Nov. 1 (Bloomberg) -- Direct Line Insurance Group Plc rose to a two-month high in London trading after the U.K.’s biggest home and motor insurer increased third-quarter profit as a higher investment return offset a drop in premiums.
Operating profit rose 6.1 percent to 131.2 million pounds ($209.9 million) in the three months to Sept. 30, the Bromley, England-based company said in a statement today. Return from investments climbed 28 percent, while gross written premiums fell 4.8 percent.
The stock rose as much as 3.2 percent to 232.2 pence in London, the highest intraday level since Aug. 13. The shares were up 1.5 percent at 9:18 a.m., extending its gain this year to 5.8 percent. The shares have underperformed a 12 percent rally for the FTSE nonlife insurance index as Royal Bank of Scotland Group Plc reduced its stake in the company.
The insurer, which was split off from RBS last year, is cutting costs and attempting to sell more profitable policies amid falling premiums in the U.K. and lower investment returns driven by record low interest rates. The company said in June it may cut about 2,000 jobs to help reduce costs to 1 billion pounds by next year.
“These are good results in competitive markets,” Paul Geddes, Direct Line’s chief executive officer, said in the statement. “Even after allowing for normal weather losses, our performance proves we are delivering our self-help agenda and making good progress toward our strategic targets.”
Direct Line’s combined operating ratio, or claims and expenses as a percentage of premiums, in the third quarter was 97 percent, about the same as a year earlier. The total cost base in the period fell 5.5 percent to 259.9 million pounds and the company said it’s on track to meet its cost target in 2014.
The insurer last month agreed to sell its closed life insurance business to Chesnara Plc for 62 million pounds, allowing the board to declare a special interim dividend of 4 pence a share upon completion.
To contact the reporter on this story: Sarah Jones in London at firstname.lastname@example.org
To contact the editor responsible for this story: Edward Evans at email@example.com