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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Natwest Group Plc | LSE:NWG | London | Ordinary Share | GB00BM8PJY71 | ORD 107.69P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.80 | 0.59% | 305.00 | 304.30 | 304.50 | 307.20 | 304.00 | 304.90 | 12,445,640 | 16:35:22 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Commercial Banks, Nec | 14.77B | 4.64B | 0.5271 | 5.77 | 26.77B |
From May 2019 to May 2024
TIDM12QN TIDMRBS
RNS Number : 3112L
Direct Line Insurance Group PLC
03 September 2012
Interim results for Direct Line Insurance Group plc
For the six months ended 30 June 2012
Financial highlights
-- Operating profit from ongoing operations(1) of GBP224.2 million up 7% compared with the first half of 2011 (1H 2011: GBP209.5 million) with adverse weather in 1H 2012 offset by higher releases from prior year claims reserves
-- In-force policies of 20.1 million, up 4% during 1H 2012 (FY 2011: 19.4 million) with Motor and Home stable and growth in Commercial and Rescue and other personal lines
-- Combined operating ratio(2) for ongoing operations of 101.1%, an improvement against 1H 2011 (102.5%) driven by a significant improvement in the loss ratio
-- Profit before tax of GBP106.5 million (1H 2011: GBP187.5 million) reflects restructuring and other one-off costs relating to the separation from RBS Group
-- Earnings per share (basic) of 5.5 pence (1H 2011: 9.5 pence, FY 2011: 16.6 pence) with adjusted earnings per share(3) of 10.8 pence (1H 2011: 10.2 pence, FY 2011: 20.5 pence)
-- Annualised return on tangible equity(4) ("RoTE") from ongoing operations of 10.2% compared with 10.0% in 2011. Had the capital actions taken by the Company in 1H 2012 (GBP800 million dividends and GBP500 million subordinated debt issuance) occurred on 1 January 2012, annualised RoTE from ongoing operations for 1H 2012 would have been 12.1%(5)
-- Total dividends of GBP800m paid to RBS Group during 1H 2012 with an additional GBP200 million approved and paid on 3 September 2012
-- Net asset value of GBP2.9 billion (FY 2011: GBP3.6 billion) and tangible net asset value of GBP2.5 billion (FY 2011: GBP3.2 billion) equal to 194 pence and 168 pence per share respectively
Strategic highlights
-- Renewed or extended long-term distribution deals with key partners in 1H 2012 - Nationwide Building Society, and Sainsbury's Bank - and expected to reach agreement with RBS Group for RBS and NatWest in September. In addition, Churchill and Privilege launched on comparethemarket.com in July 2012
-- Further progress in rebuilding competitive advantage in pricing and claims management with benefits starting to be realised
-- Initiatives launched to target GBP100 million of gross annual cost savings(6) by the end of 2014
-- Successful inaugural capital markets transaction with GBP500 million of Tier 2 subordinated debt issued in April 2012
-- Separation from RBS Group substantially complete with independent corporate functions and governance from 1 July 2012
-- Direct Line Group continues to deliver its transformation plan and has set a target of a 15% RoTE
Paul Geddes, CEO of Direct Line Group, commented
"This has been an important period for Direct Line Group. We are now beginning to see the benefits of our transformation plan in pricing, risk, claims as well as capital management actions and operational efficiency. Other than some transitional services provided by RBS Group, we have essentially achieved the goal of operating as a standalone insurance company. This means we have full ownership of our cost base and have launched initiatives to target GBP100 million of gross annual cost savings across the business. Real progress has been made during the first half of the year towards achieving our target of a 15% RoTE."
See page 2 for notes
For further information, please contact:
Neil Manser Rob Bailhache Head of Investor Relations Director of Communications Tel: 020 8285 3134 Tel: 020 8313 8420
Notes:
(1) Ongoing operations
Ongoing operations include the Group's ongoing segments: Motor, Home, Rescue and other personal lines, Commercial and International. It excludes Run-off and Restructuring and other one-off costs.
(2) Combined operating ratio
Combined operating ratio is the sum of loss, commission and expense ratios (all expressed as a percentage of net earned premium). The ratio excludes instalment income and other operating income (as well as investment income).
(3) Adjusted earnings per share
Adjusted to exclude Run-off operations and Restructuring and other one-off costs and based on weighted average number of ordinary shares in issue during the period (using UK standard tax rate).
(4) Return on tangible equity (RoTE)
Adjusted to exclude Run-off operations and Restructuring and other one-off costs and based on average tangible invested equity (adjusted for the weighted average value of dividend paid in the period) (using UK standard tax rate).
(5) No adjustment for the weighted average value of dividend paid in the period as assumes all dividends paid on 1 January 2012.
(6) GBP100 million gross cost savings
Cost savings expected to be recognised in operating costs for ongoing operations and claims handling expenses by the end of 2014.
Forward-looking statements
Certain information contained in this announcement including any information as to the Group's strategy, plans or future financial or operating performance constitute "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "projects", "expects", "intends", "aims", "plans", "predicts", "may", "will", "seeks" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Directors concerning, amongst other things: the Group's results of operations, financial condition, prospects, growth, strategies and the industry in which the Group operates.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future or are beyond the Group's control. Forward-looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and the development of the business sector in which the Group operates may differ materially from those suggested by the forward-looking statements contained in this announcement. In addition, even if the Group's actual results of operations, financial condition, and the development of the business sector in which the Group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods.
The forward-looking statements contained in this announcement speak only as of the date of this announcement. The Group expressly disclaims any obligations or undertaking to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable law, regulation or accounting standard, or the Listing Rules or the Disclosure and Transparency Rules of the FSA.
Overview
Direct Line Group made further progress in the first half of 2012 in relation to both its strategic plan and financial performance.
Business development
In the first half of 2012, Direct Line Group (the "Group") continued to make significant progress in delivering its strategic aim to be Britain's best retail general insurer by rebuilding competitive advantage in the areas of distribution, pricing, claims management and operational efficiency.
The Group has renewed or expanded partnership agreements that represent a substantial portion of its portfolio, especially in its home segment. The existing contract with Nationwide Building Society has been extended to 2015, and building on this relationship, the Group began to handle all of the post sales service and claims management for Nationwide's home insurance customers. The agreement with Sainsbury's Bank to provide motor insurance to its customers is now in its second year and was extended to provide home insurance.
Furthermore, Direct Line Group expects to reach agreement with RBS Group in September for an arm's length, five year distribution agreement for the continued provision of general insurance products post divestment.
Following the launch on comparethemarket.com, Churchill and Privilege motor insurance products are now available on all four major price comparison websites in the UK. This move reinforces Direct Line Group's multi-channel distribution strategy. Home products are expected to follow later in the year.
