Direct Line Insurance Group PLC preliminary results for the year ended 31 December 2017

Strong financial performance, final dividend up 40.2% to 13.6p and special dividend of 15.0p

Paul Geddes, CEO of Direct Line Group, commented

“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 £486 million 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.”

Results summary

Financial highlights

• Strong growth in direct own brands1 premiums and in-force policies up 9.3% and 5.3% respectively, driven again by continued Direct Line momentum in Motor.
• Operating profit from Ongoing operations of £610.9 million (2016: £403.5 million), primarily due to the non-repeat of the Ogden discount rate change which was reflected in 2016’s results. Profit before tax of £539.0 million (2016: £353.0 million).
• Reported expense ratio in line with 2016. Excluding non-cash intangible assets impairments of £56.9 million (2016: £39.3 million), underlying expense ratio improved 0.5 percentage points to 23.5%.
• Combined operating ratio from Ongoing operations of 91.8% (2016: 97.7%) reflecting strong Motor and Commercial performance, including from prior-year reserve releases. Adjusted for normal weather, combined operating ratio towards the lower end of the target range of 93% to 95%.
• Final dividend up by 40.2% to 13.6 pence bringing the total ordinary dividends to 20.4 pence (2016: 14.6 pence) and a special dividend of 15.0 pence (2016: 10.0 pence). Total dividends for 2017 of 35.4 pence per share (2016: 24.6 pence).

Notes:

1. See glossary on pages 39 and 40 for definitions and appendix A – Alternative performance measures on page 42 for reconciliation to financial statement line items.
2. A reduction in the ratio represents an improvement as a proportion of net earned premium, while an increase in the ratio represents a deterioration. See glossary on page 39 for definitions.
3. Estimates based on the Group’s solvency II partial internal model.

For further information, please contact:

Andy Broadfield
Director of Investor Relations
Tel: +44 (0) 1651 831022

Lisa Tremble
Head of External Affairs
Tel: +44 (0) 1651 834211

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Certain information contained in this document, including any information as to the Group’s strategy, plans or future financial or operating performance, constitutes “forward-looking statements”. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms “aims”, “ambition”, “anticipates”, “aspire”, “believes”, “continue”, “could”, “estimates”, “expects”, “guidance”, “intends”, “may”, “mission”, “outlook”, “over the medium term”, “plans”, “predicts”, “projects”, “propositions”, “seeks”, “should”, “strategy”, “targets” or “will” 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 document and include statements regarding the intentions, beliefs or current expectations of the Directors concerning, among other things: the Group’s results of operations, financial condition, prospects, growth, strategies and the industry in which the Group operates. Examples of forward-looking statements include financial targets and guidance which are contained in this document specifically with respect to the return on tangible equity, solvency capital ratio, the Group’s combined operating ratio, prior-year reserve releases, cost reduction, reductions in expense and commission ratios, investment income yield, net realised and unrealised gains, results from the Run-off segment, restructuring costs and risk appetite range. By their nature, all forward-looking statements involve risk 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 document, for example directly or indirectly as a result of, but not limited to, UK domestic and global economic business conditions, the outcome of the negotiations relating to the UK’s withdrawal from the European Union, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities (including changes related to capital and solvency requirements or the Ogden discount rate), the impact of competition, currency changes, inflation and deflation, the timing impact and other uncertainties of future acquisitions, disposals, joint ventures or combinations within relevant industries, as well as the impact of tax and other legislation and other regulation in the jurisdictions in which the Group and its affiliates operate. 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.

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