Profit Rises 14% For Direct Line Insurance Group PLC

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.Direct Line 2

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%.

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Mark does not own shares in any company mentioned.