Execution of the Group's pricing and claims transformation plans continues with further developments in its pricing capability, embedding peril level technical pricing models for Home and developing price optimisation for Motor. Within claims management, and following pilot testing, a number of claims initiatives were implemented and the benefits are beginning to emerge. Claims inflation in small bodily injury claims has abated and together with lower litigation rates has contributed to higher reserve releases from estimates for prior year claims.
In line with the strategic business transformation plan, the Group has launched further initiatives to target GBP100 million of gross annual cost by the end of 2014, with one-off restructuring costs expected to be c. GBP100 million. The initiatives include reducing administration costs in central functions and improving marketing efficiency.
The Group also made further progress in optimising its capital structure during the first six months of 2012. On 27 April 2012, GBP500 million of Tier 2 subordinated debt was raised following publication of inaugural credit ratings from both Standard and Poor's and Moody's Investor Services. Direct Line Group's principal underwriter, U K Insurance Limited, is rated A by Standard and Poor's and A2 by Moody's Investor Services; both ratings carry a stable outlook.
Since 1 July 2012, the Group has been operating on a substantially standalone basis from RBS Group with independent corporate functions and governance following the completion of a number of separation initiatives. During 2012 to date, these included: launching a new corporate identity, confirming further senior management appointments, appointing a new independent Chairman , agreeing and issuing new terms and conditions for staff, implementing independent HR systems and making progress on an arm's length transitional services agreement with RBS Group for residual services.
Over the last 18 months a number of regulatory reviews and initiatives have been announced by the UK Government, the Ministry of Justice, the Office of Fair Trading and others in relation to the motor insurance industry. Direct Line Group is actively engaged with the major stakeholders, and supports the introduction of a coherent set of reforms.
Overall, Direct Line Group continues to deliver on its transformation plan and remains focussed on delivering its target of a 15% RoTE.
Financial summary
Hot Features
Premium
Six months ended Year Ended
30 Jun 30 Jun 31 Dec
2012 2011 2011
GBP million GBP million GBP million
In-force policies (ongoing operations,
millions) 20.1 20.0 19.4
Gross written premium 2,058.4 2, 093.2 4,124.9
Net earned premium 1,860.8 1,943.7 3,890.9
Underwriting result (20.0) (50.2) (72.3)
Other income 98.8 134.2 255.5
Investment return 145.4 125.5 238.7
---------------------------------------- ------------- ------------- -------------
Operating profit from ongoing
operations 224.2 209.5 421.9
---------------------------------------- ------------- ------------- -------------
Run-off segment 1.2 (12.4) (23.9)
Restructuring and other one-off
costs (108.7) (9.8) (54.0)
---------------------------------------- ------------- ------------- -------------
Operating result 116.7 187.3 344.0
---------------------------------------- ------------- ------------- -------------
Finance and other (10.2) 0.2 (1.1)
---------------------------------------- ------------- ------------- -------------
Profit before tax 106.5 187.5 342.9
Tax (23.7) (45.3) (93.9)
---------------------------------------- ------------- ------------- -------------
Profit for the period 82.8 142.2 249.0
---------------------------------------- ------------- ------------- -------------
Of which ongoing operations(1) 161.6 153.0 308.1
---------------------------------------- ------------- ------------- -------------
Combined operating ratio 101.1% 102.5% 101.8%
RoTE (annualised) 10.2% n/a 10.0%
In-force policies and gross written premium
As at As at
In-force policies (million) 30 Jun 30 Jun 31 Dec
2012 2011 2011
Motor 4.2 4.4 4.1
Home 4.3 4.4 4.3
Rescue and other personal lines 9.7 9.5 9.2
Commercial 0.5 0.4 0.4
International 1.4 1.3 1.4
--------------------------------- ------- ------- -------
Total ongoing operations 20.1 20.0 19.4
In-force policies (IFPs) for ongoing operations increased 4% during the first half of 2012 to 20.1 million and were broadly stable compared to a year ago (FY 2011: 19.4 million and 1H 2011 20.0 million). The increase related mainly to Rescue and other personal lines and arose from an increase in travel policies from packaged bank accounts. Motor and Home IFPs were stable during the period across both own brands and partnerships.
The Commercial business continued to grow IFPs through Direct Line for Business which focuses on micro and small businesses. After a period of strong growth in 2011, International consolidated its position at 1.4 million IFPs.
(1) Adjusted to exclude Run-off operations and Restructuring and other one-off costs (using UK standard tax rate)
Six months ended Year Ended
Gross written premium (GBP million) 30 Jun 30 Jun 31 Dec
2012 2011 2011
Motor 842.1 866.0 1,734.8
Home 484.4 500.8 1,031.3
Rescue and other personal lines 199.3 192.5 350.2
Commercial 229.8 231.9 438.6
International 302.8 302.0 570.0
------------------------------------- --------- -------- -----------
Total ongoing operations 2,058.4 2,093.2 4,124.9
Gross written premiums (GWP) of GBP2,058 million were broadly stable with 1H 2011 (GBP2,093 million) reflecting the trends in IFPs. Motor market rates were broadly stable in 1H 2012.
Underwriting results
Six months ended Year Ended
Key ratios (ongoing operations) 30 Jun 30 Jun 31 Dec
(%) 2012 2011 2011
Loss ratio 67.3 74.2 70.2
Commission ratio 8.4 7.7 10.1
Expense ratio 25.4 20.6 21.5
--------------------------------- --------- -------- -----------
Combined operating ratio 101.1 102.5 101.8
The combined operating ratio from ongoing operations of 101.1% improved over both 1H 2011 and full year 2011. This was attributable to a significant improvement in the loss ratio which more than offset an increase in the expense ratio.
The improvement in the loss ratio was despite approximately GBP90 million of weather related claims in the Home segment following the wettest April to June period since meteorological records began. Home weather related claims were approximately GBP50 million more in the UK than expected for the first half of 2012 (1H 2011: approximately GBP20 million better than expected).
Six months ended Year Ended
Movements in prior year claims 30 Jun 30 Jun 31 Dec
reserves 2012 2011 2011
(GBP million)
Release / (increase)
Motor 108.5 54.5 138.2
Home 29.2 (55.8) (48.5)
Rescue and other personal lines 12.7 24.7 52.8
Commercial 58.5 31.7 38.4
International 19.5 14.4 7.9
Total ongoing operations 228.4 69.5 188.8
Releases from prior year claims reserves contributed GBP228 million and represented 12.3 percentage points (pts) of net earned premium (1H 2011: GBP70 million and 3.6pts; FY 2011: GBP189 million and 4.9pts). Reserve releases in 1H 2012 arose from all segments particularly from Motor and Commercial. Releases from Motor were partly attributable to benefits that are starting to arise from the Group's claims transformation programme. Prior year reserve increases in Home in 2011 primarily reflected late reported claims on the 2010 weather events, some of which were released in 1H 2012.
