Direct Line Group stated that the reduction in operating profit alongside £15m of restructuring and one-off costs as the group invests £60m in cost-saving initiatives across 2019 and 2020
Direct Line Group CEO Penny James. (Credit: Direct Line Insurance Group plc.)
Direct Line Group, a UK-based insurance company, has reported a profit before tax of £236.4m for the first half (H1) of 2020, a 9.5% decrease compared to £261.3m for the corresponding period of last year.
Direct Line Group earned a gross written premium of £1.58bn for the first half of 2020, a 0.4% increase compared to £1.57bn for the same period of last year.
The company stated that the gross written premiums improved by 4.7% during the first quarter (Q1), but were largely offset by lower sales in motor and rescue division in the second quarter (Q2) due to the Covid-19 pandemic.
Direct Line invested in initiatives supporting Covid-19, increasing operating expenses
The UK-based insurance firm has reported operating expenses of £372m for the first half, which were £9m higher than last year’s expenses. The company claims to have invested in initiatives to support Covid-19 uncertainty.
Direct Line stated that though there was an increase in levy costs by £3m, yet underlying operating expenses have broadly been stable. The firm is also planning to deliver a 20% expense ratio by 2023.
Direct Line Group CEO Penny James said: “We have launched initiatives with an estimated investment of £80 to £90 million to support our customers, people and local communities through the uncertainty caused by Covid-19.
“When the Covid-19 pandemic hit, we prioritised phone lines for existing customers, created new online journeys and offered additional value through various initiatives including mileage refunds and payment deferrals.”
The operating profit for the period was reported as £265m, a 3.4% decrease compared to £274.3m from the same period last year. The insurer stated that the fall in the H1 operating profit was due to an increase in weather costs of £30.4m.
James further added: “We did not access Government support and chose to protect all roles and salaries at the Group through to the autumn and our Community Fund is providing £3.5million to help people in communities across the UK.
“Despite the significant disruption caused by Covid-19 we have continued the trading momentum we saw at the end of 2019, growing direct own brands by 2% and improving the quality of our earnings with an improved current-year loss ratio.
“We have also demonstrated financial resilience in the face of Covid-19 disruption, which has enabled us to declare our 2020 interim dividend as well as a catch-up of our cancelled 2019 final dividend.”