Direct Line nears split from RBS

Direct Line Group has taken a significant step forward to its split from parent RBS Group in the announcement of its first half 2012 results today.

In a telling statement, Direct Line’s chief executive Paul Geddes said the company had essentially achieved its goal of operating as a “standalone” insurer.

This will enable the insurer to take full control of its cost base as it aims to achieve £100m in annual savings across the business by the end of 2014.

Added to this, the company is clearly gearing up for its imminent initial public offering (IPO) by setting itself a target of 15% return on tangible equity (RoTE), which is likely to be a major key performance indicator once it has listed.

The results reveal that Direct Line has already made some big strides towards achieving that target during the first half of the year.

The insurer also said that the separation from its parent was “substantially complete”, having established independent corporate functions and governance in July 2012.

Profits drop but insurer remains positive

Despite profits dropping by almost £60m and flat GWP of £2.1bn during the first half of the year on restructuring and one-off costs related to its split from RBS, there are also lots of positive signs for the insurer.

Operating profit climbed 7%, while combined operating ratio improved to 101.1% and investment return climbed £20m during the first half of 2012.

Another encouraging factor was the rise in in-force policy sales, which increased 4% over the same period.  

In one of the significant developments for broking this year, the FSA has unveiled plans to tighten up brokers’ client money account audits and ban conditional risk transfer.

The FSA’s new consultation paper reflects the Authority’s concerns that some brokers are becoming lax about holding their own audits.

If enforced, the new proposals would result in the FSA checking all of the audits in the future, as well as carrying out in-depth spot checks.