Interim Results-Part 1 of 2
Royal Bank of Scotland Group PLC
1 August 2000
THE ROYAL BANK OF SCOTLAND GROUP plc
Part 1
FOREWORD TO PRO FORMA RESULTS
These interim results include National Westminster Bank Plc ('NatWest'), which
was acquired on 6 March 2000. Following the acquisition, the Group's
accounting year end was changed from 30 September to 31 December.
Consequently these results are for the six months to 30 June, the date to
which interim results will be drawn up in the future.
The acquisition has had a significant effect on the Group's financial position
and, as a consequence, comparisons with the prior year on a statutory basis
(which only includes NatWest from 6 March 2000) are of limited benefit. In
order to provide shareholders with relevant and meaningful information, pro
forma results have been prepared on the basis described on page 4. The pro
forma results assume that the acquisition of NatWest took place on 1 January
1999. This approach facilitates meaningful comparisons with the prior year
and provides a benchmark against which the Group's future performance can be
judged.
As required by The Listing Rules, statutory results for the Group have been
prepared both for the six months to 31 March 2000, the previous interim date,
and for the nine months to 30 June 2000. The statutory results are also being
announced at this time and are set out in a separate report.
THE ROYAL BANK OF SCOTLAND GROUP plc
FINANCIAL HIGHLIGHTS - PRO FORMA BASIS
12 months
6 months 6 months ended
ended ended 31
30 June 30 June December
2000 1999 Increase 1999
£m £m % £m
Profit before tax,
goodwill amortisation
and integration costs 2,011 1,639 23 3,359
-------- -------- --------
Goodwill amortisation 308 280 10 566
-------- -------- --------
Integration costs 189 n/a 113
-------- -------- --------
Profit before tax 1,514 1,359 11 2,680
-------- -------- --------
Cost:income ratio 55.7% 60.0% 59.3%
-------- -------- --------
Profit attributable to 782 703 11 1,425
ordinary shareholders
-------- -------- --------
Adjusted earnings per 46.1p 37.2p 24 78.3p
ordinary share
-------- -------- --------
Viscount Younger, Chairman of The Royal Bank of Scotland Group plc said:-
'We are making good progress with integration and have met all of our initial
targets. Whilst recognising that much remains to be done, the integration
process is firmly on track to deliver the forecast cost savings and other
benefits.
We announced on 19 April 2000 that, as a consequence of changing our year end
to 31 December, the interim dividend would be paid later in the year. The
directors have recommended an interim dividend of 9.5p per ordinary share for
the period to 30 June 2000, an increase of 16% over the interim dividend paid
in 1999.
A 23% increase in profit before tax, goodwill amortisation and integration
costs is an encouraging start, the more so as it demonstrates the potential of
the enlarged Group.'
THE ROYAL BANK OF SCOTLAND GROUP plc
CONTENTS PAGE
PRO FORMA RESULTS
Basis of preparation of pro forma results 4
Overview of results 5
Consolidated profit and loss account 6
Consolidated balance sheet 8
Acquisition of NatWest 9
Divisional performances 10
- Corporate Banking and Financial Markets 11
- Retail Banking 12
- Retail Direct 13
- Manufacturing 14
- Wealth Management 15
- Direct Line Insurance 16
- Ulster Bank 17
- Citizens 18
- Central items 19
Notes 20
Integration information 23
Average balance sheet 25
Average interest rates, yields, spreads and 26
margins
Risk elements in lending 27
Market risk 28
Regulatory ratios and other information 29
Derivation of pro forma information 30
INDEPENDENT REVIEW REPORT BY THE AUDITORS 33
CONTACTS 34
THE ROYAL BANK OF SCOTLAND GROUP plc
BASIS OF PREPARATION OF PRO FORMA RESULTS
The pro forma results for the six months ended 30 June 2000 and 30 June 1999
and the year ended 31 December 1999 have been prepared on the following basis:
1. They incorporate the results of NatWest from 1 January 1999.
2. Goodwill arising on the acquisition of NatWest, currently estimated
to be £11.2 billion (see page 9), has been amortised over its estimated
economic life of 20 years from 1 January 1999.
Goodwill arising on other acquisitions made by the Group - Green Flag, the
commercial banking operations of State Street Corporation, and UST Corp -
has been amortised from the effective dates of acquisition, also over 20
years.