The higher expense ratio in 1H 2012 reflected a temporary increase in central overhead charges relating to building separate corporate functions, higher management recharges from RBS Group of GBP16 million and accelerated spend in relation to marketing activities. The effect of lower net earned premium added around 1 percentage point to the ratio for ongoing operations. The Group expects to make progress in reducing its expense ratio in the second half of 2012.
Six months ended Year Ended
Combined operating ratio (%) 30 Jun 30 Jun 31 Dec
2012 2011 2011
Motor 102.4 107.0 105.6
Home 103.4 98.6 95.1
Rescue and other personal lines 75.7 82.4 86.3
Commercial 112.7 103.7 112.3
International 103.0 112.5 107.6
--------------------------------- --------- -------- -----------
Total ongoing operations 101.1 102.5 101.8
On a segmental basis the combined operating ratio improved in Motor, Rescue and other personal lines and International compared with the first six months of 2011 and full year 2011. In Motor the improvement reflects management actions taken to improve the risk profile of the book as well as benefits flowing from the Group's claims transformation programme. Given the stage of this programme, these benefits are primarily achieved through releases from prior year claims reserves.
The Home combined operating ratio was adversely affected by the increase in weather related claims as noted above. Commercial benefited from significant reserve releases but was affected by a number of one-off large claims in its property book. The International combined operating ratio benefited from significant reserve releases in 1H 2012. Rescue and other personal lines demonstrated an underlying improvement in the 1H 2012 loss ratio compared with 1H 2011.
Operating result
Six months ended Year Ended
Operating result (GBP million) 30 Jun 30 Jun 31 Dec
2012 2011 2011
Underwriting result (20.0) (50.2) (72.3)
Other income 98.8 134.2 255.5
Investment return 145.4 125.5 238.7
-------------------------------- --------- -------- -----------
Operating result 224.2 209.5 421.9
The operating result for ongoing operations of GBP224.2 million was a 7.0% increase on 1H 2011 (GBP209.5 million). The underwriting result and investment return both improved but this was partially offset by a lower contribution from other income.
Other income of GBP98.8 million fell 26% due to the cessation of fee income relating to managing certain elements of the run-off of the Tesco Personal Finance (TPF) business and lower instalment income reflecting lower IFPs in Motor period on period and promotional campaigns.
Six months Year
ended ended
30 Jun 31 Dec
2012 2011
Investment yields
Investment income (1) 2.1% 2.3%
Investment return (2) 3.4% 2.7%
Investment return of GBP145.4 million was GBP19.9 million (16%) higher than 1H 2011 and reflects higher realised gains arising primarily from portfolio restructuring. The income yield on the total portfolio (including run-off) was 2.1% in 1H 2012 (FY 2011: 2.3%) reflecting a higher proportion of short term deposits. The investment assets supporting the TPF liabilities are predominantly held in cash.
As at As at
30 Jun 31 Dec
2012 2011
Financial investments and cash
(GBP million)
Government bonds 2,947.1 3,481.2
Corporate bonds 3,916.4 3,843.2
Mortgage backed securities 169.3 283.5
Other investment funds - 382.8
-------------------------------------- --------- ---------
Total available-for-sale investments 7,032.8 7,990.7
Loans and receivables 483.0 1,489.6
Total financial investments 7,515.8 9,480.3
Cash and cash equivalents 2,565.6 1,379.8
-------------------------------------- --------- ---------
Total financial investments and
cash 10,081.4 10,860.1
At 30 June 2012, exposure to peripheral Eurozone bonds was GBP51 million, less than 1% of the portfolio, comprising non-sovereign debt issued in Ireland, Italy and Spain. During the first half of 2012 the Group increased its investment in corporate bonds by investing approximately GBP400 million in US dollar corporate credit, bringing the portfolio closer to its maximum allocation of 60% toward corporate bonds. This is managed through leading global third party asset managers and is hedged back to Sterling. The Group believes that accessing the US markets should significantly increase the breadth of its investible corporate bond market and reduce its concentration risk.
Run-off and Restructuring and other one-off costs
The Run-off segment, which includes the exited personal lines broker and TPF businesses, made a profit of GBP1.2 million compared with a loss of GBP12.4 million in 1H 2011. Currently the majority of the results of operations from the TPF business are attributable to TPF through commission payments, and favourable run-off has resulted in a higher commission ratio in the period.
Restructuring and other one-off costs of GBP109 million primarily relate to activities associated with separation and divestment from RBS Group. It is currently expected that for the whole of 2012 costs will be approximately GBP170 million before any charges associated with the recently announced cost saving initiatives.
Finance and other costs
Finance costs increased to GBP10.2 million primarily reflecting interest associated with the GBP500 million Tier 2 subordinated debt issued in April 2012.
(1) Investment income excludes net gains and is shown on an annualised basis.
(2) Investment return includes net gains and is shown on an annualised basis.
Profit, and return on equity
Overall pre-tax profit for 1H 2012 was GBP106.5 million with profit after tax of GBP82.8 million (1H 2011: GBP187.5 million, GBP142.2 million; FY 2011: GBP342.9 million, GBP249.0 million respectively).
Annualised return on tangible equity for the period for ongoing operations was 10.2% (FY 2011: 10.0%). Had the capital actions taken by the Company in 1H 2012 (GBP800 million dividends and GBP500 million subordinated debt issuance) occurred on 1 January 2012, annualised RoTE from ongoing operations for 1H 2012 would have been 12.1%.
Earnings per share
Earnings per share were 5.5 pence (1H 2011: 9.5 pence; FY 2011: 16.6 pence). Adjusted earnings per share(3) for 1H 2012 were 10.8 pence, an increase of 5.9% on 1H 2011 ((1H 2011: 10.2 pence; FY 2011: 20.5 pence).
Dividends
Total dividends of GBP800 million were paid to RBS Group during 1H 2012 with an additional GBP200 million approved and paid by the Board on 3 September 2012.
Net asset value
The net asset value at 30 June 2012 was GBP2,905.7 million (31 December 2011: GBP3,612.8 million) with tangible net asset value of GBP2,514.8 million (31 December 2011: GBP3,247.0 million). This equates to 193.7 pence and 167.7 pence per share respectively.
Capital position
Direct Line Group continues to be well capitalised, with an estimated Insurance Groups Directive (IGD) coverage ratio of 306% at 30 June 2012 (31 December 2011: 319%).
(3) Adjusted to exclude Run-off operations and Restructuring and other one-off costs, and based on weighted average number of ordinary shares in issue during the period (using UK standard tax rate).
