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Direct Line Insurance HY Profit Down; Declares Special Dividend

Direct Line Insurance Group Plc (DLG.L) reported that its profit attributable to owners of the company for the six months ended 30 June 2020 declined to 192.6 million pounds or 13.4 pence per share from 211.8 million pounds or 14.7 pence per share in the previous year.

Profit before tax was 236.4 million pounds, down from 261.3 million pounds last year, following the reduction in operating profit alongside 15 million pounds of restructuring and one-off costs as the Group invests 60 million pounds in cost saving initiatives across 2019 and 2020 as outlined at the Capital Markets Day in November 2019.

Operating profit decreased by 9.4 million pounds to 264.9 million pounds from the prior year, predominantly due to the major weather events in first-half partially offset by the change to the Ogden discount rate to minus 0.25% in last year.

Underwriting profit increased by 33.0 million pounds to 143.6 million pounds primarily due to the favourable impact that the Covid-19 pandemic had on Motor and Rescue claims partially offset by a £48.4 million reduction in prior year reserve releases, the effect of the major weather events in early 2020 on Home and Commercial and Covid-19-related claims on travel and business interruption policies.

Total income decreased to 1.60 billion pounds from 1.65 billion pounds.

The company has now declared an interim dividend of 7.4 pence alongside a further special dividend of 14.4 pence to replace the cancelled 2019 final dividend. The company paid interim dividend of 7.2 pence in 2019.

For 2020, the company reiterated its target of a combined operating ratio of 93% to 95% normalised for weather and anticipate its restructuring costs of 60 million pounds over 2019 and 2020 will be incurred in full as we strive to maximise the opportunity for operational efficiencies.

The Group expects a net investment yield of approximately 1.8% in 2020.

The company reiterated its target of achieving at least a 15% return on tangible equity per annum over the long term.

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