Direct Line Ins Grp DLG Interim Management Statement Q3

  Direct Line Ins Grp (DLG) - Interim Management Statement Q3

RNS Number : 1862Q
Direct Line Insurance Group PLC
02 November 2012




Interim management statement for Direct Line Insurance Group plc for the three
                 months and nine months to 30 September 2012

                                                                             

                                                               2 November 2012



Financial highlights



·Operating profit from  ongoing operations^1  of £347.9  million for  the 
nine months to 30  September 2012, up  3% (nine months  to 30 September  2011: 
£337.8 million)

·In-force policies of 20.1 million, up 4% since the beginning of the year
(31 December 2011: 19.4 million) with Motor and Home broadly stable and growth
in Rescue and other personal lines

·Combined operating ratio^2 for ongoing operations of 99.7% for the  nine 
months to 30  September 2012,  an improvement against  the nine  months to  30 
September 2011 (101.9%) driven principally by a significant improvement in the
loss ratio

·Annualised return on tangible equity^3 ("RoTE") from ongoing  operations 
of 10.6% for the nine months to 30 September (proforma RoTE: 13.5%^4)

·Operating profit  from  ongoing operations  for  third quarter  2012  of 
£123.7 million,  down 4%  compared with  third quarter  2011 reflecting  lower 
investment returns partially offset by a better underwriting result; the third
quarter 2012 combined operating ratio of 96.9% compared with 100.5% for  third 
quarter 2011, driven by improvements in both the loss and expense ratios

·Net asset value per  share of 187.2 pence  and tangible net asset  value 
per share of 159.7 pence  per share (31 December  2011: 240.9 pence and  216.5 
pence, respectively)



Business highlights



·Successful separation from RBS Group  and subsequent IPO of Direct  Line 
Group in early October

·Steps announced to deliver approximately 50% of the 2014 target of  £100 
million gross annual cost savings^5

·Continued rollout of claims transformation plan with over 400,000  Motor 
and Home claims now on the new claims system. Benefits from plan  contributing 
to prior year reserve releases.



Paul Geddes, CEO of Direct Line Group, commented



"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 £100 million  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."





For further information, please contact:

                              

Neil Manser                    Rob Bailhache
Director of Investor Relations Director of Communications
Tel: +44 (0)20 8285 3134       Tel: +44 (0)20 8313 5850





Notes:

(1) Ongoing operations

Ongoing operations include Direct Line Group's (the "Group") ongoing segments:
Motor, Home, Rescue and other  personal lines, Commercial and  International. 
It excludes Run-off and Restructuring and other one-off costs.



(2) Combined operating ratio

Combined operating ratio is  the sum of net  insurance claims, commission  and 
other operating expenses expressed as a percentage of net earned premium. The
ratio excludes  instalment  income,  other  operating  income  and  investment 
income.



(3) Return on tangible equity ("RoTE")

Adjusted to exclude  Run-off operations  and Restructuring  and other  one-off 
costs; based on average  tangible invested equity,  adjusted for the  weighted 
average value of dividends paid in the period and using UK standard tax rate.



(4) Proforma RoTE

Assumes that  the capital  actions  taken by  Direct  Line Group  (£1  billion 
dividend payment and £500  million Tier 2 debt  issued) occurred on 1  January 
2012.



(5) £100 million gross annual cost savings

Cost savings  expected  to  be  recognised  in  operating  costs  for  ongoing 
operations and claims handling expenses in 2014.



(6) NIG

NIG is the broker facing brand of the Commercial segment of the Group.





Forward-looking statements



Certain information contained in  this announcement including any  information 
as to the Group's strategy, plans or future financial or operating performance
constitute "forward-looking statements". These forward-looking statements  may 
be identified by the use  of forward-looking terminology, including the  terms 
"aims", "anticipates", "believes",  "estimates", "expects", "intends",  "may", 
"plans", "predicts", "projects", "seeks", "should", "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 
announcement and  include  statements  regarding the  intentions,  beliefs  or 
current expectations of  the Directors concerning,  amongst other things:  the 
Group's  results  of  operations,  financial  condition,  prospects,   growth, 
strategies and the industry in which the Group operates.



By their nature,  forward-looking statements involve  risks 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 announcement. 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 announcement speak only as of
the date of this announcement. The Group expressly disclaims 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, regulation or accounting standard, or the
Listing Rules or the Disclosure and Transparency Rules of the FSA.

