Direct Line beats the weather to improve profits

RBS’S insurance arm Direct Line - which will be spun off as a separate company on the stock market - has revealed a rise in profits despite worse-than-forecast weather claims worth £40 million.

But despite the unprecedented level of claims, the group revealed a 6 per cent rise in operating profits to £219m and increased the number of its in-force policies by 2 per cent to 20.1 million.

The robust results will reinforce the group’s separation plans, which RBS hopes to complete by the end of the year and will see Direct Line traded as a standalone business on the stock market with a value of up to £5 billion.

RBS is required to sell the business, which includes the Churchill, Direct Line, Green Flag and Privilege brands as well as the broker business NIG, by the end of 2014 in return for its £45bn taxpayer bail-out.

RBS Insurance, which is headquartered in Bromley, south east London, and has operations in the UK, Germany and Italy, said it bolstered its competitive position after securing a five-year contract with Sainsbury’s Finance to provide customers with home and car insurance.

The business has introduced a new management system to deal with motor claims as well as new home claims to improve efficiency.

Direct Line said net claims fell 18 per cent to £1.2bn in the period as the bad weather claims were offset by the exit of the personal line broker business and reserves released under the transformation plan.