(Reuters) – Shares in Direct Line Insurance Group (DLGD.L), Britain’s largest motor insurer, jumped to a record high on Tuesday after it reported better than expected first-half profit and raised its interim dividend.
Intense competition in British motor insurance has put pressure on premiums in recent years but the average price of car insurance hit a record high in the second quarter, driven by new rules for personal injury claims and a tax rise.
Direct Line said operating profit from ongoing operations rose 9.5 percent to 354.2 million pounds, well above a company consensus forecast of 268 million pounds, and it raised its interim dividend by 1.9 pence to 6.8 pence.
Its shares jumped as much as 7.6 percent to 403 pence and were 6 percent higher at 0900 GMT, the top gainer in the FTSE 350 index of non-life insurance companies. FTNMX8530. The previous record high was 399.1 pence on Dec. 17, 2015.
Direct Line said its solvency capital ratio rose to 173 percent from 165 percent.
It also released 49 million pounds of reserve after a review of the additional costs from a lower Ogden discount rate indicated a smaller than expected increase to claims costs.
The Ogden discount rate was cut to minus 0.75 percent from 2.5 percent in February, effectively raising the amount insurers must pay out in the event of successful personal injury claims.
Direct Line, whose brands include Churchill, Green Flag and Privilege, said gross written premiums rose 5 percent to 1.69 billion pounds in the six months, with a 10 percent rise in gross written motor premiums.
Its in-force policies from continuing operations rose to 15.8 million, up 0.5 percent from a year earlier. It reported a combined operating ratio of 88.9 percent and maintained its target of 93 percent to 95 percent for 2017 and the medium term.
($1 = 0.7559 pounds)
Direct Line has been a loyal entrant into the UK Customer Experience Awards and the UK Digital Experience Awards. They have taken a number of awards home with them over the years and we hope they will continue to do so in the future.
Reporting by Noor Zainab Hussain and Arathy S Nair in Bengaluru; editing by Jason Neely and David Clarke
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