Acquisitions and additions 0.3 80.5 80.8 Disposals and write-off1 – (5.8) (5.8)
Goodwill arose on the acquisition of U K Insurance Limited (£141.0 million) and Churchill Insurance Company Limited (£70.0 million), which is allocated across Motor, Home, Rescue and other personal lines and Commercial. The addition to goodwill in the year ended 31 December 2016 of £0.3m arose on acquisition of two accident repair centres with a combined purchase price of £3.6 million which was allocated to Motor.
The Group’s testing for goodwill impairment includes the comparison of the recoverable amount of each CGU to which goodwill has been allocated with its carrying value and updated at each reporting date in the event of indications of impairment.
There have been no impairments in goodwill for the year ended 31 December 2016 (2015: £nil).
Recoverable amount in excess of carrying value £m 1% decrease in terminal growth rate £m 1% increase in pre-tax discount rate £m 1% decrease in forecast pre-tax profit1 £m
Transfer to assets held for sale (note 28) (18.0) (8.3) (26.3)
Transfer to assets held for sale (note 28) (0.3) (2.5) (2.8)
The valuation conforms to international valuation standards. The fair value was determined using a methodology based on recent market transactions for similar properties, which have been adjusted for the specific characteristics of each property within the portfolio. This approach to valuation is consistent with the methodology used in the year ended 31 December 2015.
Reinsurers’ share of general insurance liabilities 1,329.0 975.8 Impairment provision (50.7) (53.9)
Derivative liabilities At fair value through the income statement: Foreign exchange contracts (forwards) 43.5 42.2 Designated as hedging instruments: Foreign exchange contracts (forwards)1 – 0.1 Interest rate swaps 1.6 4.1
HTM debt securities Corporate 85.1 13.5 Total debt securities 4,730.3 5,240.1 Total debt securities Fixed interest rate1 4,709.6 4,801.6 Floating interest rate 20.7 438.5
Loans and receivables Deposits with credit institutions with maturities in excess of three months – 44.9 Infrastructure debt 337.0 329.6 Commercial real estate loans 79.7 –
Note: 1. The Group swaps a fixed interest rate for a floating rate of interest on its US Dollar, Euro and a small amount of its Sterling corporate debt securities by entering into interest rate derivatives. The hedged amount at 31 December 2016 was £1,593.6 million (2015: £1,283.3 million).
Direct Line Group Annual Report & Accounts 2016 166 27. Cash and cash equivalents and borrowings £m 2015 £m
Note: 1. The freehold property held for sale at 31 December 2016 is a site in Bristol which was transferred from property, plant and equipment to AFS in 2016 with a carrying value of £23.5 million and impaired by £19.7 million to reflect the costs of remediation and estimated realisable value. The freehold property held for sale at 31 December 2015 comprising the sites at Pudsey were sold in the year releasing the carrying value.
At a General Meeting on 29 June 2015, shareholders approved a share consolidation which completed on 30 June 2015. As a result of the share consolidation, shareholders held 11 new Ordinary Shares of 10 10/11 pence each issued by the Company in exchange for every 12 Ordinary Shares of 10 pence each held immediately prior to the share consolidation, which were cancelled by the Company.
At 31 December 2016, 9,946,340 Ordinary Shares (2015: 6,256,108 Ordinary Shares) were owned by the employee share trusts with a cost of £34.3 million (2015: £20.4 million). These Ordinary Shares are carried at cost and have a market value of £36.7 million (2015: £25.5 million).
overnance Financial statem ents www.directlinegroup.com 167 30. Other reserves Movements in the revaluation reserve for AFS investments £m 2015 £m
The subordinated guaranteed dated notes were issued on 27 April 2012 at a fixed rate of 9.25%. On the same date, the Group also entered into a 10-year designated hedging instrument to exchange the fixed rate of interest for a floating rate of three-month LIBOR plus a spread of 706 basis points which was credit value adjusted to 707 basis points with effect from 29 July 2013.
