Direct Line profits slip despite increase in overall policies across the UK

British motor insurer Direct Line saw profits drop in the first half of its trading year but opted to hike its dividend on the back of an increased number of overall policies across the UK.

Operating profits fell 10% to £274m, which was actually still ahead of consensus forecasts of £258m, while profits from motor insurance tumbled from £239m to £154m as premium income fell and claims reserves were strengthened.

Operating expenses dipped £16.1m to £363m for the half.

Earlier in July, Downing Street changed the way in which compensation payouts were calculated, leaving insurers handing over much more than they had anticipated - with Direct Line taking a £17m hit in order to cover payouts for those who were seriously injured in accidents.

But despite the slowdown, Direct Line reiterated its 2019 financial targets of a combined operating ratio of 93% to 95%, normalised for the weather, and operating expenses of less than £700m. The group also upped its dividend 2.9% to 7.2p as in-force policies rose 2%.

Chief executive Penny James said: "I am pleased with the progress that we have made so far this year. We have delivered a good financial performance overall, benefitting from the breadth and diversity of our business.

"There remains much to do, but we are successfully removing costs from the business."

As of 1000 BST, Direct Line shares had slipped 1.33% to 319.60p.