Direct Line Regulatory News (DLG)

Trading Update for Q3 20181

6 November 2018

On track to deliver strategic and financial targets

Paul Geddes, CEO of Direct Line Group, commented:

"The Group's performance during the quarter was robust in a competitive market. We continued to grow our direct own brands2 in-force policies while maintaining discipline on loss ratios. We are delivering our key strategic priorities, including strong growth in our direct Rescue and Commercial businesses, Green Flag and Direct Line for Business, and we are on track to begin rolling out our new personal lines systems in 2019.

"Overall, we are making good progress on our strategic priorities and are on course to meet our 2018 and medium-term financial targets3."

Results summary: Q3 2018

Q3 2018£m

Q3 2017£m

Change

Gross written premium:

Motor

456.4

462.0

(1.2%)

Home: own brands

115.3

114.3

0.9%

Home: partnerships

51.4

102.7

(50.0%)

Of which Nationwide and Sainsbury's

3.8

51.1

(92.6%)

Rescue and other personal lines

113.4

110.0

3.1%

Commercial

118.0

118.2

(0.2%)

Of which Direct Line for Business

35.3

32.8

7.6%

Total

854.5

907.2

(5.8%)

Of which direct own brands2

610.4

606.6

0.6%

30 Sep 2018 '000

30 Sep 2017 '000

Change

In-force policies:

15,183

15,775

(3.8%)

Of which direct own brands2

7,078

6,838

3.5%

Highlights

·

Motor in-force policies grew by 1.9% (own brands: 3.0% growth) compared to the prior year, driven by strong retention levels, particularly in Direct Line. Premiums were lower by 1.2% (own brands: 0.5% lower) as a result of lower average premiums, primarily due to changes to propositions in the price comparison website channel, partially offset by positive rate movements. Underlying claims inflation was at the upper end of the Group's long-term expectation of 3% to 5%.

·

Home own brands in-force policies grew by 0.3% and premiums grew by 0.9% compared to the prior year. Retention levels improved in the quarter while new business volumes declined. Premiums in the partnerships channel decreased by £51.3m, primarily due to the exit from the Nationwide and Sainsbury's partnerships. The Group expects claims inflation to remain within the Group's long-term expectation of 3% to 5% and that subsidence claims, including those associated with the dry summer weather in the UK, will not materially be above normal annual expectations.

·

The Group's investment in its direct Rescue and Commercial brands, Green Flag and Direct Line for Business, continued to make good progress, as premiums grew by 13.1% and 7.6% respectively. In Commercial, NIG and other premiums fell by 3.2% due, in part, to exiting several larger risks which were not expected to achieve target returns.

For further information, please contact:

Notes:

1. Direct Line Group's Trading Update relates to the three months and nine months ended 30 September 2018, and contains information to the date of publication.

2. Direct own brands include Home and Motor under the Direct Line, Churchill and Privilege brands, Rescue under the Green Flag brand and Commercial under the Direct Line for Business brand.

3. For 2018 and over the medium-term, the Group targets a 93% to 95% combined operating ratio, assuming a normal level of claims and no change in the Ogden discount rate, supported by reductions in expense and commission ratios and an ongoing target of achieving at least a 15% return on tangible equity. For 2018, the Group expects overall investment income of in the region of £150 million.

Results summary: 9 months to 30 September 2018

9 months 2018£m

9 months 2017£m

Change

Gross written premium:

Motor

1,296.2

1,286.4

0.8%

Home: own brands

309.7

307.5

0.7%

Home: partnerships

147.7

297.6

(50.4%)

Of which Nationwide and Sainsbury's

9.5

148.7

(93.6%)

Rescue and other personal lines

323.3

323.3

-

Commercial

387.9

386.6

0.3%

Of which Direct Line for Business

99.3

92.9

6.9%

Total

2,464.8

2,601.4

(5.3%)

Of which direct own brands2

1,709.4

1,670.5

2.3%

Corporate information

Direct Line Insurance Group plc is a public limited company registered in England & Wales, number 02280426. The address of the registered office is Churchill Court, Westmoreland Road, Bromley BR1 1DP.

The Annual Report & Accounts 2017 is available at: www.directlinegroup.com

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