Direct Line Group Annual Report & Accounts 2016 168 32. Insurance liabilities £m 2015 £m
Estimate of ultimate gross claims costs: At end of accident year 4,014.7 3,393.4 3,823.3 3,941.7 2,698.1 2,372.7 2,184.0 2,094.5 2,118.1 2,157.7 One year later (44.7) 50.8 121.6 (117.1) (99.3) (163.3) (117.6) 20.7 (30.0) Two years later 7.8 51.7 (37.0) (99.1) (94.6) (118.9) (153.0) (38.4) Three years later 64.8 (36.7) (14.0) (50.3) (89.3) (49.3) (21.0) Four years later (5.4) (16.7) (101.5) (105.5) (60.9) (9.9) Five years later (12.1) (55.5) (38.8) (57.7) (21.2) Six years later (24.4) (45.7) (80.8) (25.9) Seven years later (18.8) (29.9) (27.3) Eight years later (14.4) (16.2) Nine years later 0.5
Current estimate of cumulative claims 3,968.0 3,295.2 3,645.5 3,486.1 2,332.8 2,031.3 1,892.4 2,076.8 2,088.1 2,157.7
Net liability recognised in balance sheet 137.1 74.7 149.9 158.2 157.1 169.4 271.0 449.6 501.0 902.8 2,970.8 2006 and prior 338.2 Claims handling provision 79.3 Total 3,388.3
Movement in prior-year net claims liabilities by operating segment £m 2015 £m
Note: 1. The liquidity fund is an investment in an open ended fund incorporated in the Republic of Ireland which targets capital stability and income in the UK. It is invested in short-term fixed income and variable rate securities (such as Treasury Bills) listed or traded on one or more recognised exchange.
Contributions by employer 2.8 – 2.8 Benefits paid (1.7) 1.7 –
Contributions by employer 2.8 – 2.8 Benefits paid (2.3) 2.3 –
Note: 1. The net interest income / (cost) in the income statement has been included under other operating expenses.
Impact on present value of defined benefit scheme obligations £m £m 2015 £m
Awards were made in the year ended 31 December 2016 over 3.3 million Ordinary Shares with an estimated fair value of £12.4 million at the 2016 grant dates (2015: 3.4 million Ordinary Shares with an estimated fair value of £11.4 million).
Granted during the year1 7.7 6.8 Impact of share consolidation (see note 29) – (1.6) Forfeited during the year (0.8) (1.5) Exercised during the year (6.0) (2.9)
Note: 1. In accordance with the rules of the LTIP and DAIP award plans, additional awards of 1.9 million shares were granted during the year ended 31 December 2016
In respect of the outstanding options at 31 December 2016, the weighted average remaining contractual life is 1.39 years (2015: 1.44 years). No share awards expired during the year (2015: nil).
