DIRECT Line reiterated plans to make £100 million cost savings annually which it signalled will involve job losses as the insurer set out its stall ahead of the planned flotation of the business by Royal Bank of Scotland.
Announcing that first half operating profits increased by 7% annually, Direct Line said it has launched cost-saving initiatives that will involve it cutting administration costs in central functions and improving marketing efficiency.
Based in Bromley, Kent, Direct Line hopes to boost returns on equity to 15% from 10.2% following separation from RBS.
RBS, 82% owned by taxpayers, must sell a majority stake in Direct Line by December 31, 2013 and offload its entire holding by the end of 2014 to appease EU regulators.
RBS said last month it expects to complete an Initial Public Offering of shares in Direct Line in October. Analysts expect the IPO to value Direct Line at around £3 billion.
Direct Line did not detail where the expected cost savings would come from.
However, a spokeswoman said: "Invariably efficiency means less people."
In August 2010 the company announced plans to close two offices in Glasgow with the loss of around 400 jobs. Direct Line currently employs 970 staff in offices on Glasgow's Cadogan Street, its main Scottish site. The company has around 15,000 staff across the UK.
Chief executive Paul Geddes said Direct Line has made good progress towards a successful independent future. "Other than some transitional services provided by RBS group, we have essentially achieved the goal of operating as a standalone insurance company," said Mr Geddes
He added: "Real progress has been made during the first half of the year towards achieving our target of a 15% Return on Tangible Equity (RoTE)."
The company has boosted the underlying profitability of its insurance operations through improved pricing and initiatives to try to reduce claims for things like minor injuries.
The number of policies in force rose 4% to 20.1 million from 19.4 million in the first half last time.
The rise in interim operating profits to £224.2m, from £209.5m last time, partly reflected the fact a £90m charge in the first half was offset by a release from reserves for claims in prior years. RoTE increased to 10.2% on an annualised basis from 10% last time.
The company said it had renewed or expanded partnership agreements under which it provides back-office services for insurance products sold by the likes of Nationwide building society. These represent a "substantial portion" of its portfolio.
Direct Line expects to reach agreement with RBS this month on an arm's length, five-year distribution agreement for general insurance products.
The division paid £800m dividends to Royal Bank in the first half and a further £200m yesterday.
Direct Line was pleased that it raised £500m subordinated debt in April through a capital markets issue indicating confidence in its prospects among investors.
RBS tried to sell Direct Line for around £6bn in 2008 before markets slumped amid the financial crisis.
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