Overview



Direct Line Insurance Group plc ("Direct Line Group" or the "Group") continues
to progress towards its target of 15% return on tangible equity.



In a competitive market,  the Group continues to  focus on margin  improvement 
over volume demonstrated by stable in-force policies for Motor and Home and  a 
3% improvement in operating profit from ongoing operations for the nine months
ended 30 September 2012.  The combined operating ratio  reduced to 99.7%  for 
the nine months ended 30 September  2012 (same period 2011: 101.9%) and  96.9% 
for the  third quarter  2012 (third  quarter 2011:  100.5%) both  driven by  a 
significant improvement  in the  loss ratio  as the  changes to  risk mix  and 
claims transformation plan deliver benefits.



In October 2012 RBS  Group sold 520.8 million  ordinary shares in Direct  Line 
Group completing a successful initial public offering (IPO). This represented
34.7% of the total share capital and generated gross proceeds of £911  million 
received by RBS Group.





Business update



Following the renewal and expansion of partnership agreements with  Nationwide 
Building Society and  Sainsbury's Bank in  the first half  of 2012, the  Group 
signed an arm's length,  five year distribution agreement  with RBS Group  for 
the continued  provision of  general insurance  products post  divestment.  In 
September, a new  marketing campaign was  launched for the  Direct Line  brand 
further  differentiating  its  service   led  proposition.  These   activities 
reinforce Direct  Line Group's  multi-brand, multi-product  and  multi-channel 
personal lines business model in the UK.



The claims transformation programme has  continued during the quarter and  all 
new Motor  and  own brand  Home  claims are  now  handled on  the  new  claims 
management system. Over  400,000 claims  are on  the system  and benefits  are 
being realised as a result of the improved claims processes including  shorter 
settlement times and improved legal case management.



During  the  quarter,  Commercial  continued  to  develop  its  new  e-trading 
platform. This will enable NIG  to provide a wider  range of SME products  for 
brokers on  an  electronic  trading platform  and  drive  greater  operational 
efficiency, whilst  also  significantly  improving  the  broker  and  customer 
experience.



International continued to consolidate its position with 1.4 million  in-force 
policies. Gross written premium  for the nine months  ended 30 September  2012 
was up 5%  in local currency  on the same  period last year.  This followed  a 
period of strong growth in 2010  and 2011. International continues to  benefit 
from its multi-channel distribution model including partnerships.



The Group  continues to  focus on  reducing operational  costs, targeting  the 
delivery of gross annual cost and  claims handling savings of £100 million  in 
2014 through overall improvements in operational efficiency, continued efforts
to simplify  its internal  organisational structure  and better  managing  its 
customer acquisition  costs. Steps  already announced,  including measures  to 
reduce costs in central  functions and the closure  of our Teesside office  as 
well as  the  reduction  of  around 70  senior  leadership  roles  across  the 
organisation, contribute to approximately 50%  of the cost saving target  with 
another 20% to be delivered from marketing  in 2013. Plans are in an  advanced 
state for the remaining 30%.



Over the last 18 months, a  number of regulatory reviews and initiatives  have 
been announced  by  the  UK  Government,  the  Ministry  of  Justice  and  the 
Competition Commission in relation to the motor insurance industry. The  Group 
is actively  engaged with  major  stakeholders and  continues to  support  the 
introduction of a coherent set of  reforms. This was reinforced by the  recent 
reversal of an earlier Court of Appeal decision (Simmons v Castle) in relation
to the timing of a 10% uplift in general damages.



Separation



From 1 July 2012, the Group  has been operating on a substantially  standalone 
basis  with  independent   corporate  functions   and  governance,   following 
successful  implementation  of   a  comprehensive   programme  of   separation 
initiatives. During the first nine months of the year these included launching
a new  corporate identity  and  the Direct  Line  Group Board  becoming  fully 
compliant  with   the  UK   Corporate   Governance  code   following   further 
non-executive director appointments.  New contracts of  employment have  been 
agreed and issued to staff, independent  HR systems have been implemented  and 
an arm's  length transitional  services agreement  has been  reached with  RBS 
Group for residual services.