overnance Financial statem ents www.directlinegroup.com 175 37. Notes to the consolidated cash flow statement £m 2015 £m
Profit for the year 278.8 580.4 Adjustments for: Investment return (171.5) (235.2) Instalment income (107.1) (101.5) Finance costs 37.2 37.6 Defined benefit pension scheme – net interest income (0.5) – Equity-settled share-based payment charge 16.8 12.1 Tax charge 74.2 127.7 Depreciation and amortisation charges 87.5 95.3 Impairment of property, plant and equipment, goodwill and intangible assets 39.3 9.1 Impairment provision movements on reinsurance contracts (3.2) (12.5) Impairment charge on assets held for sale – freehold property 19.7 12.9 Gain on disposal of discontinued operations – (167.1) Loss on sale of property, plant and equipment 1.7 4.7
Operating cash flows before movements in working capital 272.9 363.5 Movements in working capital: Net decrease in net insurance liabilities including reinsurance assets, unearned premium reserves and deferred acquisition costs (143.1) (194.5) Net increase in prepayments and accrued income and other assets (20.1) (2.8) Net increase in insurance and other receivables (32.5) (66.4) Net increase in trade and other payables including insurance payables 42.7 52.3 Contribution to defined benefit pension scheme (2.8) (2.8)
Cash generated from operations 117.1 149.3 Taxes paid (83.3) (107.4) Cash flow hedges 1.2 0.2 Net cash generated from operating activities before investment of insurance assets 35.0 42.1 Interest received 294.6 318.7 Rental income received from investment property 18.4 17.9 Purchases of investment property (1.4) (16.0) Proceeds on disposal of investment property 25.2 – Proceeds on disposal / maturity of AFS debt securities 2,489.9 3,549.3 Net decrease in financial investments: loans and receivables to credit institutions 44.9 9.8 Advances made for Infrastructure debt and commercial real estate loans (97.7) (268.9) Repayments of infrastructure debt 11.0 16.6 Purchases of AFS debt securities (1,886.5) (3,110.8) Purchase of HTM debt securities / commercial real estate loans (71.0) (13.5) Cash generated from investment of insurance assets 827.4 503.1 38. Contingent liabilities The Group did not have any contingent liabilities at 31 December 2016 (2015: none).
Direct Line Group Annual Report & Accounts 2016 176 39. Commitments Operating lease commitments where the Group is the lessee The Group has entered into non-cancellable operating lease agreements for properties, vehicles and other assets.
Within one year 17.4 16.8 In the second to fifth years inclusive 54.2 53.2 After five years 159.7 162.0
Fair value hierarchy For disclosure purposes, fair value measurements are classified as level 1, 2 or 3 based on the degree to which fair value is observable:  Level 1 financial assets are measured in whole or in part by reference to published quotes in an active market. In an active market quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
 Level 2 financial assets and liabilities are measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions. These are assets for which pricing is obtained via pricing services, but where prices have not been determined in an active market, or financial assets with fair values based on broker quotes or assets that are valued using the Group’s own models whereby the majority of assumptions are market-observable.
 Level 3 fair value measurements used for investment properties, HTM debt securities, infrastructure debt and commercial real estate loans are those derived from a valuation technique that includes inputs for the asset that are unobservable.
Comparison of carrying value to fair value of financial instruments and assets carried at fair value The following table compares the carrying value and the fair value of financial instruments and other assets where the Group discloses a fair value.
Liabilities held at fair value: Derivative liabilities (note 25) 46.4 – 46.4 – 46.4 Other financial liabilities: Subordinated liabilities (note 31) 521.1 – 623.2 – 623.2
Differences arise between carrying value and fair value where the measurement basis of the asset or liability is not fair value (e.g. assets and liabilities carried at amortised cost). Fair values of the following assets and liabilities approximate their carrying values:  Insurance and other receivables;  Cash and cash equivalents;  Borrowings; and
The movements in assets held at fair value and classified as level 3 in the fair value hierarchy are all within Investment property and are analysed in note 20. There were no changes in the categorisation of assets between levels 1, 2 and 3 during the year for assets and liabilities held at 31 December 2015.
Year end balances arising from sales and purchases of products and services to and from related parties Amounts owed by related parties Amounts owed to related parties £m £m 2015 £m
Short-term employee benefits 8.4 9.5 Post-employment benefits – 0.2 Termination benefits 0.1 – Share-based payments 7.6 4.5 42. Post balance sheet events The 2016 results reflect a one-off Ogden discount rate reduction to minus 0.75% impacting operating profit and profit before tax resulting from an announcement made by the Ministry of Justice on 27 February 2017.
