# Direct Line Insurance Group PLC Strong set of results driven by resilient business model - Link: https://www.directorstalkinterviews.com/direct-line-insurance-group-plc-strong-set-of-results-driven-by-resilient-business-model/412768563 - Published: 2019-03-05T07:46:44+00:00 - Author: Charlotte Edwards **Direct Line Insurance Group PLC** (LON:DLG), today announced preliminary results for year ended 31 December 2018. > **PAUL GEDDES, CEO OF DIRECT LINE GROUP, COMMENTED** > “I am pleased to announce a strong set of results driven by our resilient business > model which performed well in a highly competitive market. We have added a million > direct own brand policies since 2014 showing that our customers value our brands, > propositions and service. > “Together, our diversified product and channel portfolio and disciplined approach > to underwriting have produced operating profits of £601.7 million, a combined > operating ratio of 91.7% and a 21.5% return on tangible equity. As a result, the > Board is able to announce a final dividend of 14.0p, an increase of 2.9% on last > year, and a special dividend of 8.3p. > “We enter a pivotal year of operational delivery in 2019. This includes starting > the roll-out of the latest generation IT systems for personal lines, following > the successful launch of our new systems for small businesses in 2018, which we > believe will deliver benefits for customers, colleagues and shareholders over > the coming years. This aims to provide the springboard from which to deliver a > step change in both capability and efficiency to help to grow the contribution > from current-year profitability. > “This gives us the confidence to continue to target a combined operating ratio > of 93% to 95% in 2019 and over the medium term. > “It gives me great pleasure to be handing over to Penny James as our next Chief > Executive Officer with effect from the AGM in May. Penny’s expertise as our Chief > Financial Officer and the breadth of experience she brings from previous roles > will be invaluable as she leads the business. I’ve worked closely with Penny for > over twelve months and have been impressed by her drive, energy and ambition for > the Group. I am pleased to be leaving the Group in such experienced and capable > hands.” Result Summary | | FY 2018 £m |  FY 2017^(1) £m | Change | | Gross written premium | 3,211.9 | 3,392.1 | (5.3%) | | Of which: direct own brands | 2,223.0 | 2,184.1 | 1.8% | | Operating profit | 601.7 | 642.8 | (6.4%) | | Combined operating ratio^(2) | 91.7% | 90.8% | (0.9pts) | | Profit before tax | 582.6 | 539.0 | 8.1% | | Return on tangible equity^(3) | 21.5% | 23.0% | (1.5pts) | | Dividend per share | – interim (pence)^(4) | 7.0 | 6.8 | 2.9% | | | – final (pence)^(4) | 14.0 | 13.6 | 2.9% | | | – special (pence) | 8.3 | 15.0 | (44.7%) | | | 31 Dec 2018 | 31 Dec 2017 | Change | | Solvency capital ratio post-dividends^(5) | 170% | 165% | 5pts | **Financial highlights** – Direct own brands premium up 1.8% compared to 2017, driven by growth across all segments. Total Group premium reduced by 5.3% year on year, as a result of the exit from Nationwide and Sainsbury’s6 Home partnerships. – Operating profit decreased by £41.1 million compared to 2017, primarily due to reductions in prior-year reserve releases and investment return as expected. Operating profit included a £55 million benefit from moving to an assumed 0% Ogden discount rate (2017: £49 million benefit relating to Ogden). – Demonstrating the value in the Group’s diversified product base, current-year underwriting profitability was stable despite a reversal of the benign motor conditions in 2017. The expense ratio reduced to 23.4%. – Profit before tax increased by 8.1% to £582.6 million (2017: £539.0 million) as the decrease in operating profit was more than offset by the non-repeat of finance costs in relation to the debt repurchased in 2017. – Final ordinary dividend of 14.0 pence per share, an increase of 2.9% on 2017. Special dividend of 8.3 pence per share. Total dividends of 29.3 pence per share.( 2017 total dividends of 35.4 pence per share including a special dividend of 15.0 pence per share). – Strong capital position with solvency capital ratio of 170% (after proposed dividends) reflecting prudence given current political and economic uncertainties. – Reiteration of financial targets for 2019 and over the medium term of achieving a combined operating ratio in the range of 93% to 95% normalised for weather. In 2019, targeting operating expenses below £700 million. Reiteration of ongoing target of achieving at least a 15% return on tangible equity. **Strategic and operational highlights** – Successful build and test of core personal lines systems; on track for first launch in Q2 2019. – Good progress on alternative pricing project, with innovative pricing capability; aiming to launch in Q2 2019 under new brand. – NIG successfully launched a new Motor Trade product using a new policy system and pricing engine. – Direct Line launched two further unique customer propositions, in Motor and Home. – Direct Line for Business launched cover for over 500 new trades in 2018 on its new digital platform alongside a national marketing campaign. – Green Flag’s five-year transformation plan kicked off with a Centre of Excellence to drive benefits through greater focus; Rescue Me app rebuilt in-house and re-launched– Apple App store score of 4.8 and used in over 35,000 claims. – Increased use of data in Motor to improve fraud prevention helping to drive 18% growth in price comparison website new business volumes. – Third in the Sunday Times list of 25 Best Big Companies7 to work for in 2019. 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