Motor drives DLG growth
Direct Line Group has reported strong growth in premiums, driven by momentum in motor.
It has reported that its motor division grew in-force polices 3.8% in the year to four million and premiums grew 8.5% to £1,670.4m.
This growth was driven by the Direct Line brand, once again demonstrating the success of the Group’s strategic focus on being a great retailer and the power of the direct model in a highly competitive switching market.
Motor current-year loss ratio improved to 79.7% as the group priced to reflect the higher costs of the lower Ogden discount rate and benefitted from having renewed its reinsurance arrangements at the beginning of the year, before the Ogden discount rate change.
Motor also benefitted from a £49m reserve release after a detailed review in the first half of the year of the group’s Ogden provision within case reserves.
Other prior-year releases were lower year on year, albeit large bodily injury claims developed favourably. In addition, in 2017 the group’s claims experience was better than expected.
The Motor excess of loss reinsurance programme renewed on 1 January 2018 at a somewhat increased cost reflecting the reduction in the Ogden discount rate and at a level within the group’s plans and risk appetite.
The Group renewed all layers, but retained 10% of the first risk layer (£2m excess £1m). This was a successful renewal in an uncertain climate reflecting the group’s historically strong performance and financial position.
Paul Geddes, CEO of Direct Line Group, said, ‘2017 is the fifth successive year in which we have delivered a strong financial performance. We have seen significant growth in our direct own brand policies as more customers respond positively to the many improvements we have made to the business.
‘This success has resulted in our proposing an increase in the final dividend by 40.2% to 13.6 pence, bringing the total ordinary dividends to 20.4 pence, and declaring a special dividend of 15.0 pence. This amounts to a cash return of £486m to shareholders for 2017.
‘At half year we refreshed our medium term targets and today’s results show we’ve been delivering on our management priorities to maintain revenue growth, reduce expense and commission ratios and deliver underwriting and pricing excellence.
‘Looking to the future, this success enables us to continue investing in our technology and customer experience, supporting our plans to grow the business whilst improving efficiency. Together with our track record of delivery, these give us the confidence to continue to target a combined operating ratio of 93% to 95% over the medium term.’