Direct Line Insurance : Trading Update for the first quarter of 2016

Direct Line Insurance Group plc
Trading Update for the first quarter of 2016

Direct Line Group's Trading Update relates to the first quarter ended 31 March 2016, and contains information to the date of publication.

Highlights

• Gross written premium for ongoing operations 4.2% higher than the first quarter of 2015, with continued growth in Motor
• Motor and Home own brands in-force policies grew for a second successive quarter. Continued growth in Green Flag direct and Commercial direct
• Trading benefited from investment in Direct Line brand differentiation and proposition initiatives. Continued strong customer retention rates in Motor and Home
• Investment income yield maintained, with a significant improvement in the available-for-sale reserve. Net investment losses of £7.7 million mainly reflect decisions to sell certain assets in the high-yield portfolio
• Continued expectation to achieve a 2016 combined operating ratio in the range of 93% to 95% for ongoing operations, assuming a normal annual level of claims from major weather events

Paul Geddes, CEO of Direct Line Group, commented

'This was another quarter of top line growth for Direct Line Group, as customers responded favourably to the many improvements we have made to the business over the last few years. For the rest of 2016, we will aim to build on these foundations, while keeping a firm control of our costs, and we reiterate our combined operating ratio target of 93% to 95% for ongoing operations.'

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Notes:

1. Ongoing operations include Direct Line Group's ongoing divisions: Motor, Home, Rescue and other personal lines and Commercial. It excludes discontinued operations, the Run-off segment and restructuring and other one-off costs.

2. Combined operating ratio is the sum of the loss, commission and expense ratios. The ratio measures the amount of claims costs, commission and expenses compared to net earned premium generated.

Forward-looking statements disclaimer

Certain information contained in this document, including any information as to the Group's strategy, plans or future financial or operating performance, constitutes 'forward-looking statements'. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms 'aims', 'anticipates', 'aspire', 'believes', 'continue', 'could', 'estimates', 'expects', 'guidance', 'intends', 'may', 'mission', 'outlook', 'plans', 'predicts', 'projects', 'seeks', 'should', 'strategy', 'targets' or 'will' or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include statements regarding the intentions, beliefs or current expectations of the Directors concerning, among other things: the Group's results of operations, financial condition, prospects, growth, strategies and the industry in which the Group operates. Examples of forward-looking statements include financial targets, which are contained in this document specifically with respect to return on tangible equity, the Group's combined operating ratio, cost reduction and investment income yield. By their nature, all forward-looking statements involve risk and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future or are beyond the Group's control.

Forward-looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and the development of the business sector in which the Group operates may differ materially from those suggested by the forward-looking statements contained in this document, for example directly or indirectly as a result of, but not limited to, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities (including changes related to capital and solvency requirements or the Ogden discount rate), the impact of competition, currency changes, inflation and deflation, the timing impact and other uncertainties of future acquisitions, disposals, joint ventures or combinations within relevant industries, as well as the impact of tax and other legislation and other regulation in the jurisdictions in which the Group and its affiliates operate. In addition, even if the Group's actual results of operations, financial condition and the development of the business sector in which the Group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods.

The forward-looking statements contained in this document reflect knowledge and information available as of the date of preparation of this document. The Group and the Directors expressly disclaim any obligations or undertaking to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable law or regulation. Nothing in this document should be construed as a profit forecast.

Neither the content of Direct Line Group's website nor the content of any other website accessible from hyperlinks on the Group's website is incorporated into, or forms part of, this document.

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