Outlook



The UK personal  lines market  remains competitive. In  this environment,  the 
Group will  continue to  focus  on its  strategy  of maintaining  margin  over 
volume. With the recent announcement relating to further delivery against  its 
£100 million 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.

Financial summary



                                        Quarter ended      Nine months ended
                                        30 Sep     30 Sep    30 Sep     30 Sep

                                         2012      2011     2012      2011

                                     £ Million £ Million £ Million £ Million

                                                                          
Gross written premium (ongoing        1,026.8   1,080.4  3,085.2   3,173.6
operations)
Net earned premium (ongoing             929.5     983.1  2,790.3   2,926.8
operations)
Underwriting result                      28.4      (5.2)      8.4     (55.4)
Other operating income                   48.0      63.6    146.8     197.8
Investment return                        47.3      69.9    192.7     195.4
Operating profit from ongoing           123.7     128.3    347.9     337.8
operations
Run-off segment                          (3.0)       0.9     (1.8)     (11.5)
Restructuring and other one-off         (28.2)     (20.8)   (136.9)     (30.6)
costs
Operating profit                         92.5     108.4    209.2     295.7
Finance costs and other                 (10.1)      (0.7)    (20.3)      (0.5)
Profit before tax                        82.4     107.7    188.9     295.2
Tax                                     (23.4)     (26.6)    (47.1)     (71.9)
Profit for the period                    59.0      81.1    141.8     223.3
Of which ongoing operations^1            85.8      93.8    247.3     246.7
Key metrics
Ongoing operations:
Loss ratio                              66.8%     71.1%    67.2%     73.2%
Commission ratio                         9.2%      7.5%     8.7%      7.6%
Expense ratio                           20.9%     21.9%    23.8%     21.1%
Combined operating ratio                96.9%    100.5%    99.7%    101.9%
Investment income yield                                       2.0%      2.3%
Investment return yield                                       3.1%      2.9%
Earnings per share (pence)                                     9.5      14.9
Adjusted earnings per share^1                                 16.5      16.4
(pence)
RoTE (annualised)                                            10.6%       n/a
Proforma RoTE (annualised)                                   13.5%       n/a



^1 Adjusted to exclude Run-off operations and Restructuring and other one-off
costs (using UK standard tax rate)



                                         As at
                                   30 Sep 31 Dec

                                     2012  2011

                                          
Net asset value per share (pence)    187.2 240.9
Tangible net asset per share (pence) 159.7 216.5







In-force policies and gross written premium - Ongoing operations



                                             As at
In-force policies (thousands)    30 Sep  30 Jun  31 Dec  30 Sep

                                  2012   2012   2011   2011

                                                           
Motor                            4,094  4,135  4,107  4,220
Home                             4,291  4,304  4,308  4,336
Rescue and other personal lines  9,771  9,693  9,151  9,600
Commercial                         466    460    422    410
International                    1,444  1,441  1,387  1,357
Total                           20,066 20,033 19,375 19,923



In-force policies  ("IFPs")  for  ongoing operations  increased  4%  from  the 
beginning of  the year  to 20.1  million. The  increase related  primarily  to 
Rescue and other  personal lines and  arose mainly from  travel policies  from 
packaged bank accounts.  Motor and Home  IFPs were broadly  stable during  the 
period.



Commercial continued  to grow  IFPs  through Direct  Line for  Business  which 
focuses on micro  and small  businesses. After a  period of  strong growth  in 
2011, International consolidated its position at 1.4 million IFPs.



                                   Quarter ended     Nine months ended
Gross written premium              30 Sep    30 Sep    30 Sep    30 Sep

                                    2012     2011     2012     2011

                                £ Million £ Million £ Million £ Million

                                        
Motor                              439.6    471.9  1,281.7  1,337.9
Home                               267.0    277.1    751.4    777.9
Rescue and other personal lines    104.0    106.7    303.3    299.2
Commercial                         103.7    100.9    333.5    332.8
International                      112.5    123.9    415.3    425.8
Total                            1,026.8  1,080.4  3,085.2  3,173.6



Gross written premiums of £3,085.2 million fell 3% compared to the nine months
to 30 September  2011 (£3,173.6  million). This was  predominantly driven  by 
Motor, due to lower  IFPs, reflecting risk mix  improvements during 2011,  and 
continued focus on disciplined  underwriting. International fell in  Sterling 
terms but  rose 5%  in local  currency.  Gross written  premium in  the  third 
quarter 2012 was 5% lower than the same quarter 2011.

