Disposal, investment in brands pays off for Direct Line

Direct Line Group reported on a year of success on Tuesday, with the 2015 disposal of its international business and ongoing investment in its own brands contributing to a solid calendar year of growth.

The FTSE 100 insurer reported gross written premiums from ongoing operations as rising 1.7% to £3.15bn, with 4.8% growth in its Motor division for the year, and 7.1% for the fourth quarter. Policies in force across its Motor and Home own brands were up 1.4%.

Direct Line's operating profit from ongoing operations increased to £520.7m for the year, from £506m in 2014. The combined operationg ratio of 94% for the period was an improvment of one percentage point.

The company said its return on tangible equity for 2015 was 18.5%, compares with 16.8% in 2014. Its profit before tax from continuing operations increased to £507.5m from £456.8m.

Direct Line's board said the results benefited from disciplined underwriting, prior-year reserve releases from ongoing operations of £378.9m, which were higher than expected, together with lower costs, partially offset by higher claims from major weather events and lower volumes.

The board recommended a 4.5% increase to the final dividend, to 9.2p per share, and an additional special dividend of 8.8p per share. Total dividends for the year were 50.1p per share, which included the special interim dividend of 27.5p per share following the sale of the International division.

"Our customers are benefiting from the many improvements we've been making, including new propositions and enhanced customer service. This has resulted in more customers coming to our brands and renewing with us," said Direct Line CEO Paul Geddes.

Geddes said growth in the firm's own brands policies contributed to overall premium growth and, alongside lower costs, allowed the business to deliver an improved financial performance for the year.

He pointed to the fact operating profits were up and return on tangible equity was well ahead of target, despite the bad weather at the end of the year. The company had also continued to grow regular dividends and announced another special dividend, Geddes explained.

"To meet our ambition of being at the forefront of the fast-moving, ever-changing insurance landscape, we are focused on building on this momentum by investing in our people, brands and systems," he concluded.