4th Aug 2015 06:33
LONDON (Alliance News) - Direct Line Insurance Group PLC on Tuesday improved its guidance for a key measure of underwriting profitability in 2015, as it recorded higher-than-expected reserve releases from prior years in the first half and reported improved profit figures.
The motor and home insurer said it expects its combined operating ratio for 2015 to be in the range of 92% to 94%, an improvement on the previous guidance of 94% to 96%, assuming a "normal annual level" of home claims from major weather events of about GBP80 million.
Its combined operating ratio from ongoing operations, which indicates profitability when it is lower than 100% and loss when higher than that, was 89.4% in the six months to the end of June, compared with 96.1% in the corresponding half of the prior year. The improvement was due to reduced claims from weather and an increase in prior-year reserve releases to GBP215.1 million from GBP212.5 million in the same period last year.
The combined operating ratio performance helped the FTSE 100 insurer to report that operating profit from ongoing operations increased to GBP335.8 million in the half from GBP235.7 million in the same period last year.
Pretax profit from continuing operations increased to GBP315.0 million in the half, compared with GBP211.7 million in the prior year period.
"Our first half performance shows the benefits of the many improvements that we continue to make to our business. Customers have reacted positively to the refreshed propositions for Direct Line and Churchill, as well as better customer service. This has led to increased retention rates and, in particular for the Direct Line brand, improved Net Promoter Scores. Together, this has helped us to hold our gross written premium flat in competitive markets," Chief Executive Paul Geddes said in a statement.
"At the same time, our efforts on efficiency have improved our expense ratio, while improvements in claims and pricing continue to support strong reserve releases from previous years and a good loss ratio so far this year. Action on our investment portfolio has contributed to improving our yield, despite the low interest rate environment," Geddes said.
Gross written premium from ongoing operations increased by 0.4% to GBP1.55 billion.
Direct Line increased its interim dividend by 4.5% to 4.6 pence per share.
By Samuel Agini; [email protected]; @samuelagini
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