Underwriting results - Ongoing operations



                         Quarter ended Nine months ended
Key ratios (%)           30 Sep 30 Sep   30 Sep   30 Sep

                          2012  2011    2012    2011

                                                    
Loss ratio                66.8%  71.1%    67.2%    73.2%
Commission ratio           9.2%   7.5%     8.7%     7.6%
Expense ratio             20.9%  21.9%    23.8%    21.1%
Combined operating ratio  96.9% 100.5%    99.7%   101.9%



The combined operating ratio from ongoing operations of 99.7% improved by  2.2 
percentage points compared with the nine months to 30 September 2011 (101.9%).
This was attributable  to a significant  improvement in the  loss ratio  which 
more than offset  an increase  in the  expense ratio.  The combined  operating 
ratio for  ongoing operations  for the  third quarter  2012 was  96.9%, a  3.6 
percentage point improvement on the same quarter in 2011.

^

The improvement in the  loss ratio was despite  approximately £100 million  of 
Home claims primarily  related to  freeze and  flood events  occurring in  the 
first nine months of 2012, of which £10 million related to the three months to
30 September  2012  (nine  months  to 30  September  2011:  approximately  £20 
million). Normally expected weather event claims for the first nine months  of 
the year are approximately £50 million.



Releases from prior year claims reserves contributed £286.8 million during the
nine months to 30 September 2012,  representing 10.3 percentage points of  net 
earned premium.  Favourable experience  in  Motor was  driven by  lower  than 
expected average claims costs  for small claims on  bodily injury on both  the 
personal  and  commercial  motor  books.  Releases  from  Motor  were  partly 
attributable to  benefits  arising  from  the  Group's  claims  transformation 
programme.



Releases from prior year claims reserves in the third quarter 2012 contributed
£58.4 million and  represented 6.3  percentage points of  net earned  premium, 
with  continuing  improvements   in  personal  Motor   bodily  injury   claims 
experience.



The increase in the expense ratio for the nine months ended 30 September  2012 
to 23.8% (nine months  ended 30 September 2011:  21.1%) reflected a  temporary 
increase in  costs including  central overhead  charges relating  to  building 
separate corporate functions.  The effect  of lower net  earned premium  added 
around 1 percentage  point to the  expense ratio for  ongoing operations.  The 
trend in the third  quarter has been  positive with an  expense ratio for  the 
third quarter 2012 of 20.9% which was 1.0 percentage point lower than the same
quarter in 2011 and 4.5 percentage points  lower than the first half of  2012. 
This is in line the Group's guidance of some improvement in the expense  ratio 
in the second half of 2012.





Other operating income - Ongoing operations



                                          Quarter ended     Nine months ended
Other operating income                    30 Sep    30 Sep    30 Sep    30 Sep

                                           2012      2011     2012      2011

                                       £ Million £ Million £ Million £ Million

                                               
Instalment income                          31.6     34.5     93.7    104.5
Other operating income                     16.4     29.1     53.1     93.3
Total instalment and other operating       48.0     63.6    146.8    197.8
income



Instalment and other operating income of £146.8 million for the nine months to
30 September 2012  fell 26% on  the same period  last year (£197.8  million). 
This was due  to the cessation  of fee  income in Motor  relating to  managing 
certain elements of the run-off of the Tesco Personal Finance ("TPF") business
and lower instalment income reflecting lower IFPs in Motor period on period.

Investment return - Ongoing operations



                                       Quarter ended     Nine months ended
Investment return                      30 Sep    30 Sep    30 Sep    30 Sep

                                        2012      2011     2012      2011

                                    £ Million £ Million £ Million £ Million

                                            
Investment income                       40.4     52.6    137.7    161.3
Net realised and unrealised gains^1      6.9     17.3     55.0     34.1
Total investment return                 47.3     69.9    192.7    195.4



^1 Unrealised gains relate to derivative hedges and property



Investment return of £192.7 million  was 1% lower than  the nine months to  30 
September 2011. This reflects lower investment yields and higher cash holdings
partially offset by  higher realised  gains. Investment return  in the  third 
quarter 2012 was down 32%  at £47.3 million compared  with the same period  in 
the previous year as a result of  lower investment yields on the fixed  income 
portfolio as well as lower realised gains.





