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Direct Line Insurance sees first-half profits decline on big weather claims; CEO to step down next year

Published: 10:27 01 Aug 2018 BST

Direct Line phone
Direct Line posted £75mln of weather-related claims in the first half, mainly associated with the ‘Beast from the East’

Direct Line Insurance Group PLC (LON:DLG) saw its shares drop on Wednesday reported a decline in first-half operating profit, and revealed its chief executive officer would step down next year.

The FTSE 100-listed firm - whose brands include Churchill, Green Flag and Privilege – saw its operating profit fall by 15.7% to £303.1mln for the six months ended June, down from £359.7mln a year earlier.

READ: Direct Line dividend at risk amid soft UK motor insurance market, says Barclays

The company posted £75mln of weather-related claims in the first half, mainly associated with the ‘Beast from the East’ tough winter in the first quarter.

Direct Line’s gross written premiums fell by 5% to £1.61bn in the first half, although motor premiums rose 1.9% to £839.8mln.

The company reported a combined operating ratio of 93%, up from 88.6% a year earlier, but below the consensus estimate of 94.9% and lower than the 100% which indicates an underwriting profit.

Paul Geddes, Direct Line’s CEO commented: "We have also made progress on our strategic initiatives which we believe will improve our competitiveness in each of our channels and we are focused on improving our efficiency.

“This strategic agenda, combined with our disciplined value over volume focus, gives us the confidence in our outlook, for us to reiterate our financial targets.”

The group raised its interim dividend by 2.9% to 7.0p, up from the 6.8p paid a year earlier.

Geddes goes

In a separate statement, Direct Line said Geddes would step down as its CEO in the summer of 2019 after a decade at the helm.

The insurer’s chairman Mike Biggs said: “We have a well-developed succession process which we will now deploy with the objective of ensuring that we have an excellent successor in place by the time Paul leaves next year.”

In mid-morning trading, Direct Line shares were 4.45p lower at 328.90p.

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