3. A surplus of £1,070 million in NatWest Pension Funds has been amortised,
from 1 January 1999, over the estimated average remaining service life of
members of the schemes.
4. An adjustment has been made to reflect the net funding of the acquisition
of NatWest as acquired on 1 January 1999. This comprises cash paid and
loan notes issued to NatWest shareholders of £7,349 million and fees and
expenses relating to the acquisition of £176 million less net proceeds of
£3,910 million from the issue of new ordinary and preference shares and
£20 million of proceeds from the exercise of options over NatWest ordinary
shares.
5. The results of businesses disposed of since 1 January 1999 and the profit
arising on their sale have been excluded from the pro forma accounts. The
principal disposals were RBS Trust Bank, Gartmore and the venture capital
investments of NatWest. A funding adjustment has been made to recognise
the benefit of estimated net proceeds of £1,500 million assuming that
these funds were received on 1 January 1999.
6. All expenditure incurred to integrate the Group's existing operations
with those of NatWest and relating to projects and initiatives to achieve
the cost reduction and income enhancement targets set in connection with
the acquisition of NatWest has been shown separately under the caption
'Integration costs'. In the six months to 31 December 1999 NatWest
incurred restructuring costs of £113m (mainly severance payments). These
are classified as 'integration costs' in the prior year pro forma results.
7. Changes have been made to align NatWest accounting presentation
with that adopted by the Group. However, in the following instances, the
NatWest presentation has been adopted:
(a) interest receivable and interest payable on trading assets and
liabilities, previously shown in net interest income, are included in
dealing profits.
(b) fraud losses, formerly included in provisions for bad and doubtful
debts, are included in administrative expenses.
(c) credit card processing costs, which were reported in administrative
expenses - other, have been moved to fees and commissions payable.
(d) a transfer of certain costs within administrative expenses from staff
costs to other costs.
8. Rentals receivable less depreciation on operating lease assets, which
were included in net interest income in NatWest's accounts, are shown in
'Other operating income' and 'Depreciation and amortisation' respectively.
9. Group operating profit excludes goodwill amortisation and integration
costs which are shown separately on the face of the profit and loss
account.
10. The consolidated balance sheet on page 8 is the actual balance sheet and
incorporates all preliminary fair value and other adjustments relating to
the acquisition of NatWest.
THE ROYAL BANK OF SCOTLAND GROUP plc
OVERVIEW OF RESULTS (pro forma basis)
Profit before tax, goodwill amortisation and integration costs increased by
23%, £372 million, from £1,639 million to £2,011 million.
Net interest income increased by 11%, £275 million, to £2,868 million.
However, as identified in NatWest's 1999 statutory accounts, in Financial
Markets, the favourable market conditions in the first half of 1999 were not
repeated. Consequently, the net interest income in NatWest Financial Markets
was down £96 million - excluding this, net interest income would have been
£371 million, 15% higher than in 1999. Good growth was achieved in both
corporate advances and personal advances. Average interest-earning assets of
the Group's banking business increased by 10%. Net interest margin of the
banking business was maintained at 3.0%.
Non-interest income, excluding general insurance, grew by 6%, £141 million,
to £2,656 million, despite a fall of £46 million in NatWest Financial Markets,
whose performance in the first half of 1999 was boosted by the favourable
trading conditions - adjusting for this, the increase would be £187 million,
8%. Fees and commissions receivable increased by 12%, £217 million, to £1,970
million. Dealing profits were up by 9%, £48 million, to £574 million. Other
operating income at £489 million was down 11%, £63 million, due to
restructuring costs in the life assurance businesses and one-off income in the
prior year.
General insurance premium income, after reinsurance, increased by 30%, £103
million, to £450 million.
Total income increased by 10%, £519 million, to £5,974 million.
Operating expenses, excluding goodwill amortisation and integration costs,
were up 2%, £57 million, to £3,330 million. Staff expenses were down £24
million to £1,747 million. Staff numbers fell by 4,000 (6,700 excluding the
impact of businesses acquired) to 99,200. Other expenses were up 5%, £81
million, to £1,583 million.
Group cost:income ratio improved from 60.0% to 55.7%.
General insurance claims, after reinsurance, increased by 12%, £34 million,
to £323 million.