                                Nine months ended
Investment yields - Total Group   30 Sep   30 Sep

                                   2012     2011

                                               
Investment income^2                 2.0%     2.3%
Investment return^3                 3.1%     2.9%



^2 Investment income excludes net gains and is shown on an annualised basis.

^3 Investment return includes net gains and is shown on an annualised basis.



The income yield on  the total portfolio (including  Run-off) was 2.0% in  for 
the nine months to 30 September 2012 (nine months to 30 September 2011:  2.3%) 
reflecting a  higher  proportion  of  cash  holdings  and  lower  reinvestment 
yields. High cash holdings  are due to rebalancing  the portfolio within  the 
ongoing operations. In  addition, the  investment assets  supporting the  TPF 
liabilities are now held in cash. Over time the cash holdings are expected to
reduce as longer term investments are made in line with the Group's investment
strategy.





                                                         As at
Financial investments and cash - Total Group    30 Sep    30 Jun    31 Dec

                                                 2012      2012      2011

                                             £ Million £ Million £ Million

                                                     
Government bonds                              2,657.8  2,947.1  3,481.2
Corporate bonds                               4,203.7  3,916.4  3,843.2
Mortgage backed securities                       95.7    169.3    283.5
Other investment funds                              -        -    382.8
Total available-for-sale investments          6,957.2  7,032.8  7,990.7
Loans and receivables                           753.1    483.0  1,489.6
Total financial investments                   7,710.3  7,515.8  9,480.3
Cash and cash equivalents                     1,854.6  2,565.6  1,379.8
Property                                         33.2        -     69.5
Total financial investments and cash          9,598.1 10,081.4 10,929.6



The  Group's  investment  portfolios  comprised  primarily  investment   grade 
corporate bonds, cash and gilts. During  the quarter, the Group continued  to 
restructure its portfolio through a further net purchase of £287.3 million  in 
corporate bonds and £33.2 million in property.



At 30 September 2012, exposure to peripheral Eurozone bonds was £52.0 million,
less than  1%  of  the  portfolio, comprising  non-sovereign  debt  issued  in 
Ireland, Italy and Spain.





Operating profit - Ongoing operations



                          Quarter ended     Nine months ended
Operating profit          30 Sep    30 Sep    30 Sep    30 Sep

                           2012      2011     2012      2011

                       £ Million £ Million £ Million £ Million

                               
Underwriting result        28.4     (5.2)      8.4    (55.4)
Other operating income     48.0     63.6    146.8    197.8
Investment return          47.3     69.9    192.7    195.4
Operating profit          123.7    128.3    347.9    337.8



The operating  profit  for ongoing  operations  of  £347.9 million  was  a  3% 
increase on  the  nine months  to  30  September 2011  (£337.8  million).  The 
improvement was driven by the underwriting result. This was partially  offset 
by a lower contribution from other operating income.



Run-off and Restructuring and other one-off costs



The Run-off segment, which includes the  exited personal lines broker and  TPF 
businesses, made a loss  of £1.8 million  in the nine  months to 30  September 
2012 compared with a loss  of £11.5 million in  the same period 2011.  Reserve 
releases for the  nine months  to 30 September  2012 were  £65.2 million,  the 
majority of which related to TPF.



During the third quarter 2012,  the Group agreed with  TPF the level of  final 
reserves to be retained by  it in respect of  the run-off of remaining  claims 
under TPF policies  and finalised  certain other  matters arising  out of  the 
expiration of the distribution  arrangements. Following determination of  the 
reserves, the risks and rewards of the  run-off for this line of business  was 
transferred to the Group.  The Group intends, subject  to the consent of  the 
FSA, to repay the £258.5 million loan  to TPF, although currently this is  not 
expected to happen until 2013.



Restructuring and other one-off  costs of £136.9  million primarily relate  to 
activities associated with  separation and  divestment from RBS  Group. It  is 
currently  expected  that  for  the  whole   of  2012  these  costs  will   be 
approximately £170 million. In addition, given the good progress on its  cost 
initiatives, the Group now expects to incur in 2012 approximately £30  million 
of the  anticipated  £100 million  restructuring  cost relating  to  its  £100 
million gross annual cost saving plan.



