Direct Line – Lower Weather Costs Boost Profits
Direct Line Insurance Group PLC (LON:DLG)’s first half gross written premiums fell 1.5% year-on-year to £1.6bn. Of this, £1.1bn was for own-brand policies, down 2.4%. In force policies fell 1.1% to 14.5m, and own-brand policies rose 1.3% to 7.5m.
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Direct Line’s underlying operating profit rose from £264.9m to £369.9m and headline profit rose after tax rose from £192.6m to £203.8m. The difference largely reflects the purchase of the lease at the group’s Bromley offices, higher taxes and higher interest costs.
The board has declared an interim dividend of 7.6p per share, up 2.7% year-on-year.
The shares rose 2.6% in early trading.
Direct Line Delivers Positive Results
William Ryder, equity analyst at Hargreaves Lansdown:
“Direct Line’s results are pretty positive overall. Several key trends are normalising and the group’s been helped through the transition by relatively benign weather. Assuming the weather cooperates, Direct Line has upgraded its full year profitability guidance. However, medium term guidance is unchanged as the benefits of unlocking and nice weather can’t be relied upon forever.
Direct Line looks in a reasonable place to us, but general insurance is still a really tough market. Competition is always tough, especially on price comparison websites, and it’s difficult to find a long term edge. While Direct Line is doing a lot of the right things, like investing in technology to improve underwriting efficiency and control costs, competitors are doing the same. Direct Line can boast a strong brand, but whether that will be enough to drive sustained outperformance remains to be seen.”
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