Cash and cash equivalents 7 157.5 29.8 Total assets 3,950.5 3,645.5
Liabilities Subordinated liabilities 9 504.5 503.9 Derivative financial instruments 5 1.7 0.4 Trade and other payables 10 6.4 6.6 Deferred tax liabilities 4 0.4 – Current tax liabilities 4 – 3.0 Total liabilities 513.0 513.9 Total equity and liabilities 3,950.5 3,645.5
Profit for the year 764.9 539.5 Other comprehensive income / (loss) Items that may be reclassified subsequently to income statement: Cash flow hedges – (1.2) Fair value gain on AFS investments 0.5 – Tax relating to items that may be reclassified (0.1) –
Parent Company statement of changes in equity For the year ended 31 December 2016
Total comprehensive income for the year – – – 0.4 – 764.9 765.3 Dividends paid – – – – – (450.6) (450.6) Credit to equity for equity-settled share-based payments – – 16.8 – – – 16.8 Shares distributed by employee trusts – – (25.6) – – – (25.6)
Parent Company cash flow statement For the year ended 31 December 2016 www.directlinegroup.com 181 £m 2015 £m
The Company’s financial statements are prepared in accordance with IFRSs as issued by the IASB and are presented in accordance with the Companies Act 2006. In accordance with the exemption permitted under section 408 of the Companies Act 2006, the Company’s income statement and related notes have not been presented in these separate financial statements.
Additional investment in subsidiary undertakings 16.9 237.0 Impairment of subsidiary undertakings – (234.6)
The subsidiary undertakings of the Company are set out below. Their capital consists of Ordinary Shares which are unlisted. In all cases, the Company owns 100% of the Ordinary Shares, either directly or through its ownership of other subsidiaries, and exercises full control over their decision making.
Notes: 1. Registered office at: Churchill Court, Westmoreland Road, Bromley, BR1 1DP. 2. Registered office at: The Wharf, Neville Street, Leeds, LS1 4A2. 3. U K Insurance Limited has a branch, as defined in section 1046 (3) of the Companies Act 2006 in the Republic of South Africa. 4. Registered office at: 22 Greenville Street, St Helier, JE4 8PX, Jersey. 5. Registered office at: 42 The Headrow, Leeds, LS1 8HZ. 6. Registered office at: 4 Aradhana Enclave, Sector 13, Rama Krishna Puram, New Delhi, South West Delhi, Delhi, 110066, India.
Two dormant subsidiaries, DL Dormant 5 Limited and DL Dormant 6 Limited were dissolved in the year.
Note: 1. Included in loans to subsidiary undertakings is a £500 million unsecured subordinated loan to U K Insurance Limited. The loan was advanced on 27 April 2012 at a fixed rate of 9.5% with a repayment date of 27 April 2042. There is an option to repay the loan on specific dates from 27 April 2022. If the loan is not repaid on 27 April 2022, the rate of interest will be reset at a rate of the six-month LIBOR plus 8.16%. All loans are neither past due nor impaired.
Direct Line Group Annual Report & Accounts 2016 184 4. Current and deferred tax £m 2015 £m
Note: 1. The derivative assets and derivative liabilities are both classified as Level 2 within the Group’s fair value hierarchy set out in note 40 of the consolidated financial statements.
Cash at bank and in hand 0.2 0.1 Short-term deposits with credit institutions1 157.3 29.7
overnance Financial statem ents www.directlinegroup.com 185 9. Subordinated liabilities £m 2015 £m
The notes are unsecured, subordinated obligations of the Company, and rank pari passu without any preference among themselves. In the event of a winding up or of insolvency, they are to be repaid only after the claims of all other senior creditors have been met.
Payables to subsidiary undertakings 4.7 3.8 Payables to third parties 1.7 – Provision – 2.8
Utilisation of provision (1.8) Released to statement of comprehensive income (1.0) At 31 December 2016 –
11. Dividends Full details of the dividends paid and proposed by the Company are set out in note 15 to the consolidated financial statements.
Profit for the year 764.9 539.5 Adjustments for: Impairment of investment in subsidiary undertakings – 234.6 Investment return (829.4) (720.5) Finance costs 46.9 47.1 Equity-settled share-based payment charge 16.8 – Gain on disposal of assets held for sale – (109.5) Tax (credit) / charge (0.5) 3.0
The following transactions were carried out with related parties: Sales of services £m 2015 £m
Management fees payable to subsidiary undertakings 18.1 6.0 Interest payable to subsidiary undertakings – 0.2
14. Share-based payments Full details of share-based compensation plans are provided in note 35 to the consolidated financial statements.
