Financial highlights
9.3% increase in operating profit from ongoing operations1 to £461.2 million with all five divisions profitable in 2012
Return to underwriting profit with a combined operating ratio2 of 99.2%, an improvement of 2.6 percentage points
Return on tangible equity3 of 11.5% and pro forma return on tangible equity3 of 13.4%
Final dividend of 8 pence per share, implying a pro forma annual payout of 55% of post-tax earnings from ongoing operations. From 2013, aim to raise the dividend annually in real terms
Strategic highlights
Good progress made towards achieving 15% return on tangible equity target
New and extended major partnership agreements and expanded presence of Churchill and Privilege to the four major UK price comparison websites
Delivered benefits through claims and pricing transformation plans contributing to a 3.1 percentage point improvement in the loss ratio to 67.1%
Announced plans relating to 70% of £100 million gross annual cost saving target with advanced plans for remainder of the proposed savings
Improved balance sheet efficiency by raising £500 million of long-term subordinated debt and paying £1 billion of dividends to RBS Group pre-IPO. Capital position remains strong with risk based capital coverage of 145% post-final dividend
Paul Geddes, CEO of Direct Line Group, commented
"We have made good progress since the beginning of our transformation plan and our 2012 performance is further evidence that we have made the right strategic decisions and are executing our plans well, with an increase in operating profit from ongoing operations of 9.3% to £461.2 million.
"However, there is no room for complacency as we face a competitive market, particularly in UK motor, where there are also expected to be significant legal reforms. Our transformation plans target further benefits and we have made substantial progress on our target to achieve £100 million of gross annual cost savings in 2014. We will maintain our firm focus on value and underwriting discipline, consistent with achieving our 98% combined operating ratio target for 2013."
