Direct Line's profits took a £217m hit as a result of the government's decision to slash the discount rate last week.
Reporting its annual returns – which boss Paul Geddes referred to as a "successful year" – the impact on profits was not as high as the £230m the firm said was the worst case scenario in the wake of the government decision.
Gross written premiums were up 3.9 per cent to £3.3bn, with motor and home own-brand policies up 4.3 per cent.
Net written premiums rose from £2.9bn to £3.0bn but underwriting profits fell from £175m to £70m.
Operating profit from its ongoing operations fell from £521m to £404m, while headline operating profit dropped from £545m to £390m.
The impact of the change to the discount rate was £175m on the firm's continuing results and £217m overall.
The firm's combined ratio jumped to 97.7 per cent from 94.0 per cent in 2015, though with the adjustment to the Ogden rate factored in it was lower at 91.8 per cent. Once normalised weather conditions were factored in it was 93.5 per cent.
Direct Line's Solvency II ratio was 165 per cent, right in the middle of the group's 140 per cent to 180 per cent guidance.
Why it's interesting
Just over a week ago the discount rate was not a widely known phrase.
But after Liz Truss' decision to slash the rate that is used to calculate lump sum settlements for injury claims – and the related impact on both insurers and consumers – the media spotlight has shone brightly on it.
In the wake of the decision last week Direct Line hastily put out a statement that profits would be hit by up to £230m. So the £217m posted today could well be a case of under promise and over deliver.
The fact was, though, the FTSE 100 firm had banked on the rate changing but only to 1.5 per cent and already provided for such a change in its previous forecasts. Not many expected the cut by the Lord Chancellor to quite so severe but many other firms had factored in that the rate was to be cut much lower than Direct Line's position.
Direct Line will no doubt be rather miffed, in particular as it has ruined the group's combined ratio – the total insurance losses and expenses as a percentage of the premiums written – which otherwise would have fallen markedly to the low 90's.
What the company said
Chief executive Paul Geddes said:
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 per cent combined operating ratio in 2017.
We will continue to target improved efficiency and invest in customer and technology trends affecting our markets.