Shareholders should notify the Registrar of any change in shareholding details, such as their address, as soon as possible.
Shareholders can access their current shareholding details online at www.investorcentre.co.uk/directline. Investor Centre is a free-to-use, secure, self-service website that enables shareholders to manage their holdings online. The website allows shareholders to:  check their holdings;  update their records, including address and direct credit details;  access all their securities in one portfolio by setting up a personal account;  vote online; and
Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that prove to be worthless or non-existent. Or they can offer to buy shares at an inflated price in return for you paying upfront. They promise high profits. However, if you buy or sell shares in this way, you will probably lose your money.
How to avoid share fraud  Remember that FCA-authorised firms are unlikely to contact you unexpectedly offering to buy or sell shares
 If it sounds too good to be true, it probably is
 If you are buying or selling shares, only deal with brokers registered in the UK or in your country of residence
 For internet sales, go to www.investorcentre.co.uk/directline. You will need your Shareholder Reference Number, as shown on your share certificate, or your welcome letter from the Chairman.
Dividend tax allowance From April 2016, dividend tax credits were replaced by an annual £5,000 tax-free allowance across an individual’s entire share portfolio. Above this amount, individuals will pay tax on their dividend income. The rate of this tax depends on their income tax bracket and personal circumstances. The Company will continue providing registered shareholders with a confirmation of the dividends paid. Shareholders should include this with any other dividend income they receive when calculating and reporting total dividend income received to HMRC. The shareholder is responsible for including all dividend income when calculating tax requirements. If you have any tax queries, please contact your financial adviser.
Financial calendar 2017 Date Event 07 March Preliminary Results 2016 16 March ‘Ex-dividend’ date for 2016 final dividend 17 March Record date for 2016 final dividend 03 May1 Trading update for the first quarter of 2017 11 May Annual General Meeting 18 May Payment date for 2016 final dividend 01 August1 Half Year Report 2017 10 August1 ‘Ex-dividend’ date for 2017 interim dividend 11 August1 Record date for 2017 interim dividend 08 September1 Payment date for 2017 interim dividend 07 November1 Trading update for the third quarter of
Annual General Meeting The 2017 AGM will be held on 11 May 2017 at the offices of Allen & Overy LLP, One Bishops Square, London E1 6AD, starting at 11.00 am. All shareholders will receive a separate notice convening the AGM. This will explain the resolutions to be put to the meeting.
Adjusted profit after tax Profit after tax is adjusted to exclude discontinued operations, the Run-off segment and restructuring and other one-off costs, and is stated after charging tax (using the UK standard tax rate of 20.0%; 2015: 20.25%).
Clawback The ability of the Company to claim repayment of paid amounts. Combined operating ratio (“COR”)
The loss ratio for the current accident year, excluding the movement of claims reserves relating to previous accident years, and claims relating to major weather events in the Home division.
Expense ratio The ratio of operating expenses divided by net earned premium. Finance costs The cost of servicing the Group’s external borrowings. Financial Conduct Authority (“FCA”)
The independent body that regulates firms and financial advisers. It puts the customers’ interests and market integrity at the core of financial service providers’ activities.
Funds set aside to meet the cost of claims for accidents that have occurred, but have not yet been reported to the Group. This includes an element of uplift on the value of claims reported where the Group has determined that the value currently held in reserves is not sufficient to meet the estimated ultimate costs if the claim is referred to as incurred but not enough reported (“IBNER”).
In-force policies The number of policies on a given date that are active, and against which the Group will pay, following a valid insurance claim.
Investment income yield The income earned from the investment portfolio, recognised through the income statement during the period, and divided by the average AUM. This excludes unrealised and realised gains and losses, impairments, and fair-value adjustments. The average AUM derives from the period’s opening and closing balances for the total Group.