Provisions for bad and doubtful debts were up 17%, £42 million, to £284
million reflecting volume growth. Total provisions at 30 June 2000 were 71%
of risk elements in lending, against 61% at 30 June 1999 reflecting a
continuation of the Group's conservative stance on provisioning.
Goodwill arising on the acquisition of NatWest is currently estimated to be
£11.2 billion. This is calculated after preliminary fair value adjustments
amounting to approximately £627 million. This goodwill is being amortised
over its estimated economic life of 20 years, resulting in a charge of £560
million per annum.
Integration costs, which is expenditure incurred in respect of cost reduction
and income enhancement targets, were £189 million in the period.
The tax charge was £548 million on profit before tax of £1,514 million - an
effective rate of 30.1%, excluding goodwill amortisation.
Profit attributable to ordinary shareholders, after tax, minority interests
and preference dividends increased by 11%, from £703 million to £782 million.
Adjusted earnings per share increased by 24%, from 37.2p to 46.1p.
Group post-tax return on equity, excluding goodwill, increased from 30.6% to
35.5%.
Group total assets were £306 billion at 30 June 2000. Loans and advances to
customers were £156 billion.
Capital ratios at 30 June 2000 were 6.4% (tier 1) and 11.4% (total).
THE ROYAL BANK OF SCOTLAND GROUP plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT (pro forma basis)
12
6 months
6 months months ended
ended ended 31
30 June 30 June December
2000 1999 1999
£m £m £m
Interest receivable 7,059 6,005 12,495
Interest payable 4,191 3,412 7,221
-------- ------- -------
Net interest income 2,868 2,593 5,274
-------- ------- -------
Dividend income 17 18 37
Fees and commissions receivable 1,970 1,753 3,597
Fees and commissions payable (394) (334) (675)
Dealing profits 574 526 1,027
Other operating income 489 552 1,073
-------- ------- -------
2,656 2,515 5,059
General insurance - earned income 621 425 929
- reinsurance (171) (78) (197)
-------- ------- -------
Non-interest income 3,106 2,862 5,791
-------- ------- -------
Total income 5,974 5,455 11,065
-------- ------- -------
Administrative expenses
- staff costs 1,747 1,771 3,512
- premises and equipment 425 430 892
- other 769 673 1,405
Depreciation of tangible fixed 389 399 754
assets
-------- ------- -------
Operating expenses 3,330 3,273 6,563
-------- ------- -------
Profit before other operating 2,644 2,182 4,502
charges
General insurance - gross claims 462 356 764
- reinsurance (139) (67) (163)
------ ----- -------
Profit before provisions for bad 2,321 1,893 3,901
and doubtful debts
Provisions for bad and doubtful 284 242 526
debts
Amounts written off investments 26 12 16
-------- ------- -------
Group operating profit before
goodwill amortisation and 2,011 1,639 3,359
integration costs
Goodwill amortisation 308 280 566
Integration costs 189 - 113
-------- ------- -------
Group profit before tax 1,514 1,359 2,680
Tax (548) (484) (917)
-------- ------- -------
Group profit after tax 966 875 1,763
-------- ------- -------
THE ROYAL BANK OF SCOTLAND GROUP plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT (pro forma basis)
12
6 months
6 months months ended
ended ended 31
30 June 30 June December
2000 1999 1999
£m £m £m
Group profit after tax 966 875 1,763
Minority interests (22) (27) (43)
------- ------- -------
Profit after minority interests 944 848 1,720
Preference dividends 162 145 295
------- ------- -------
Profit attributable to ordinary 782 703 1,425
shareholders ------- ------- -------
Basic earnings per ordinary share 29.5p 26.6p 53.9p
------ ------- -------
Adjusted earnings per ordinary 46.1p 37.2p 78.3p
share (Note 6)
------- ------- -------
THE ROYAL BANK OF SCOTLAND GROUP plc
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2000
Actual
30
June
2000
£m
Assets
Cash and balances at central banks and 6,449
items in the course of collection
Treasury bills and other eligible bills 5,332
Loans and advances to banks 37,324
Loans and advances to customers 156,292
Debt securities and equity shares 54,297
Intangible fixed assets 12,121
