Direct Line Insurance Group (DLG) H2 2023 earnings summary

Executive summary

• Pricing actions lifted Motor written profitability to above 10% in H2 2023, but low-margin business earned through the year left ongoing operations with a £190m operating loss.

• Home, Rescue and Commercial performed well; non-Motor NIM was 12.2%. Capital resilience recovered to a 201% solvency ratio before dividend.

Financial highlights

• Ongoing GWP and associated fees rose 27.1% to £3,106m; insurance service result was a £212m loss versus a £24m loss in 2022.

• Profit before tax was £277m, including a £444m gain on disposal of brokered Commercial business; profit after tax was £223m versus a £232m loss in 2022.

• EPS was 15.9p versus a 19.1p loss; ongoing operating loss was £190m versus £6m in 2022.

• Net investment income rose to £179m from £115m; net fair value gains were £124m versus £343m losses in 2022.

Outlook and guidance

• Motor’s higher earned premiums are expected to deliver a mechanical 12-point improvement in current-year NIM versus H2 2023; 2024 is expected to be a transition year for Motor NIM.

• Target at least £100m of cost savings by exit 2025; additional Motability and amortisation costs of c.£50m in 2024, with the expense ratio expected to remain broadly stable.

• Weather-normalised NIM target raised to 13% for 2026, including 4–5 points of expected margin accretion from quick wins and refreshed strategy.

• Investment income yield expected at c.3.8% in 2024 and c.3.9% in 2025; refreshed strategy to be announced at the July capital markets day.

• February YTD ongoing GWP grew 17%; Motor rose 21% with policy count 1.6% lower, while Home grew 14% with modest own-brand policy growth.