Glossary and appendices continued 190 Direct Line Group Annual Report & Accounts 2016
Investment return The income earned from the investment portfolio, including unrealised and realised gains and losses, impairments, and fair value adjustments.
An arrangement that permits unvested remuneration awards to be forfeited, when the Company considers it appropriate.
Net asset value The net asset value of the Group is calculated by subtracting total liabilities from total assets. Net claims The cost of claims incurred in the period less any claims costs recovered under reinsurance contracts.
Bodily injury cases use them to calculate lump-sum awards. Ongoing operations Ongoing operations comprise Direct Line Group’s ongoing divisions: Motor, Home, Rescue and other personal lines, and Commercial. It excludes discontinued operations, the Run-off segment, and restructuring and other one-off costs.
Return on tangible equity for 2016 is adjusted profit after tax from Ongoing operations, divided by the Group’s average shareholders’ equity, less goodwill and other intangible assets. Profit after tax is adjusted to exclude discontinued operations, the Run-off segment, restructuring and other one-off costs, and the gain on disposal of subsidiary. It is stated after charging tax (using the UK standard tax rate of 20.0%; 2015: 20.25%). RoTE for comparative periods include the net assets held for sale in the disposal group, and profit after tax for discontinued operations, as the International division was managed as part of Ongoing operations (see page 192 alternative performance measures).
Total costs Total costs comprise operating expenses and claims handling expenses. Total Shareholder Return (“TSR”)
Appendix A – Alternative performance measures The Group has identified Alternative Performance Measures (“APMs”) in accordance with the European Securities and Markets Authority’s published Guidelines. The Group uses APMs to improve comparability of information between reporting periods and reporting segments, by adjusting for either uncontrollable or one-off costs which impact on IFRS measures, to aid the user of the Annual Report in understanding the activity taking place across the Group. These APMs are contained within the main narrative sections of this document, outside of the financial statements and notes, and may not necessarily have standardised meanings for ease of comparability across peer organisations.
Further information is presented below, defined in the glossary on pages 189 and 190 and reconciled to the most directly reconcilable line items in the financial statements and notes. Note 4 on page 150 of the consolidated financial statements presents a reconciliation of the Group’s business activities on a segmental basis to the statutory income statement including Ongoing operations of the Group.
Group APM Equivalent IFRS measure Adjustment to reconcile primary statements and where calculated Rationale for adjustments
Adjusted diluted earnings per share is defined in the glossary on page 189 and is reconciled on page 192.
Loss ratio Current-year attritional loss ratio is defined in the glossary on page 189 and is reconciled to loss ratio on page 40.
Investment income yield is defined in the glossary on page 189 and is reconciled on page 193.
Expresses a relationship between the investment income and the associated opening and closing assets net of any associated liabilities.
Investment return yield is defined in the glossary on page 190 and is reconciled on page 193.
Operating profit – Ongoing operations is defined as operating profit (see glossary on page 190) less operating profit from run-off segment plus restructuring and one-off costs (see note 4) and is reconciled on page 192.
This measure shows the underlying performance (before tax and finance costs) of the business activities without the impact of business that is in run-off and non-repeating restructuring and one-off expenses.
Profit after tax – Ongoing profit (as above) less Finance costs and Tax at standard rate and is reconciled on page 192.
Tangible net asset per share is defined as Tangible equity (as above) expressed as a value per share and is reconciled in note 17 on page 160
Total costs – Ongoing operations is defined as Operating expenses adjusted to remove restructuring and one-off costs and operating expenses charged to the run-off segment (reconciled in note 11) plus claims handling expenses incurred in net insurance claims on Ongoing operations (note 9). This is reconciled on page 40.