Finance and other costs



Finance  costs  increased  to  £20.3  million  primarily  reflecting  interest 
associated with the £500 million Tier 2 debt issued in April 2012.



Profit and return on tangible equity



Overall pre-tax profit  for the nine  months to 30  September 2012 was  £188.9 
million with profit after tax of  £141.8 million (nine months to 30  September 
2011: £295.2 million and £223.3 million, respectively).



Annualised return on tangible equity for the period for ongoing operations was
10.6%. Had the capital actions taken by the Group in 2012 (£1 billion dividend
payment and £500  million Tier 2  debt issuance) occurred  on 1 January  2012, 
proforma annualised RoTE  from ongoing operations  for the nine  months to  30 
September 2012 would have been 13.5%^1.



^1 See note 4 to the financial highlights above





Earnings per share



Earnings per share  were 9.5  pence (nine months  to 30  September 2011:  14.9 
pence). Adjusted earnings per share^2 for the nine months to 30 September 2012
were 16.5 pence (nine months to 30 September 2011: 16.4 pence).



^2 Adjusted to exclude Run-off operations and Restructuring and other  one-off 
costs, and based on weighted average number of ordinary shares in issue during
the period (using UK standard tax rate).

Dividends



The Group continued to improve its  capital structure with a further  dividend 
of £200  million paid  to RBS  Group on  3 September  2012, taking  the  total 
dividend paid in 2012 to £1 billion. Following the IPO, the Group has  adopted 
a progressive dividend policy which will aim to increase dividends annually in
real terms. For 2012,  the dividend pay-out ratio  is expected to be  between 
50-60% of post tax profits from ongoing operations and a final dividend of two
thirds of this amount is expected to be paid in the second quarter of 2013.





Net asset value



The net asset value at 30 September  2012 was £2.8 billion (31 December  2011: 
£3.6 billion) with tangible net asset value of £2.4 billion (31 December 2011:
£3.2 billion).  This  equates  to  187.2  pence  and  159.7  pence  per  share 
respectively as at 30 September 2012 (31 December 2011: 240.9 pence and  216.5 
pence, respectively).

                       DIRECT LINE INSURANCE GROUPPLC

                          COMBINED INCOME STATEMENT

TOTAL GROUP

                                         Quarter ended      Nine months ended

                                         30 September         30 September
                                        2012      2011       2012      2011
                                     £ Million £ Million  £ Million £ Million
Gross earned premium                   1,014.2  1,105.4   3,048.9  3,473.3
Reinsurance premium ceded                (81.5)    (69.5)    (246.0)   (197.0)
Net earned premium                       932.7  1,035.9   2,802.9  3,276.3
Investment return                         61.6     87.8     237.6    234.7
Instalment and other operating
income                                    47.0     59.1     146.1    182.1
Total income                           1,041.3  1,182.8   3,186.6  3,693.1
Insurance claims                        (626.3)   (770.7)  (2,135.4) (2,539.8)
Insurance claims recoverable from
reinsurers                                36.1     35.4     321.1    104.1
Net insurance claims                    (590.2)   (735.3)  (1,814.3) (2,435.7)
Commission expenses                     (135.5)    (93.3)    (357.5)   (277.6)
Other operating expenses                (223.1)   (245.8)    (805.6)   (684.1)
Total expenses                          (358.6)   (339.1)  (1,163.1)   (961.7)
Operating profit                          92.5    108.4     209.2    295.7
Finance costs                            (10.1)     (0.7)     (20.3)     (2.1)
Gain on disposal of subsidiary               -        -         -      1.6
Profit before tax                         82.4    107.7     188.9    295.2
Tax charge                               (23.4)    (26.6)     (47.1)    (71.9)
Profit for the period attributable
to Owners of the Company                  59.0     81.1     141.8    223.3
Earnings per share
- basic(pence)                         3.9      5.4       9.5     14.9







