* 2016 operating profit down 22 pct to 403.5 mln stg
* Follows cut in discount rate to minus 0.75 pct
* RBC analyst says performance better than expected
By Carolyn Cohn
LONDON, March 7 British insurer Direct Line
reported a 22 percent fall in full-year operating
profit on Tuesday, after the government changed the way personal
injury claims are calculated, pushing up lump sum payments.
Direct Line, whose brands include Churchill, Green Flag and
Privilege, said operating profit from continuing operations was
403.5 million pounds ($493.60 million) for the year ended Dec.
31, compared with 520.7 million pounds a year earlier.
Several insurers have seen profits dented after Britain's
justice ministry last week cut the discount rate used in the
calculations of lump sum payments to minus 0.75 percent from 2.5
Direct Line's operating profit would have been 578.6 million
pounds without the discount rate change, the insurer said in a
RBC analysts said the results were better than expected when
taking account of the discount rate change, reiterating their
'outperform' rating on the stock and raising their target price
to 410 pence from 400 pence.
Direct Line Chief Executive Paul Geddes said the insurer was
well-positioned "in a market disrupted by the reduction in the
Gross written premiums for ongoing operations rose 3.9
percent to 3.27 billion pounds in the period, Direct Line said.
The FTSE 100 company achieved a full-year combined operating
ratio from continuing operations of 97.7 percent, also hit by
the discount rate change.
A level below 100 percent indicates an underwriting profit.
Direct Line has a 93-95 percent target range for the rate
and said it maintained that target for 2017.
The insurer said it would pay a final dividend of 9.7 pence
per share, for a total dividend, including a special dividend,
of 24.6 pence per share, down 50 percent from a year earlier.
($1 = 0.8175 pounds)
(Reporting by Carolyn Cohn and Noor Zainab Hussain; editing by