DIRECT LINE INSURANCE GROUP PLC
COMBINED INCOME STATEMENT
Six months ended Year ended
30 June 31 December
---------------------------- -------------
2012 2011 2011
Notes GBP Million GBP Million GBP Million
------ ------------- ------------- -------------
(reviewed) (unaudited) (audited)
Gross earned premium 2,034.7 2,367.9 4,522.9
Reinsurance premium ceded (164.5) (127.5) (269.9)
------------- ------------- -------------
Net earned premium 1,870.2 2,240.4 4,253.0
Investment return 3 176.0 146.9 281.9
Instalment income 62.1 76.7 145.0
Other operating income 4 37.0 46.3 95.1
------------- ------------- -------------
Total income 2,145.3 2,510.3 4,775.0
------------- ------------- -------------
Insurance claims (1,509.1) (1,769.1) (3,160.6)
Insurance claims recoverable from reinsurers 285.0 68.7 193.1
------------- ------------- -------------
Net insurance claims (1,224.1) (1,700.4) (2,967.5)
------------- ------------- -------------
Commission expenses (222.0) (184.3) (518.9)
Other operating expenses (582.5) (438.3) (944.6)
------------- ------------- -------------
Total expenses (804.5) (622.6) (1,463.5)
------------- ------------- -------------
Operating profit 116.7 187.3 344.0
Finance costs (10.2) (1.4) (2.7)
Gain on disposal of subsidiary - 1.6 1.6
------------- ------------- -------------
Profit before tax 106.5 187.5 342.9
Tax charge (23.7) (45.3) (93.9)
------------- ------------- -------------
Profit for the period attributable to Owners of the Company 82.8 142.2 249.0
============= ============= =============
Earnings per share
* basic (pence) 5 5.5 9.5 16.6
DIRECT LINE INSURANCE GROUP PLC
COMBINED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 31 December
---------------------------- -------------
2012 2011 2011
GBP Million GBP Million GBP Million
------------- ------------- -------------
(reviewed) (unaudited) (audited)
Profit for the period 82.8 142.2 249.0
Other comprehensive (loss)/income
Actuarial loss on defined benefit plan (3.0) - (0.6)
Exchange differences on translation of
foreign operations (1.5) 6.0 (3.5)
Fair value gain on available-for-sale
investments 62.5 71.4 183.8
Less: realised net gains on available-for-sale
investments (64.7) (21.4) (52.3)
------------- ------------- -------------
(6.7) 56.0 127.4
------------- ------------- -------------
Tax credit/(charge) on other comprehensive
income 0.8 (12.8) (36.8)
------------- ------------- -------------
Other comprehensive (loss)/income for
the period (5.9) 43.2 90.6
------------- ------------- -------------
Total comprehensive income for the period
attributable to Owners of the Company 76.9 185.4 339.6
============= ============= =============
DIRECT LINE INSURANCE GROUP PLC
COMBINED BALANCE SHEET
As at As at
30 June 31 December
------------ ------------
2012 2011
GBP million GBP million
------------ ------------
(reviewed) (audited)
ASSETS
Goodwill and other intangible assets 390.9 365.8
Property, plant and equipment 85.3 46.9
Investment property - 69.5
Reinsurance assets 964.2 741.6
Deferred tax assets 31.0 26.9
Current tax assets 4.4 -
Deferred acquisition costs 337.1 310.5
Insurance and other receivables 1,233.8 1,252.9
Prepayments, accrued income and other assets 61.6 92.2
Derivative financial instruments 17.1 0.1
Retirement benefit asset 2.5 2.6
Financial investments 6 7,515.8 9,480.3
Cash and cash equivalents 7 2,565.6 1,379.8
Assets held-for-sale 1.0 1.0
------------ ------------
Total assets 13,210.3 13,770.1
============ ============
EQUITY
Invested capital 1,500.0 1,500.0
Other reserves 613.6 575.2
Retained earnings 792.1 1,537.6
------------ ------------
Total invested equity 2,905.7 3,612.8
Non-controlling interest 258.5 258.5
------------ ------------
Total equity 3,164.2 3,871.3
------------ ------------
LIABILITIES
Subordinated liabilities 516.1 -
Insurance liabilities 8 6,514.6 6,509.0
Unearned premium reserve 1,946.7 1,931.6
Borrowings 83.7 317.9
Derivative financial instruments 1.6 -
Trade and other payables including insurance payables 737.2 910.2
Deferred tax liabilities 15.1 12.1
Current tax liabilities 231.1 218.0
------------ ------------
Total liabilities 10,046.1 9,898.8
------------ ------------
Total equity and liabilities 13,210.3 13,770.1
============ ============
DIRECT LINE INSURANCE GROUP PLC
COMBINED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2011 and the six months ended 30 June 2012
Total
Other Retained invested Non- Total
Invested reserves earnings equity controlling equity
capital GBP GBP GBP interest GBP
GBP Million Million Million Million GBP Million Million
------------ ----------- ----------- ----------- --------------- -----------
Balance as at 1 January
2011 1,500.0 590.4 1,133.2 3,223.6 258.5 3,482.1
Profit for the year - - 249.0 249.0 - 249.0
Other comprehensive income - 91.2 (0.6) 90.6 - 90.6
Transfers (from)/to non
distributable reserves - (167.3) 167.3 - - -
Movement in demerger
reserve - 55.9 - 55.9 - 55.9
Movement in net assets of
Direct Line Versicherung
AG - 5.0 (11.3) (6.3) - (6.3)
----------- ----------- ----------- ----------- ----------- ---------------
Balance as at 31 December
2011 (audited) 1,500.0 575.2 1,537.6 3,612.8 258.5 3,871.3
Profit for the period - - 82.8 82.8 - 82.8
Other comprehensive income - (3.5) (2.4) (5.9) - (5.9)
Dividends - - (800.0) (800.0) - (800.0)
Transfers to/(from) non
distributable reserves - 16.9 (16.9) - - -
Movement in demerger
reserve - 24.6 - 24.6 - 24.6
Movement in net assets of
Direct Line Versicherung
AG - 0.4 (9.0) (8.6) - (8.6)
----------- ----------- ----------- ----------- ----------- ---------------
Balance as at 30 June 2012
(reviewed) 1,500.0 613.6 792.1 2,905.7 258.5 3,164.2
=========== =========== =========== =========== =========== ===============
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION
1. ACCOUNTING POLICIES
Basis of preparation
The condensed combined interim financial information presented has been prepared for Direct Line Insurance Group plc ("the Company") and its subsidiaries (together the "Group"). The financial information has been prepared on a historical cost basis except for investment properties and those financial instruments that have been measured at fair value. This condensed combined interim financial information has been prepared in accordance with IAS 34 Interim Financial Reporting, with the exception of the requirement to include a combined Cash Flow Statement.
