Nov 1 Direct Line Insurance Group,
Britain's largest motor insurer, reported a 6 percent rise in
third-quarter operating profit, and expected restructuring costs
for this year and next to be 12 percent lower than anticipated.
Direct Line, spun out of Royal Bank of Scotland in a
787 million pound float last year, said it expected aggregate
restructuring and other one-off costs in 2013 and 2014 to be
about 220 million pounds ($353.5 million), 30 million pounds
lower than previously expected.
State-backed RBS floated nearly a third of Direct Line's
shares last October, fulfilling conditions of a government
bailout during the 2008 financial crisis that left the bank 82
percent state-owned. Direct Line promised shareholders before
its London float that it would restructure itself.
The company has a greater ability to cut costs than peers,
and it is expected it to meet its 2014 target cost base with
ease, said RBC Capital Markets analyst Gordon Aitken in a note.
"The quarterly run rate of 260 million pounds is already
close to the 2014 target of 250 million pounds, even though the
efficiency plan extension was only announced in June 2013,"
The insurer, whose brands include Churchill, Privilege and
the Green Flag roadside recovery service, said in June that it
planned to axe about 2,000 jobs and trim 130 million pounds in
annual costs by 2014 to remain competitive in the face of
intense competition from price-comparison websites.
The company said on Friday that operating profit from
ongoing operations rose to 131.2 million pounds in the three
months ended Sept. 30 from 123.7 million pounds a year earlier,
driven by higher net investment gains.
While underwriting profits fell about 7 percent to 26.5
million pounds, net investment gains more than doubled to 14.6
million pounds during the period.
Numis Securities analyst Nick Johnson said investment
earnings were stronger than expected, but were offset by a
slight shortfall in underwriting profit due to German hail
losses of 9 million pounds.
"Any disappointment on underwriting is more than offset by
positive news elsewhere," Morgan Stanley analyst Marcus Rivaldi
said in a note to clients.
Net insurance claims fell 7.2 percent to 547.7 million
Direct Line said it was too early to assess claims costs
from the St. Jude's Day storm with certainty, but they were
likely to fall within its fourth-quarter expectation of about 25
million pounds from major weather events.
The company added that its vehicle-tracking devices would
become increasingly important in the UK motor market and it was
installing about 400 devices each week.
The Financial Times reported on Thursday that Direct
Line was in advanced talks to sell a telematics business to a
private equity house. ()
If it goes ahead with the disposal, Direct Line would retain
other telematics-related interests, including a mobile phone app
it launched in June, FT said.
Shares in Direct Line were trading up 2 percent at 229.4
pence at 0943 GMT on the London Stock Exchange. The stock was
among the top percentage gainers on the FTSE-250 Midcap Index