Direct Line Insurance Share Discussion Threads

[skinny] 07/3/2017 07:09

7 March 2017

Financial highlights

· Gross written premium for Ongoing operations1,2 up 3.9% to £3,274.1m (2015: £3,152.4m), driven by growth in Motor and Home own-brand in-force policies (up 4.3%)

· 2016 results reflect the one-off impact of using the new Ogden discount rate of minus 0.75%. Operating profit from Ongoing operations of £403.5m (pre-Ogden discount rate reduction3: £578.6m; 2015: £520.7m) and profit before tax of £353.0m (pre-Ogden3: £570.3m; 2015: £507.5m). Return on tangible equity1, 2 of 14.2%, (pre-Ogden3: 20.2%; 2015: 18.5%)

· Combined operating ratio1 from Ongoing operations of 97.7% (pre-Ogden3: 91.8%; 2015: 94.0%) increased as a result of the reduction in the Ogden discount rate, partially offset by improved current-year underwriting performance and favourable weather claims. Adjusted for normal weather and before the Ogden discount rate change, the combined operating ratio was 93.5%, towards the lower end of the target range of 93% to 95%

· 5.4% increase in final dividend per share to 9.7 pence per share, (2015: 9.2 pence). Total dividends per share for 2016, including special interim dividend of 10.0 pence per share paid in September 2016 following the approval of the Group's partial internal model, of 24.6 pence per share (2015: 50.1 pence)

· The Group's estimated Solvency II capital coverage ratio4 post dividend is 165%, above the middle of the Group's risk appetite range of 140% - 180% (pre-dividend: 174%)

Strategic and operational highlights

· Direct Line Motor and Home new business growth at the highest annual level since IPO, demonstrating the success of the investment in brand, proposition and customer service

· Total costs for Ongoing operations of £923.7m broadly flat year on year before non-cash impairment charge of £39.3m, after absorbing £24.1m Flood Re levy and supporting growth in Motor and Home own brands

· Extended Home and Private Insurance partnership with RBS for a further three years, and implemented faster and easier sales journeys using cloud-based technology making connectivity and future change easier

· Invested in innovation, including partnership with PSA Peugeot Citroën for telematics extended for 4 more years, introducer role developed with Tesla, and MOVE_UK project brought into data collection stage

· Received approval from the Prudential Regulation Authority to use the Group's Solvency II partial internal model

Paul Geddes, CEO of Direct Line Group, commented
"2016 was a successful year for Direct Line Group and I'm proud of the strong own brand growth achieved in a switching market, proving our competitiveness in all our key categories and channels. This positions us well in a market disrupted by the reduction in the discount rate, and allows us to target a 93-95% combined operating ratio in 2017. We will continue to target improved efficiency and invest in customer and technology trends affecting our markets."

[nicksoj] 03/3/2017 14:34

DLG. If you keep going lower. I'm going to drink your milkshake! I'll drink it up....

[nicksoj] 01/3/2017 13:00

Sweet, sweet DLG

[essentialinvestor] 01/3/2017 11:21

Sadly I don't always get it right!, rational was.. bad news out there,
unless they cut the divi, 9% plus off at one stage Monday seemed to allow for a lot.
Luck with your holding.

[speedsgh] 01/3/2017 11:06

Hope you're right, EI. Have been waiting for a buy opp for DLG for some time & dipped my toe in early Mon morning on the basis that markets usually overreact to such news. However I won't be adding any more for now until I have seen the results & their detailed analysis of the impact of the change in discount rate on their financials going forward. That's the plan anyway!

[guy_fawkes] 01/3/2017 10:21

Car insurance: Chancellor moves to ease insurers' fears



'Crazy' change

Mr Hammond met chief executives and other senior executives from 15 major insurance firms, including Aviva, Direct Line and Admiral.

Ahead of the meeting, the Association of British Insurers (ABI) said it would urge the chancellor to block the new formula before it kicks in on 20 March.

[essentialinvestor] 01/3/2017 10:06

speed, when everyone is bearish and the Company is sound
(rather than some tinpot outfit) often pays to go against trend.

But I can hope ). BAB went well for me yesterday at least.

[speedsgh] 01/3/2017 10:00

Still early days, EI. Uncertainty caused by Monday's announcement by the Lord Chancellor will ensure plenty of volatility up until results imo.