International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") does not provide for the preparation of condensed combined interim financial information and accordingly, certain accounting conventions commonly used in the preparation of combined financial information issued by the UK Auditing Practices Board have been applied. The application of these conventions results in material departure from IFRS as adopted by the EU with respect to the following item:
-- the preparation of the combined financial information has required the allocation of certain RBS Group costs to the Group. While such costs have been allocated on the basis intended to reflect their nature, the financial information has not necessarily reflected the results of the Group had it been a standalone group during this time. As these cost allocations did not result in a corresponding cash payment, they are offset by an entry in equity, described as 'demerger reserves'.
The Group was formed on 2 April 2012 when the Company acquired Direct Line Versicherung AG. Prior to this date, the Group was not held by a single legal entity and, accordingly, consolidated financial statements do not exist. The combined financial information has been prepared using merger accounting principles, as if the transaction that gave rise to the formation of the Group had taken place at the beginning of the comparative period. Under these principles, the condensed combined interim financial information has been prepared as if the Company were the holding company of Direct Line Versicherung AG from 1 January 2011, the date of the beginning of the comparative period. The assets, liabilities and the profit or loss of the Company and its subsidiaries, and of Direct Line Versicherung AG have been combined. All transactions and balances between the entities included within the Group have been eliminated. The condensed combined interim financial information reflects a liability payable to RBS Group, at each period end prior to acquisition for the Direct Line Versicherung AG consideration. As the basis of preparation represents a reorganisation of entities under common control, it is therefore outside the scope of IFRS 3, Business Combinations. Accordingly, as permitted by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, it has been accounted for as a group reorganisation.
Adoption of new and revised standards
There have been no new or revised standards adopted during the period.
Principal accounting policies
There have been no significant changes to the Group's principal accounting policies as set out on pages F-11 to F-22 of the Historical Financial Information, included in the Group's prospectus dated 25 April 2012. The policies have been applied consistently throughout all the periods presented to items considered material to the condensed combined interim financial information.
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
2. SEGMENTAL ANALYSIS
There have been no significant changes to the Group's reportable segments as set out on pages F-50 to F-51 of the Historical Financial Information, included in the Group's prospectus dated 25 April 2012. The following is an analysis of the Group's revenue and results by reportable segment for the six months ended 30 June 2012 (reviewed):
Rescue
and
other Restructuring
personal Total and other Total
Motor Home lines Commercial Ongoing Run-off one- Group
GBP GBP GBP GBP International GBP GBP off costs GBP
Million Million Million Million GBP Million Million Million GBP Million Million
-------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Gross written
premium 842.1 484.4 199.3 229.8 302.8 2,058.4 4.1 - 2,062.5
======== ======== ========= =========== ============== ========== ======== ============== ==========
Gross earned
premium 840.2 504.3 201.7 215.2 260.7 2,022.1 12.6 - 2,034.7
Reinsurance
premium ceded (22.4) (26.9) (10.0) (16.6) (85.4) (161.3) (3.2) - (164.5)
-------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Net earned
premium 817.8 477.4 191.7 198.6 175.3 1,860.8 9.4 - 1,870.2
Investment
return 86.4 22.2 4.2 19.0 13.6 145.4 30.6 - 176.0
Instalment
income and
other
operating
income 79.3 12.8 (1.6) 4.8 3.5 98.8 0.3 - 99.1
-------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Total income 983.5 512.4 194.3 222.4 192.4 2,105.0 40.3 - 2,145.3
Insurance
claims (698.4) (314.9) (103.2) (153.6) (207.4) (1,477.5) (31.6) - (1,509.1)
Insurance
claims
recoverable
from
reinsurers 105.8 11.6 12.3 24.8 69.9 224.4 60.6 - 285.0
-------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Net insurance
claims (592.6) (303.3) (90.9) (128.8) (137.5) (1,253.1) 29.0 - (1,224.1)
Commission
expenses (9.3) (77.4) (9.6) (39.7) (19.9) (155.9) (66.1) - (222.0)
Other
operating
expenses (235.4) (113.3) (44.6) (55.3) (23.2) (471.8) (2.0) (108.7) (582.5)
-------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Total expenses (244.7) (190.7) (54.2) (95.0) (43.1) (627.7) (68.1) (108.7) (804.5)
-------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Operating
profit/(loss) 146.2 18.4 49.2 (1.4) 11.8 224.2 1.2 (108.7) 116.7
======== ======== ========= =========== ============== ========== ======== ==============
Finance costs (10.2)
Profit before
tax 106.5
==========
Loss ratio 72.5% 63.5% 47.4% 64.9% 78.4% 67.3%
Commission
ratio 1.1% 16.2% 5.0% 20.0% 11.4% 8.4%
Expense ratio 28.8% 23.7% 23.3% 27.8% 13.2% 25.4%
Combined
operating
ratio 102.4% 103.4% 75.7% 112.7% 103.0% 101.1%
All operations are in the UK except for International which operates in Germany and Italy.
