good 2012 results were due to “positive one-offs relating to the run-off of legacy creditor business that were not expected to be repeated in 2013.”
Geddes added: “The UK motor market remained competitive and dynamic, with significant premium reductions and the introduction of legal reforms. We believe the full effect of the reforms will take time to materialise and their ultimate impact is difficult to predict as it will depend on a change in the behaviour of claimants and lawyers. We continued to price based upon our observed claims experience, which was favourable. In the second quarter, this has helped us to reduce premium rates overall about 3% year on year, contributing to a stabilisation of our policy count.
“Alongside our ongoing focus on costs, we continue to invest in our future. In the second quarter, Direct Line launched a telematics black box and smartphone app, DrivePlus, while the group announced plans to establish a law firm to enhance the affordable legal services accessible to our customers.”
Direct Line Group H1 2013 results (compared to H1 2012)
Profit after tax: £151.8m (£82.8m)
Underwriting result: £95.9m (£-20m)
Combined operating ratio: 94.6% (101.1%)