Profit Rises 14% For Direct Line Insurance Group PLC

Direct Line Insurance Group PLC (LON: DLG) “delivers” for shareholders in 2013.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 21 March, 2014 9:49 am GMT

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Shares in Direct Line (LSE: DLG) were flat at 248p during early trade this morning, after the insurance company announced a 14% increase in operating profit to £527m.

Direct Line, which owns the brands Churchill and Green Flag, also announced a 5% increase in the final dividend to 8.4p for a total payout of 20.6p this year.

The firm said that operating expenses fell 9% to a little over £1bn due to benefits from the group’s cost savings plan.

In addition, claims from major weather related events fell to £69m from £105m a year earlier.

Looking ahead Direct Line has an ongoing target of a 15% return on tangible equity.

The chief executive, Paul Geddes, commented:

“We have continued to make good progress on our strategic priorities, helping us to achieve our 2013 financial targets in highly competitive markets.”

““In UK Motor, our improved pricing capability and claims management, as well as benefits arising from recent legal reforms, enabled us to reduce average prices for customers by 3% during 2013. In Home, recent UK weather events have emphasised the importance of insurance.”

“Looking forward to 2014, we will continue to pursue our strategic priorities and self-help agenda to enable us to deliver benefits for our customers and shareholders.”

Today’s announcement revealed earnings per share of 25p which means, based on the current price, shares in Direct Line trade on a P/E of 10. Based on forecasts for 2014 the shares offer a prospective income of 5.2%.

Of course, the decision to ‘buy’ is solely down to you.