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
2. SEGMENTAL ANALYSIS (Continued)
The following is an analysis of the Group's revenue and results by reportable segment for the six months ended 30 June 2011 (unaudited):
Rescue
and
other Restructuring
personal Total and other Total
Motor lines Commercial Ongoing Run-off one- Group
GBP Home GBP GBP International GBP GBP off costs GBP
Million GBP Million Million Million GBP Million Million Million GBP Million Million
--------- ------------ ---------- ----------- -------------- ---------- -------- -------------- ----------
Gross written premium 866.0 500.8 192.5 231.9 302.0 2,093.2 26.1 - 2,119.3
========= ============ ========== =========== ============== ========== ======== ============== ==========
Gross earned premium 916.7 512.2 202.4 204.9 222.0 2,058.2 309.7 - 2,367.9
Reinsurance premium ceded (8.9) (27.5) (9.8) (12.5) (55.8) (114.5) (13.0) - (127.5)
--------- ------------ ---------- ----------- -------------- ---------- -------- -------------- ----------
Net earned premium 907.8 484.7 192.6 192.4 166.2 1,943.7 296.7 - 2,240.4
Investment return 74.6 17.4 6.7 14.4 12.4 125.5 21.4 - 146.9
Instalment income and
other operating income 111.6 16.0 0.9 2.2 3.5 134.2 (11.2) - 123.0
--------- ------------ ---------- ----------- -------------- ---------- -------- -------------- ----------
Total income 1,094.0 518.1 200.2 209.0 182.1 2,203.4 306.9 - 2,510.3
Insurance claims (766.7) (311.0) (122.8) (115.7) (188.8) (1,505.0) (264.1) - (1,769.1)
Insurance claims
recoverable from
reinsurers 7.5 (1.5) 11.2 2.0 42.9 62.1 6.6 - 68.7
--------- ------------ ---------- ----------- -------------- ---------- -------- -------------- ----------
Net insurance claims (759.2) (312.5) (111.6) (113.7) (145.9) (1,442.9) (257.5) - (1,700.4)
Commission expenses (9.8) (79.8) (9.0) (42.2) (9.4) (150.2) (34.1) - (184.3)
Other operating expenses (202.0) (85.4) (37.9) (43.7) (31.8) (400.8) (27.7) (9.8) (438.3)
--------- ------------ ---------- ----------- -------------- ---------- -------- -------------- ----------
Total expenses (211.8) (165.2) (46.9) (85.9) (41.2) (551.0) (61.8) (9.8) (622.6)
--------- ------------ ---------- ----------- -------------- ---------- -------- -------------- ----------
Operating profit/(loss) 123.0 40.4 41.7 9.4 (5.0) 209.5 (12.4) (9.8) 187.3
========= ============ ========== =========== ============== ========== ======== ==============
Finance costs (1.4)
Gain on disposal of subsidiary 1.6
----------
Profit before tax 187.5
==========
Loss ratio 83.6% 64.5% 58.0% 59.1% 87.8% 74.2%
Commission ratio 1.1% 16.5% 4.7% 21.9% 5.6% 7.7%
Expense ratio 22.3% 17.6% 19.7% 22.7% 19.1% 20.6%
Combined operating ratio 107.0% 98.6% 82.4% 103.7% 112.5% 102.5%
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
2. SEGMENTAL ANALYSIS (Continued)
The following is an analysis of the Group's revenue and results by reportable segment for the year ended 31 December 2011 (audited):
Rescue
and
other Restructuring
personal Total and other Total
Motor Home lines Commercial Ongoing Run-off one- Group
GBP GBP GBP GBP International GBP GBP off costs GBP
Million Million Million Million GBP Million Million Million GBP Million Million
---------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Gross written
premium 1,734.8 1,031.3 350.2 438.6 570.0 4,124.9 43.4 - 4,168.3
========== ======== ========= =========== ============== ========== ======== ============== ==========
Gross earned
premium 1,797.4 1,031.1 410.3 420.5 482.8 4,142.1 380.8 - 4,522.9
Reinsurance
premium ceded (25.8) (57.0) (19.5) (27.8) (121.1) (251.2) (18.7) - (269.9)
---------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Net earned
premium 1,771.6 974.1 390.8 392.7 361.7 3,890.9 362.1 - 4,253.0
Investment
return 145.2 28.5 9.5 30.5 25.0 238.7 43.2 - 281.9
Instalment
income and
other
operating
income 208.2 35.1 - 5.0 7.2 255.5 (15.4) - 240.1
---------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Total income 2,125.0 1,037.7 400.3 428.2 393.9 4,385.1 389.9 - 4,775.0
Insurance
claims (1,501.6) (579.2) (195.7) (268.6) (391.4) (2,936.5) (224.1) - (3,160.6)
Insurance
claims
recoverable
from
reinsurers 54.8 19.9 22.1 11.9 96.8 205.5 (12.4) - 193.1
---------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Net insurance
claims (1,446.8) (559.3) (173.6) (256.7) (294.6) (2,731.0) (236.5) - (2,967.5)
Commission
expenses (25.9) (170.0) (87.8) (82.3) (28.6) (394.6) (124.3) - (518.9)
Other
operating
expenses (397.5) (196.5) (75.6) (101.6) (66.4) (837.6) (53.0) (54.0) (944.6)
---------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Total expenses (423.4) (366.5) (163.4) (183.9) (95.0) (1,232.2) (177.3) (54.0) (1,463.5)
---------- -------- --------- ----------- -------------- ---------- -------- -------------- ----------
Operating
profit/(loss) 254.8 111.9 63.3 (12.4) 4.3 421.9 (23.9) (54.0) 344.0
========== ======== ========= =========== ============== ========== ======== ==============
Finance costs (2.7)
Gain on
disposal of
subsidiary 1.6
----------
Profit before
tax 342.9
==========
Loss ratio 81.7% 57.4% 44.4% 65.4% 81.4% 70.2%
Commission
ratio 1.5% 17.5% 22.5% 21.0% 7.9% 10.1%
Expense ratio 22.4% 20.2% 19.4% 25.9% 18.3% 21.5%
Combined
operating
ratio 105.6% 95.1% 86.3% 112.3% 107.6% 101.8%
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
3. INVESTMENT RETURN
Six months ended Year ended
30 June 31 December
---------------------------- -------------
2012 2011 2011
GBP Million GBP Million GBP Million
------------- ------------- -------------
(reviewed) (unaudited) (audited)
Investment income:
Interest income on debt securities 92.1 109.8 208.1
Other investment fund income 3.1 3.7 8.5
Cash and cash equivalent interest income 11.5 8.4 20.4
Property 3.5 3.6 6.6
------------- ------------- -------------
Total 110.2 125.5 243.6
Net realised gains:
Debt securities 41.5 21.4 54.3
Other* 23.2 - -
Derivatives 1.9 - -
Impairments on available-for-sale financial assets - - (2.0)
Net unrealised losses:
Derivatives (0.8) - -
Property - - (14.0)
------------- ------------- -------------
Total investment return 176.0 146.9 281.9
============= ============= =============
Impairments on available--for--sale financial assets during 2011 relate to debt securities. There were no impairments in 2012.
*Other net realised gains are in relation to the sale of other investment funds in June 2012.
4. OTHER OPERATING INCOME
Six months ended
30 June Year ended 31 December
---------------------------- -----------------------
2012 2011 2011
GBP Million GBP Million GBP Million
------------- ------------- -----------------------
(reviewed) (unaudited) (audited)
Instalment income 62.1 76.7 145.0
============= ============= =======================
Solicitors' referral fee income 11.0 14.6 27.9
Vehicle replacement referral income 8.5 10.9 21.9
Revenue from vehicle recovery and repair services 14.8 16.4 39.3
Fee income from insurance intermediary services 0.7 2.5 3.4
Other income 2.0 1.9 2.6
------------- ------------- -----------------------
Total other operating income 37.0 46.3 95.1
============= ============= =======================
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
5. EARNINGS AND NET ASSETS PER SHARE, RETURN ON EQUITY
Basic earnings per share are as follows:
Six months ended
30 June Year ended 31 December
---------------------------- -----------------------
2012 2011 2011
GBP Million GBP Million GBP Million
------------- ------------- -----------------------
(reviewed) (unaudited) (audited)
Earnings attributable to Owners of the Company 82.8 142.2 249.0
============= ============= =======================
Six months ended Year ended
30 June 31 December
------------------------- -------------
2012 2011 2011
Million Million Million
----------- ------------ -------------
(reviewed) (unaudited) (audited)
Weighted average number of ordinary shares in issue 1,500.0 1,500.0 1,500.0
=========== ============ =============
Six months ended Year ended
30 June 31 December
------------------------- -------------
2012 2011 2011
Pence Pence Pence
----------- ------------ -------------
(reviewed) (unaudited) (audited)
Basic earnings per share 5.5 9.5 16.6
=========== ============ =============
Basic earnings per share are calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares in issue during the period.
