The shares of Direct Line Insurance Group PLC (LON: DLG) may yield 5.7%.
The shares of Direct Line Insurance (LSE: DLG) climbed 1p to 212p during early London trade this morning after the company declared its first dividend following its separation from Royal Bank of Scotland last year.
The insurer will pay an 8p per share final dividend to shareholders in June, and the shares will go ex-dividend next week.
Direct Line said the dividend implied a pro-forma annual payout equivalent to 55% of underlying post-tax profits. Therefore, with reported earnings coming in at 21.8p per share, the full-year dividend would have been 12p per share had the company operated separately from RBS throughout all of 2012.
Direct Line's dividend news accompanied full-year results that showed underlying net earned premiums falling 5% to £3.7bn and underlying operating profits advancing 9% to £461m.
The profit improvement was due to a £72m underwriting loss transforming into a £28m underwriting profit. The company cited "pricing actions" and "improvements to risk mix" for the turnaround.
Today's figures also showed the number of in-force policies gaining 1% to 19.6 million and net tangible assets falling from 217p to 161p per share.
Paul Geddes, Direct Line's chief executive, said:
"We have made good progress since the beginning of our transformation plan… However, there is no room for complacency as we face a competitive market, particularly in UK motor, where there is also expected to be significant legal reforms."
"Our transformation plans target further benefits and we have made substantial progress on our target to achieve £100 million of gross annual cost savings in 2014. We will maintain our firm focus on value and underwriting discipline, consistent with achieving our 98% combined operating ratio target for 2013."
Mr Geddes also said he aimed to raise Direct Line's dividend annually in real terms from 2013.
Based on today's results, Direct Line is valued at 10 times profits and offers a possible 5.7% dividend income.
Of course, whether the current rating, today's maiden dividend and the general outlook for the insurance industry all combine to make Direct Line a 'buy' remains your decision.
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> Maynard does not own any share mentioned in this article.