Direct Line to ring up healthy profits

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Changes to its claims and underwriting process should see Direct Line deliver a solid profit figure in its first set of annual results since its stock market debut last year.

The company, which also trades as Churchill, raised £787 million for former owner Royal Bank of Scotland as part of London’s biggest flotation of last year.

City experts predict the firm will post pre-tax profits of £279m for 2012 when it reports on Thursday, despite challenging markets which have seen motoring claims surge in recent years.

The group previously reported a 7 per cent rise in first-half operating profits, helped by “broadly stable” trends on premiums and signs of an improving claims environment. Cost savings have included the loss of more than 1,100 jobs.

Kevin Ryan, an analyst at Investec, said: “The group’s core UK motor and home insurance markets, where it is the market leader, remain challenging. However, as claims and underwriting processes are re-engineered, steady improvement in profitability should emerge.”

On the same day, the battle to secure the survival of loss-making Spanish airline Iberia will dominate results from British Airways owner International Consolidated Airlines.

The group, which has been battling Spanish unions as it attempts to cut costs and jobs, is expected to make an operating loss of €120m (£104m). The figure, which excludes Iberia restructuring costs, compares with profits of €485m a year earlier and comes as it also suffered from the impact of Superstorm Sandy, which grounded flights to and from the east coast of the United States.

The group – formed when BA merged with Madrid-based Iberia in 2011 – will cut the Spanish carrier’s capacity by 15 per cent and downsize its fleet by 25 aircraft as part of a restructuring that will cost 4,500 jobs.

Broadcaster ITV is expected to report surging profits on Wednesday thanks to its booming Studios business, which makes shows including I’m a Celebrity… Get Me Out of Here! and the historical drama Mr Selfridge.

The firm is three years into a five-year transformation programme that helped it deliver a 24 per cent rise in profits in 2011, and analysts at Numis predict a further 
16 per cent rise to £460m.