Direct Line lifts FY profit and dividends despite competition

26th Feb 2014 08:59

Newly floated car and house insurer Direct Line unveiled higher annual profits, hiked its dividend and pledged to target profit margins despite increased competition.Direct Line, which was spun out of Royal Bank of Scotland and floated in 2012, increased operating profit in the year to December 31st by 14.2% to £526.5m.It raised its final dividend per share 5% to 8.4p and gave a second special interim dividend of 4p per share, taking total dividends for 2013 to 20.6p per share.The group said good progress continued in 2013. Improved pricing capability and claims management, as well as benefits arising from recent legal reforms, helped it cut average prices for customers by 3% during 2013.Its home insurance business faced fewer bad weather claims during the year, although they rose significantly in the final quarter.The firm expected claims from UK flooding to be up to £90m, compared to usual expected claims in an average year from major weather events of about £80m.Chief Executive Paul Geddes said UK motor and home markets remain highly competitive and competition had also intensified in the Italian motor market following a period of falling claims frequency.But he added: "In this trading environment, the group will continue to prioritise targeting appropriate margins even if this is at the expense of premium volumes."Shares rose 2.9p to 263.9p at 09:09 in London.PW