Add back: restructuring and other one-off costs 4 39.9 48.7 Exclude: operating profit from run-off 4 (26.6) (73.1) Operating profit from Ongoing operations 4 403.5 520.7
Closing derivatives liability2 (5.8) (45.7) Closing investment holdings 6,581.0 6,818.7 Average investment holdings 6,699.9 6,935.0 Investment income yield 2.5% 2.4% Investment return yield 2.6% 2.9%
Profit before tax – Ongoing operations 366.3 483.1 Tax charge (using the UK standard tax rate of 20.0% and 20.25% respectively) (73.3) (97.8) Adjusted profit after tax – Ongoing operations 293.0 385.3
Opening shareholders’ equity 2,630.0 2,810.5 Opening goodwill and other intangible assets (524.8) (517.5) Opening disposal group equity – (241.0) Opening shareholders’ tangible equity 2,105.2 2,052.0 Closing shareholders’ equity 2,521.5 2,630.0 Closing goodwill and other intangible assets (508.9) (524.8) Closing shareholders’ tangible equity 2,012.6 2,105.2 Average shareholders’ tangible equity3 2,058.9 2,078.6 Return on tangible equity 14.2% 18.5%
Adjusted profit after tax – Ongoing operations 293.0 385.3 Weighted average number of Ordinary Shares for the purpose of diluted earnings per share (millions) 16 1,381.8 1,449.0 Adjusted diluted earnings per share (pence) 21.2 26.6
Glossary and appendices continued 194 Direct Line Group Annual Report & Accounts 2016
Profit from discontinued operations, net of tax – – 181.2 Profit after tax 278.8 452.6 580.4
Adjusted diluted earnings per share (pence) 2 21.2 31.3 26.6 Return on tangible equity2 14.2% 20.2% 18.5% Key metrics Investment income yield1 2.5% 2.5% 2.4%
Dividend per share – interim (pence) 4.9 n/a 4.6 – final interim (pence) 9.7 n/a 9.2 – regular (pence) 14.6 n/a 13.8 – first special interim3 (pence) 10.0 n/a 27.5 – second special interim (pence) – n/a 8.8 – total (pence) 24.6 n/a 50.1 Net asset value per share (pence) 184.7 197.4 192.2 Tangible net asset value per share (pence) 147.4 160.2 153.8
Notes: 1. A reduction in the ratio represents an improvement and positive change as a proportion of net earned premium, while an increase in the ratio represents a deterioration and negative change 2. See glossary on pages 189 and 190 for definitions and appendix A – Alternative performance measures on pages 192 and 193 for reconciliation to financial statement line items 3. The special interim dividend paid on 24 July 2015 of 27.5 pence per share, following the sale of the Group’s former Italian and German operations 4. Estimates based on the Group’s Solvency II PIM for 31 December 2016
Certain information contained in this document, including any information as to the Group’s strategy, plans or future financial or operating performance, constitutes “forwardlooking statements”. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms “aims”, “anticipates”, “aspire”, “believes”, “continue”, “could”, “estimates”, “expects”, “guidance”, “intends”, “may”, “mission”, “outlook”, “plans”, “predicts”, “projects”, “seeks”, “should”, “strategy”, “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 document, and include statements regarding the intentions, beliefs or current expectations of the Directors concerning, among other things: the Group’s results of operations, financial condition, prospects, growth, strategies and the industry in which the Group operates. Examples of forward-looking statements include financial targets and guidance which are contained in this document specifically with respect to the return on tangible equity; solvency capital coverage ratio; the Group’s combined operating ratio; prior-year reserve releases; cost reduction; investment income yield; net realised and unrealised gains; results from the Run-off segment; restructuring and other one-off costs; and risk appetite range. By their nature, all forwardlooking statements involve risk 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.
Neither the content of Direct Line Group’s website nor the content of any other website accessible from hyperlinks on the Group’s website is incorporated into, or forms part of, this document.
Contact information 196 Direct Line Group Annual Report & Accounts 2016
Principal banker The Royal Bank of Scotland Group plc 280 Bishopsgate London EC2M 4RB