Direct Line targets £100m savings to ensure growth
NEWLY-listed insurance group Direct Line, which operates a large call centre operation in Birmingham, is targeting £100m cost savings to stay on target for growth, it has said.
In its first stament since listing last month, the group said its operating profit from ongoing operations for the first nine months of the year rose 3% on last year to £347.9m (2011: £337.8m).
The number of in-force has reached 20.1m, up 4% since the beginning of the year (2011: 19.4m). Motor and Home policies have been broadly stable with growth coming in the Rescue and other personal lines, it said.
Operating profit from ongoing operations for the third quarter 2012 reached £123.7m, a 4% decline compared with Q3 last year which it said reflected lower investment returns partially offset by a better underwriting result.
It said the listing of the business last month had been successful and steps were now in place to deliver approximately 50% of its 2014 target of £100m gross annual cost savings.
Part of this has involved a head office restructure which has seen the loss of 70 leadership posts.
Paul Geddes, CEO of Direct Line Group, said: “These are our first quarterly results as a listed company and we are pleased to report continued progress on our strategy.
“Against the backdrop of a competitive market and subdued investment returns, we continue to focus on disciplined pricing and underwriting, delivering claims improvements and lowering our expenses through our cost savings initiatives. This together with the improved capital structure and performance helped to increase our proforma return on tangible equity to 13.5% for the first nine months of 2012.
“We continue to make good progress on the initiatives that will deliver our previously announced target of reducing gross annual costs by £100m in 2014. As part of these initiatives, we have undertaken a significant simplification of our head office, including the loss of around 70 senior leadership roles. These changes, combined with previous actions, mean we have now announced approximately 50% of our 2014 cost saving target.”
The group said the UK personal lines market remained competitive so in the current environment, it would continue to focus on its strategy of maintaining margin over volume.
“With the recent announcement relating to further delivery against its £100m gross annual cost saving target and continued benefits arising from its claims transformation plan, the group continues to make progress towards its 98% combined operating ratio target for ongoing business in 2013,” it said.
