Direct Line profit beats own consensus, shares jump

(Reuters) - Direct Line Insurance Group, Britain's largest motor insurer, said its first-half profit was hurt by lower investment gains and the new Flood Re levy, but beat its own consensus estimates.

Shares in the company jumped 7.8 percent to their highest since May 10 and recorded the biggest daily percentage gain ever.

Direct Line, whose brands include Churchill, Green Flag and Privilege, said operating profit fell 5 percent to 316.9 million pounds for the six months ended June 30, but was well above a company supplied consensus estimate of 263 million pounds.

Direct Line also said it would pay a special dividend of 10 pence per share and an interim dividend of 4.9 pence per share.

The company said its combined operating ratio - the sum of the loss, commission and expense ratios - from continuing operations was 89.6 percent. A number below 100 percent indicates a profit.

Direct Line retained its forecast to achieve a full-year combined operating ratio from continuing operations between 93 percent and 95 percent, adding that if current trends continued, the ratio reported would be towards the lower end of the guidance.

The company reported a levy of 24 million pounds from the Flood Re scheme, which was set up by the British government and industry to cut insurance costs for homes in flood-risk areas after severe flooding in recent years.

On the new European capital rules for insurers that came in January 2016, Direct Line said its Solvency II capital ratio was 184 percent after dividends.

Solvency II dictates the amount of capital an EU insurer must hold to reduce the risk of insolvency. The lower the ratio, the greater the chances of a company defaulting on its obligations.

Direct Line said gross written premiums from ongoing operations rose 3.9 percent to 1.61 billion pounds in the period, with a 2.5 percent rise in motor in-force policies.

It was "business as usual" for day-to-day operations after Brexit, the insurer said, as it was a UK-based business that underwrites risks within the country.

Direct Line said, however, that it was too early to quantify the impact on the wider economy, including asset prices.

Shares in the company were up 7.5 percent at 381.9 pence at 0849 GMT, making them the top gainers on the FTSE 100 Index.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Gopakumar Warrier)