Direct Line lifts divi, makes 'catchup' payment despite lower profit

Car insurer Direct Line lifted its interim dividend and declared a special “catchup” payout to make up for cancelling its 2019 disbursement, as it reported a fall in profits.

Pre-tax profit fell 9.5% to £236.4m after £30.4m of bad weather costs and £15m of one-off restructuring costs. Operating profit slipped 3.4% to £264.9m, the company said on Tuesday.

The interim dividend was increased to 7.4p a share from 7.2p a year ago. A special 14.4p-a-share bonus was declared.

Direct Line maintained estimates for coronavirus costs from the first quarter at £25m on travel insurance and £10m for business insurance.

In-force policies fell 1.7% year on year to 14.6m for the half-year, but the firm’s combined operating ratio improved by 2.2 percentage points to 90.3%, with anything below 100% indicating a profit.

"For 2020, we reiterate our target of a combined operating ratio of 93% to 95% normalised for weather and anticipate our restructuring costs of £60 million over 2019 and 2020 will be incurred in full as we strive to maximise the opportunity for operational efficiencies," the company said.