Net asset and net tangible asset value per share are as follows:
Six months ended Year ended
30 June 31 December
----------------- -------------
2012 2011
GBP Million GBP Million
----------------- -------------
(reviewed) (audited)
Net assets 2,905.7 3,612.8
Goodwill and other intangible assets (390.9) (365.8)
----------------- -------------
Net tangible assets 2,514.8 3,247.0
================= =============
Six months ended Year ended
30 June 31 December
----------------- -------------
2012 2011
----------------- -------------
(reviewed) (audited)
Net asset value per share (pence) 193.7 240.9
Net tangible asset value per share (pence) 167.7 216.5
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
5. EARNINGS AND NET ASSETS PER SHARE, RETURN ON EQUITY (Continued)
Net asset value per share is calculated as total invested equity (excluding non-controlling interest) divided by the average number of shares in issue during the period.
Net tangible asset value per share is calculated as total invested equity (excluding non-controlling interest) less goodwill and other intangible assets divided by the average number of shares in issue during the period.
Return on equity is as follows:
Six months ended Year ended
30 June 31 December
----------------- -------------
2012 2011
GBP Million GBP Million
----------------- -------------
(reviewed) (audited)
Profit after tax 82.8 249.0
----------------- -------------
Opening invested equity 3,612.8 3,223.6
Closing invested equity 2,905.7 3,612.8
----------------- -------------
Average invested equity 3,259.2 3,418.2
Adjustment for time weighting of dividends paid in the period 288.8 -
----------------- -------------
Weighted average invested equity 3,548.0 3,418.2
----------------- -------------
Return on equity 4.7%* 7.3%
Return on equity is calculated as profit after tax for the period divided by average invested equity, expressed as a percentage.
*Annualised.
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
6. FINANCIAL INVESTMENTS
As at As at
30 June 31 December
------------ ------------
2012 2011
GBP million GBP million
------------ ------------
Available-for-sale investments: (reviewed) (audited)
Government bonds 2,947.1 3,481.2
Corporate bonds 3,916.4 3,843.2
Mortgage--backed securities 169.3 283.5
------------ ------------
Total debt securities 7,032.8 7,607.9
============ ============
Debt securities:
Listed-fixed interest rate 6,457.9 6,747.8
Listed-floating interest rate 574.9 860.1
--------------- --------
7,032.8 7,607.9
Other investment funds:
Other investment funds - 382.8
--------------- --------
7,032.8 7,990.7
Loans and receivables:
Deposits with credit institutions with maturities in excess of three months
* third parties 283.0 1,342.6
* related parties 200.0 147.0
-------- --------
Total loans and receivables 483.0 1,489.6
======== ========
Total financial investments 7,515.8 9,480.3
======== ========
Included within the debt securities balance above is GBP233.7 million (31 December 2011: GBP304.6 million) relating to securities issued by members of RBS Group.
Other investment funds comprised an investment fund which included Euro and US Dollar denominated bonds, hedged back to Sterling.
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
7. CASH AND CASH EQUIVALENTS As at As at
30 June 31 December
------------ -------------
2012 2011
GBP million GBP million
------------ -------------
Cash at bank and in hand: (reviewed) (audited)
* third parties 199.3 153.5
* related parties 73.8 48.4
------------ -------------
273.1 201.9
Short-term deposits with credit institutions:
* third parties* 2,244.9 1,029.5
* related parties 47.6 148.4
------------ -------------
Total cash and cash equivalents 2,565.6 1,379.8
============ =============
* included in the above are investments held by the Group in Global Treasury Funds PLC, (an open ended umbrella investment company with variable capital incorporated with limited liability in Ireland) as at 30 June 2012 of GBP838.6 million (31 December 2011: GBP612.0 million). RBS Asset Management (Dublin) Limited is the appointed manager to the fund.
8. INSURANCE LIABILITIES, UNEARNED PREMIUM RESERVE AND REINSURANCE ASSETS
As at As at
30 June 31 December
------------ ------------
2012 2011
GBP million GBP million
------------ ------------
Insurance liabilities (reviewed) (audited)
Life insurance business 102.2 97.8
General insurance business 6,412.4 6,411.2
------------ ------------
Total insurance liabilities excluding unearned premiums 6,514.6 6,509.0
============ ============
Gross (general insurance business)
Claims reported 3,978.8 4,036.9
Claims incurred but not reported 2,273.9 2,217.5
Loss adjustment expenses 147.9 153.2
Liability adequacy provision 11.8 3.6
------------ ------------
Total insurance liabilities, gross excluding unearned premiums 6,412.4 6,411.2
Unearned premiums 1,946.7 1,931.6
------------ ------------
Total insurance liabilities, gross 8,359.1 8,342.8
============ ============
Recoverable from reinsurers (general insurance business)
Claims reported (371.8) (318.1)
Claims incurred but not reported (439.1) (281.8)
------------ ------------
Total recoverable from reinsurers, excluding unearned premiums (810.9) (599.9)
Unearned premiums (64.5) (59.0)
------------ ------------
Total reinsurers' share of insurance liabilities (875.4) (658.9)
============ ============
Net (general insurance business)
Claims reported 3,607.0 3,718.8
Claims incurred but not reported 1,834.8 1,935.7
Loss adjustment expenses 147.9 153.2
Liability adequacy provision 11.8 3.6
------------ ------------
Total insurance liabilities, net excluding unearned premiums 5,601.5 5,811.3
Unearned premiums 1,882.2 1,872.6
------------ ------------
Total insurance liabilities, net 7,483.7 7,683.9
============ ============
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
8. INSURANCE LIABILITIES, UNEARNED PREMIUM RESERVE AND REINSURANCE ASSETS (Continued)
Movements in insurance liabilities and reinsurance assets
(i) Claims and loss adjustment expenses
Gross Reinsurance Net
GBP Million GBP Million GBP Million
------------- ------------- -------------
Notified claims 4,327.6 (310.0) 4,017.6
Incurred but not reported 2,514.2 (220.8) 2,293.4
------------- ------------- -------------
At 1 January 2011 6,841.8 (530.8) 6,311.0
Cash paid for claims settled in the year (3,547.7) 81.7 (3,466.0)
Increase/(decrease) in liabilities
* arising from current-year claims 3,345.3 (134.4) 3,210.9
* arising from prior-year claims (209.9) (17.2) (227.1)
Net exchange differences (21.9) 0.8 (21.1)
------------- ------------- -------------
At 31 December 2011 6,407.6 (599.9) 5,807.7
============= ============= =============
Notified claims 4,190.1 (318.1) 3,872.0
Incurred but not reported 2,217.5 (281.8) 1,935.7
------------- ------------- -------------
At 31 December 2011 (audited) 6,407.6 (599.9) 5,807.7
Cash paid for claims settled in the period (1,474.8) 56.8 (1,418.0)
Increase/(decrease) in liabilities
* arising from current-year claims 1,589.9 (116.6) 1,473.3
* arising from prior-year claims (104.4) (154.0) (258.4)
Net exchange differences (17.7) 2.8 (14.9)
------------- ------------- -------------
At 30 June 2012 6,400.6 (810.9) 5,589.7
============= ============= =============