ONGOING OPERATIONS



                                         Quarter ended      Nine months ended

                                         30 September         30 September
                                        2012      2011       2012      2011
                                     £ Million £ Million  £ Million £ Million
Gross earned premium                   1,009.5  1,049.0   3,031.6  3,107.2
Reinsurance premium ceded                (80.0)    (65.9)    (241.3)   (180.4)
Net earned premium                       929.5    983.1   2,790.3  2,926.8
Investment return                         47.3     69.9     192.7    195.4
Instalment and other operating
income                                    48.0     63.6     146.8    197.8
Total income                           1,024.8  1,116.6   3,129.8  3,320.0
Insurance claims                        (683.7)   (742.5)  (2,161.2) (2,247.5)
Insurance claims recoverable from
reinsurer                                 62.7     43.8     287.1    105.9
Net insurance claims                    (621.0)   (698.7)  (1,874.1) (2,141.6)
Commission expenses                      (85.6)    (73.7)    (241.5)   (223.9)
Other operating expenses                (194.5)   (215.9)    (666.3)   (616.7)
Total expenses                          (280.1)   (289.6)    (907.8)   (840.6)
Operating profit                         123.7    128.3     347.9    337.8
Finance costs                            (10.1)     (0.7)     (20.3)     (2.1)
Profit before tax for ongoing
operations                               113.6    127.6     327.6    335.7



                       DIRECT LINE INSURANCE GROUPPLC

                            ADDITIONAL INFORMATION

Company overview



Direct Line Group is a retail general insurer with leading market positions in
the United Kingdom, the  largest direct motor insurer  in Italy and the  third 
largest direct motor insurer  in Germany. The  Group utilises a  multi-brand, 
multi-product and multi-distribution channel  business model that covers  most 
major customer  segments in  the  United Kingdom  for personal  lines  general 
insurance and a more  targeted presence in the  Commercial market. The  Group 
has market leading positions  in terms of in-force  policies and has the  most 
highly recognised brands (Direct Line and Churchill) in the United Kingdom for
personal motor insurance and personal home insurance.





Corporate information

Direct Line Insurance Groupplc  is a public  limited company incorporated  in 
the United Kingdom. The address of  the registered office is Churchill  Court, 
Westmoreland Road, Bromley, BR11DP, England.



The Company, formerly RBS Insurance Group Limited, was incorporated on 26July
1988 as  a private  limited company  with a  registered number02280426  as  a 
wholly-owned subsidiary of  The Royal  Bank of Scotland  Groupplc. RBS  Group 
comprises The Royal Bank of Scotland Group plc and its subsidiaries.



In 2009, RBS Group committed to the European Commission to sell its  insurance 
business as a  condition of  its receipt  of State  Aid. To  comply with  this 
requirement, RBS Group must cede control of the Company by the end of 2013 and
must divest its entire interest by the end of 2014.



In October 2012 RBS  Group sold 520.8 million  ordinary shares in Direct  Line 
Group completing a successful IPO. This represented 34.7% of the total  share 
capital and generated gross proceeds of £911 million received by RBS Group.





Historical financial information



The basis  of preparation  of the  financial information  within this  interim 
management statement for the nine months to  30 September 2012 is the same  as 
the financial  statements and  notes contained  within the  Direct Line  Group 
price range  prospectus issued  on 28  September 2012.  Historical  financial 
information for the three years ended 31 December 2011 and six months ended 30
June    2012    are    available    on    Direct    Line    Group's    website 
http://directlinegroup.com/investors.aspx.    The    historical     financial 
information is not directly comparable to the Divisional Results published  by 
RBS Group  principally  because a  number  of items,  including  restructuring 
costs, separation costs and  goodwill impairment, are  not included in  Direct 
Line Group's  operating profit  reported in  the RBS  Group results;  and  the 
operating results of activities  of TPF are reflected  in operating profit  in 
the historical financial information as  Run-off business in all periods.  In 
RBS Group's financial results disclosures prior to 2012, the operating results
of TPF were included as part of the Non-Core division of the RBS Group.



Statutory results

The information  for the  year  ended 31  December  2011 does  not  constitute 
statutory accounts as  defined in section  434 of the  Companies Act 2006.  A 
copy of  the  statutory  accounts for  the  Company  for that  year  has  been 
delivered to  the  Registrar of  Companies.  The auditor's  report  on  those 
accounts was not  qualified, did  not include a  reference to  any matters  to 
which the auditors drew  attention by way of  emphasis without qualifying  the 
report and did  not contain statements  under section  498 (2) or  (3) of  the 
Companies Act 2006.



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


IMSBTBFTMBAMMLT -0- Nov/02/2012 07:07 GMT