Direct Line’s Share Price on The Rise

on Aug 2, 2013
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iNVEZZ.com Friday August 2nd: Direct Line Insurance Group (LON:DLG) scores a 27.8 percent increase in its operating profit for the first half of 2013 as compared to last year. According to the company, this is due to lower claims from major weather events and improved cost control.

Gross written premiums, however, are down by 4 percent to $1.98 billion which the group claims is due to stronger competition in the market this year. The company’s combined operating ratio, a measure used by insurance companies to measure profitability, has decreased by 6.5 percent to 94.6 percent. This means that the Group is now making underwriting profit unlike last year when it was paying out more money in claims than it was receiving. The result is that profit before tax (PBT) has risen by a hefty 96.1 percent with the company last year suffering an underwriting loss of £20 million which severely dented overall profits.

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The interim dividend is also up 5 percent and is now 4.2 pence a share.
Direct Line Insurance Group was spun off the Royal Bank of Scotland (LON:RBS) in 2012 as one of the conditions which the bank faced as part of its bail out agreement during the financial crisis. Earlier in June, Direct Line announced that it would have to cut 2,000 jobs in the UK in order to reduce costs. This represents 14.4 percent of the company’s workforce.

According to the report, the company will further enhance its cost cutting program by targeting operating expenses for 2014 of £1 billion. This is a reduction of £130 million from 2011 and should improve efficiency and reduce complexity.
!m[Insurer’s profits almost double](/uploads/story/4524/thumbs/pic1_inline.png)
The company’s International division is also developing thanks to strong growth in Germany and increased profitability in Italy. The international side of the business managed to offset a part of the decrease in underwritings in the UK due to the absence of severe weather conditions, a major source of claims.

Basic and diluted earnings per share have increased by 83.6 percent from the first half of 2012 and are 10.1 pence.
The stock market reacted well to the news of the success of the Group during the interim period and the stock opened with a 2.8% percent increase at 235.90 pence.
**Direct Line Insurance Group’s share price was 231.70p as of 02.08.2013, 08:37 BST**

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