Direct Line improves dividend despite profit drop
Direct Line suffered a 10 per cent profit drop amid the first half of 2020 due to bad weather, but the insurer said coronavirus’ impact was “broadly neutral” across its divisions.
The figures
Profit before tax fell by £24.9m, or 9.5 per cent, year on year to £236.4m owing chiefly to £30.4m of bad weather costs and £15m of one-off restructuring costs.
Operating profit slipped 3.4 per cent to £264.9m.
Direct Line did not change its estimates for coronavirus costs from the first quarter, leaving them at £25m on travel insurance and £10m for business insurance.
And the insurer raised its interim dividend to 7.4p, up from 7.2p the same time last year.
However, in-force policies slipped 1.7 per cent year on year to 14.6m for the half-year. But Direct Line’s combined operating ratio improved by 2.2 percentage points to 90.3 per cent – anything below 100 per cent indicates profit.
What Direct Line said
CEO Penny James said:
“I am very proud of what we have achieved so far this year. We have launched initiatives with an estimated investment of £80m to £90m to support our customers, people and local communities through the uncertainty caused by Covid-19.
“When the Covid-19 pandemic hit, we prioritised phone lines for existing customers, created new online journeys and offered additional value through various initiatives including mileage refunds and payment deferrals. We did not access government support and chose to protect all roles and salaries at the Group through to the autumn and our Community Fund is providing £3.5m to help people in communities across the UK.
“Despite the significant disruption caused by Covid-19 we have continued the trading momentum we saw at the end of 2019, growing direct own brands by two per cent and improving the quality of our earnings with an improved current-year loss ratio. We have also demonstrated financial resilience in the face of Covid-19 disruption, which has enabled us to declare our 2020 interim dividend as well as a catch-up of our cancelled 2019 final dividend.”