Direct Line Insurance Group PLC (LON:DLG) shares edged lower on Tuesday after its full-year results failed to provide any surprises, having pre-released most of the details, while its big increase to dividends had also been well-flagged.
The FTSE 100-listed insurer’s final dividend for 2017 was increased by 40% to 13.60p per share, and it also announced another special dividend of 15.00p, having paid a 10.00p special payout in 2016, giving total dividends for 2017 of 35.40p, up 44% from 2016's 24.60p.
READ: Direct Line to be the highlight of the results season, says Barclays
The company’s full-year 2017 results showed gross written premiums for 2017 rise 3.6% year-on-year to £3.39bn, up from £3.27bn, while operating profit from ongoing operations jumped by 51% to £610.9mln, from £403.5mln in 2016.
Direct Line said the full-year profit jump was primarily due to the non-repeat of the Ogden discount rate change which occurred in 2016.
The group’s combined operating ratio in 2017 fell by 5.9 percentage points to 91.8% after strong Motor and Commercial performance, lower than the target range of 93% to 95%.
The Churchill brand firm said, assuming a "normal" year for weather claims and no further changes to the Ogden discount rate, it is continuing to target a 93% to 95% combined operating ratio over the medium term.
Motor policies up, but home insurance weaker
Direct Line's Motor division grew in-force policies by 3.8% year-on-year for 2017 to 4.0mln, with premiums growing 8.5% to £1.67bn.
In the Home division, direct own-brand in-force policies rose 2% to 1.8mln and premiums increased by 1.2% to £409.7mln, though this was more than offset by a continued fall in its partnership channel, where in-force policies fell by 10% and premiums by 9.4%.
Direct Line’s chief executive Paul Geddes said: "2017 is the fifth successive year in which we have delivered a strong financial performance.”
He added: "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.“
Shares lower; Shore Capital repeats ‘sell’
In late morning trading, Direct Line shares were down 0.4% at 387.20p.
Analysts at Shore Capital reiterated a ‘sell’ rating on the stock.
In a note to clients, they said: “Following the hit to the 2016 results from Ogden, DLG, not surprisingly, reported a strong improvement in 2017. However … (the) pre-Ogden the uplift is a tad more subdued.”
“Nonetheless,” the analysts added, “we continue to applaud DLG’s focus on capital, and the 15p special dividend should be well-received, and we must acknowledge the income attractions of the stock in this low interest rate environment.”