The Direct Line Board has declared an interim dividend of 7.6 pence per share, an increase of 2.7% over 2020. The Group's strong capital generation during the first half, alongside broadly flat capital requirements, resulted in a solvency capital ratio as at 30 June 2021 of 195% after the interim dividend.
Other financial highlights include:
- Direct own brands in-force policies grew by 1.3% with growth across Commercial direct own brands, Green Flag and Home more than offsetting declines in Motor. Total policies reduced 1.1% as lockdown restrictions impacted partnership volumes in Travel.
- Gross written premium reduced by 1.5% as continued growth in Commercial, Home and Green Flag Rescue was offset by declines in Motor and Travel. During H1, they have focused on maintaining the quality of their Motor book resulting in some lost competitiveness and saw reduced risk mix from lower new car sales and fewer new drivers entering the market, with Motor gross written premium falling 6.2%. The reduction was lower in Q2, as pricing in the motor market stabilised and risk mix trends started to reverse. Overall, gross written premium increased by 1.6% in Q2 compared to Q2 2020, demonstrating the benefits of a diversified business model.
- Motor's current-year attritional loss ratio was relatively stable at 66.9% (H1 2020: 65.5%), driven by claims frequency remaining below normal levels together with lower premium. In July, claims frequency returned close to the level assumed in their pricing and consequently they expect their Motor current-year attritional loss ratio in H2 to return closer to underlying 2020 levels, which is estimated was around 79%.
- Operating profit increased by £105.0 million to £369.9 million benefiting broadly equally from benign weather conditions, strong prior-year reserve releases, the non-repeat of Covid-19 impacts on Travel claims and the reversal of investment losses. Progress continued on underlying profitability following a reduction in operating expenses and good current-year trading across the book.
- Profit before tax of £261.3 million was £24.9 million higher than H1 2020 following the increased operating profit partially offset by £91.5 million of restructuring and one-off costs which primarily relate to the Group's site strategy announced with the full year 2020 results.
- Proposed interim ordinary dividend of 7.6 pence per share, an increase of 2.7% over H1 2020. On or about 4 August 2021, they expect to commence the second £50 million tranche of the £100 million share buyback programme announced in March 2021. There was strong capital generation during H1 with a solvency ratio after dividends of 195%.
- They reiterate their medium-term target of achieving a combined operating ratio in the range of 93% to 95%, normalised for weather. For 2021, following lower than normal claims frequency in Motor and strong prior-year reserve releases, they expect a combined operating ratio in the range of 90% to 92%, normalised for weather.