There's good international growth for Direct Line Insurance Group PLC (LON:DLG), but the UK sees a fall-off in premiums.
Direct Line Insurance Group (LSE: DLG) -- the company that operates the Direct Line, Churchill and Green Flag brands -- is down 1.5% so far this morning, following the publication of its results for the first quarter to 31 March 2013. The fall comes despite a reported 33% increase in operating profit, up to £107.5m from 2012's £80.9m.
However, gross written premiums were 4.5% lower, due to competitive market conditions in the UK, with a 14.3% drop in gross written premiums in the company's Motor business, following a decision to reduce exposure to young drivers and on-going refinements to "gender neutral" pricing models. But good growth was reported in Direct Line's international business, especially in Germany.
The company also stated that it remains on track to achieve £100m of gross annual cost savings during 2014, and that it will continue to target underwriting profitability, even if it has to be at the expense of volume.
Paul Geddes, Direct Line Group's CEO, commented
"The UK market remains competitive, particularly in motor. We made some deliberate choices in the quarter that had the effect of reducing our motor premiums. We believe these choices achieved an appropriate balance between managing risk and protecting value.
"Momentum across our five strategic pillars was sustained, and independent control of our cost base continues to present us with opportunities to improve efficiency.
"We continue to monitor and support the implementation of motor legal reforms, the impact of which we expect to be at least net neutral in the medium term. Reduced claims arising from these reforms should, over time, contribute to lower premiums for motorists, especially young drivers."
Although it's fallen back almost 10% since its post-IPO high earlier this year, Direct Line's share price is still up over 8% on its flotation value in October last year. Furthermore, the company's estimated yield for 2013 currently stands at just over 6%, forecast to rise to over 6.5% in 2014, which makes it very hard for income-seeking investors to ignore.
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> Jon doesn't own shares in Direct Line Insurance Group.