Notified claims 4,126.7 (371.8) 3,754.9
Incurred but not reported 2,273.9 (439.1) 1,834.8
------------- ------------- -------------
At 30 June 2012 (reviewed) 6,400.6 (810.9) 5,589.7
============= ============= =============
(ii) (Decrease)/increase in liabilities arising from prior-year claims
Six months ended
30 June Year ended 31 December
------------------- -------------------------
2012 2011
GBP Million GBP Million
------------------- -------------------------
(reviewed) (audited)
Motor (108.5) (138.2)
Home (29.2) 48.5
Rescue and other personal lines (12.7) (52.8)
Commercial (58.5) (38.4)
International (19.5) (7.9)
---------------- -----------------------
Total Ongoing (228.4) (188.8)
Run-off (30.0) (38.3)
---------------- -----------------------
Total Group (258.4) (227.1)
================ =======================
DIRECT LINE INSURANCE GROUP PLC
NOTES TO THE FINANCIAL INFORMATION (Continued)
9. RELATED PARTY TRANSACTIONS
Related party transactions in the half year ended 30 June 2012 were similar in nature to those for the year ended 31 December 2011. Dividends of GBP800 million were paid to The Royal Bank of Scotland Group plc in the period and loans of GBP247.7 million from The Royal Bank of Scotland Group plc to the Group were repaid in June 2012. The Group acquired Direct Line Versicherung AG in April 2012 for a consideration of GBP105.2 million, and fixtures and fittings in the period for a consideration of GBP39.3 million; a payment of GBP31.3 million was made to the RBS Group Pension Fund to settle liabilities on the Group's exit from the scheme in respect of a number of employees. In addition, in June 2012 the Group sold its investment properties to The Royal Bank of Scotland plc for GBP69.5 million.
Full details of the Group's related party transactions for the year ended 31 December 2011 are included on pages F-86 to F-88 of the Group's prospectus dated 25 April 2012.
10. DATE OF APPROVAL
The condensed financial statements for the half year ended 30 June 2012 were approved by the Board of Directors on 3 September 2012.
11. POST BALANCE SHEET EVENTS
On 31 August 2012, board and shareholder resolutions were approved to subdivide the share capital of Direct Line Insurance Group plc from 1.5 billion ordinary shares of GBP1 each to 1.5 billion ordinary shares of 10 pence each and 1.5 billion deferred shares of 90 pence each. The deferred shares were then transferred back to the Company by its parent, The Royal Bank of Scotland Group plc, for no value and immediately cancelled by the Company. This cancellation has created a non-distributable capital redemption reserve in the Company of GBP1,350 million. The Company's issued share capital now comprises 1.5 billion ordinary shares of 10 pence each, all held legally and beneficially by The Royal Bank of Scotland Group plc. For the period ended 30 June 2012, this would not have altered the earnings per share calculation.
On 3 September 2012, the Board of Directors of Direct Line Insurance Group plc approved a dividend of GBP200 million to be paid immediately to the parent company, The Royal Bank of Scotland Group plc.
INDEPENDENT REVIEW REPORT TO DIRECT LINE INSURANCE GROUP PLC
We have been engaged by the Company to review the condensed combined set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the combined income statement, the combined statement of comprehensive income, the combined balance sheet, the combined statement of changes in equity and related notes 1 to 11. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed combined set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors.
As disclosed in note 1, the debt prospectus for Direct Line Insurance Group plc was prepared on a combined basis, using the conventions commonly used in the preparation of historical financial information in investment circulars issued by the Auditing Practices Board as set out in the Annexure to Standard for Investment Reporting 2000 (Revised) Investment reporting standards applicable to public reporting engagements on historical financial information, which requires certain departures from International Financial Reporting Standards (IFRSs) as adopted by the European Union. Note 1 explains therefore that this condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting with the exception of the inclusion of a combined Cash Flow Statement, as adopted by the European Union subject to the underlying accounting policies being modified in the same way.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with the basis of preparation set out in note 1.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
3 September 2012
DIRECT LINE INSURANCE GROUP PLC
ADDITIONAL INFORMATION
Company overview
Direct Line Group is a retail general insurer with leading market positions in the United Kingdom, the largest direct underwriter in Italy and the third largest direct motor insurer in Germany. The Group utilises a multi-brand, multi-product and multi-distribution channel business model that covers most major customer segments in the United Kingdom for personal lines general insurance and a more targeted presence in the Commercial market. The Group has market leading positions in terms of in-force policies and has the most highly recognised brands (Direct Line and Churchill) in the United Kingdom for personal motor insurance and personal home insurance.
Corporate information
Direct Line Insurance Group plc is a public limited company incorporated in the United Kingdom. The address of the registered office is Churchill Court, Westmoreland Road, Bromley, Kent BR1 1DP, England.
The Company, formerly RBS Insurance Group Limited, was incorporated on 26 July 1988 as a private limited company with a registered number 02280426 as a wholly-owned subsidiary of The Royal Bank of Scotland Group plc. RBS Group comprises The Royal Bank of Scotland Group plc and its subsidiaries.
In 2009, RBS Group committed to the European Commission to sell its insurance business as a condition of its receipt of State Aid. To comply with this requirement, RBS Group must cede control of the Company by the end of 2013 and must have divested its entire interest by the end of 2014.
Historical financial information
Historical financial information for the three years ended 31 December 2011 is available on Direct Line Group's website http://directlinegroup.com/investors.aspx. The historical financial information is not directly comparable to the Divisional Results published by RBS Group principally because a number of items, including restructuring costs, separation costs and goodwill impairment, are not included in Direct Line Group's operating profit reported in the RBS Group Interim results; and the operating results of activities of Tesco Personal Finance are reflected in operating profit in the historical financial information as run-off business in all periods. In RBS Group's financial results disclosures prior to 2012, the operating results of TPF were included as part of the Non-Core division of the RBS Group.
Statutory results
The information for the year ended 31 December 2011 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the Company for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
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