26th Feb 2014 08:47
LONDON (Alliance News) - Direct Line Insurance Group PLC Wednesday reported a rise in 2013 pretax profit, as it suffered fewer claims from major weather events over the course of the year, despite a surge in claims in the fourth quarter. The insurer also declared a special dividend.
Direct Line, which is still part-owned by Royal Bank of Scotland Group PLC, said pretax profit for 2013 rose by 70% to GBP423.9 million, with fourth-quarter pretax profit rising by 51% to GBP90.9 million. Analysts had been forecasting 2013 pretax profit of GBP367 million, according to consensus provided by the company.
The insurer's combined operating ratio - a measure of claims costs, commission and expenses compared to net earned premium generated - fell by 3.1 percentage points to 96.1%, ahead of its 98% target. It set its target for 2014 at 95-97%, as long as claims from major weather events are "normal".
But with the UK motor and home markets remaining very competitive, Direct Line said it will continue to prioritise higher margin business ahead of premium volumes.
On top of a 5% increase in its full-year dividend to 12.6 pence per share, Direct Line declared its second 4 pence special dividend of the year because of a "better than planned" performance in its run-off segment and the proceeds from the recently announced sale of Tracker, its stolen vehicle recovery business. The Tracker sale was made after the end of the reporting period, on February 5.
Direct Line said it has suffered more home-insurance claims relating to the severe flooding and storm damage in parts of the UK, particularly in parts of southern and south-west England.
"Adverse weather conditions experienced in the fourth quarter of 2013 have continued in the first quarter of 2014 resulting in further storm damage and severe flooding. While it is too early to assess with accuracy, the group's preliminary estimate for the cost of home claims from this event up to February 22, 2014 is in the range of GBP70 to GBP90 million. This compares to an expectation in an average year of GBP80 million of claims from major weather events," Direct Line said in a statement.
It said it has also had weather-related claims of about GBP20 million in its commercial division.
Direct Line shares were Wednesday quoted at 263.00 pence, up 2.00 pence, or 0.8%.
By Samuel Agini; [email protected]; @samuelagini
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Direct Line