[essentialinvestor] 01/3/2017 08:39

FFS, still have a few at least, Monday looking like a bargain.

[essentialinvestor] 28/2/2017 14:57

speed, at these markets levels it may be an essential!.

Get far more nervous when everyone loves something, bullish unanimity
is often a licence to lose money.

[speedsgh] 28/2/2017 13:49

Ah, the contrarian coming out in you, EI :-)

[essentialinvestor] 28/2/2017 13:47

There looks too much bearishness to me.
Premiums will increase, with DL % market share they should be well
positioned in any enviornment imv.

The news, which was worse than about anyone expected, is now in the market.

Buying some BAB this morning and missed the early markdown,
have kept this on a watchlist to add. All just IMV only.

[speedsgh] 28/2/2017 13:44

Brief analysis by Jonas Crosland (Investors Chronicle)...

Insurers hit by changes in personal damages calculations - [SUBSCRIPTION REQUIRED]

Direct Line would appear to be one of the hardest hit...

"... Direct Line (DLG), whose claims are calculated using a discount rate of 1.5 per cent, estimates that the impact of the move will reduce pre-tax profits by between £215m and £230m, while altering its Solvency II capital coverage ratio towards the top end of the target range of 140-180 per cent. In addition, the combined operating ratio (of claims as a percentage of premium income) is expected to deteriorate from around 93 per cent to 99 per cent - barely break-even..."

[nicksoj] 28/2/2017 12:16

Shore.

One of the reasons I never allow my discipline ever be determined by analysts.
Imho dyor

[carer] 28/2/2017 12:13

not much of an analyst! stating what is known. expect a bit down side when result come out, but would be good opportunity to top up for longer term.

[essentialinvestor] 28/2/2017 12:01

But there will be material increases and it will be sector wide.

Goodness me.

[speedsgh] 28/2/2017 11:59

Direct Line profits take a hit from changes to payout rules -

Direct Line (DLGD) profits will take a big hit from new government rules that will push up lump sum payments for personal injury claims.

Analyst Eamonn Flanagan reiterated his ‘sell’ recommendation on the stock after Direct Line said the cutting of the discount rate insurers must apply to compensation payouts could reduce 2016 profits by as much as £230 million. The shares had fallen 7.5%, or 27p, to 337p at the time of writing.

The Ministry of Justice has cut the discount rate that applies to compensation payouts to -0.75% from 2.5% to reflect lower gilt yields. Direct Line had been applying a 1.5% discount rate.

‘Direct Line has just updated the market as to the impact of the shift in the Ogden discount rate,’ said Flanagan.‘The impact of the changes being…a hit to 2016 pre-tax profits of between £215 million and £230 million, our 2016 forecast was £514 million.

‘The key here is that without material increases to premium rates, the group’s profitability will drop by c.£80 million per annum, or c.16% of our 2017 forecast earnings.’

[essentialinvestor] 28/2/2017 09:13

diku, you like your TA, a possible re-test of yesterday's low at some point?.

[diku] 28/2/2017 09:12

320p better...

[essentialinvestor] 28/2/2017 08:43

Had too many updates to look at this morning, would have had some at 3.36,
best laid plans etc.

[essentialinvestor] 27/2/2017 23:01

There is a lot of anger on some forums about the potential premium
increases many may face. When I first read minus .75 thought it was a misprint.

[topvest] 27/2/2017 20:49

What an absolutely ridiculous decision by the Government. Guaranteed to add 5% to insurance premiums from March and destabilising the insurance industry in the meantime as none of the companies were projecting such a low discount rate and this hits their capital surpluses. To me a negative discount rate is ridiculous. I'm an accountant and don't see discount rates below 1% on anything I look at. Having a negative discount rate looks and is totally ridiculous and a direct result of printing money. The government are stoking up massive inflation for later in the year. First food and energy, now insurance. What next?

[the shuffle man] 27/2/2017 18:58

You guys should look at Frenkel Topping (FEN). This news will have a big benefit for them as they manage the awards from personal injury claims.

[essentialinvestor] 27/2/2017 18:39

Yes indeed Jack, If was my intended meaning.

[cousin jack] 27/2/2017 18:33

EI: an enigmatic last post as it can be read two ways ! I think you mean "if" there is a sell off ?

Having bought mid morning and sold early afternoon I bought back some at the close and like you will add on any further drop tomorrow as this is going to be a trading share until the results.