Other assets 24,132
-------
295,947
Long-term assurance assets attributable to 10,258
policyholders -------
Total assets 306,205
-------
Liabilities
Deposits by banks and items in the course 35,472
of transmission to other banks
Customer accounts 166,221
Debt securities in issue 23,614
Other liabilities 37,348
Subordinated liabilities 10,092
Minority interests 759
Shareholders' funds 22,441
-------
295,947
Long-term assurance liabilities to 10,258
policyholders -------
Total liabilities 306,205
-------
Memorandum items:
Contingent liabilities and commitments 99,699
------
THE ROYAL BANK OF SCOTLAND GROUP plc
ACQUISITION OF NATWEST
£m £m
Consideration paid:
Issue of 1,563.5 million new RBSG 25 pence
ordinary shares to NatWest ordinary
shareholders (Note a) 13,462
Payment of cash to NatWest ordinary 7,110
shareholders (Note b)
Issue of loan notes to NatWest ordinary 239
shareholders (Note b)
Fees and expenses related to the 176
acquisition
-------
20,987
-------
Net assets acquired:
Shareholders' funds 9,648
Less: preference shares (488)
-------
NatWest net assets as at 6 March 2000 9,160
-------
Fair value adjustments:
Goodwill in NatWest (533)
Disposal of businesses: (Note c)
- Gartmore 866
- Other 271
-------
1,137
Pension fund surplus 1,070
Contingent asset 70
Fixed assets excluding property (40)
Property (172)
Financial instruments carried at cost (203)
Other (428)
Tax on fair value adjustments (274)
-------
Total fair value adjustments 627
-------
Adjusted net assets acquired 9,787
-------
Goodwill arising on acquisition (Note d) 11,200
-------
Notes
(a) The 'Consideration paid' information above is based on the closing
price on the London Stock Exchange on 3 March 2000, the trading day
immediately prior to the offer for NatWest being declared unconditional
in all respects, of 861 pence per RBSG ordinary share of 25 pence.
(b) NatWest ordinary shareholders had the right to receive, for each
NatWest share held, 0.968 new RBSG 25 pence ordinary shares plus 400
pence in cash or loan notes. A 'Partial cash alternative' was also
offered, which, for each NatWest share held, consisted of 0.92 new RBSG
25 pence ordinary shares plus 450 pence in cash or loan notes.
(c) The fair value adjustment relating to the disposal of businesses
reflects the excess of sale proceeds over the net tangible asset value of
these businesses in NatWest's consolidated balance sheet at 6 March 2000.
(d) The goodwill arising on acquisition is being amortised over its
estimated economic life of 20 years, resulting in a charge of £560
million per annum.
THE ROYAL BANK OF SCOTLAND GROUP plc
DIVISIONAL PERFORMANCES (pro forma basis)
The results of each division before integration costs and goodwill
amortisation are detailed below.
6 6 12
months months months
ended ended ended
30 30 31
June June December
2000 1999 1999
£m £m £m
Corporate Banking and 1,337 1,265 2,491
Financial Markets
Retail Banking 1,202 1,044 2,144
Retail Direct 177 128 302
------ ----- -------
Contribution before 2,716 2,437 4,937
manufacturing costs
Manufacturing* (859) (927) (1,866)
------ ----- -------
Operating profit 1,857 1,510 3,071
Wealth Management 200 145 328
Direct Line Insurance Group 76 36 100
Ulster Bank 96 83 166
Citizens 167 125 258
Central items (385) (260) (564)
----- ------ ------
Group operating profit before
goodwill amortisation
and integration costs 2,011 1,639 3,359
------ ----- -------
* Given the integrated nature of Manufacturing's services it is neither
meaningful nor practical to allocate these costs to Corporate Banking and
Financial Markets, Retail Banking and Retail Direct.
THE ROYAL BANK OF SCOTLAND GROUP plc
CORPORATE BANKING AND FINANCIAL MARKETS (pro forma basis)
6 6 12
months months months
ended ended ended
30 30 31
June June December
2000 1999 1999
£m £m £m
Net interest income 885 887 1,758
Non-interest income 1,398 1,330 2,663
----- ------ -----
Total income 2,283 2,217 4,421
Direct expenses 837 877 1,721
------ ----- -----
Contribution before provisions 1,446 1,340 2,700
Provisions for bad and 83 65 193
doubtful debts
Amounts written off 26 10 16
investments ----- ------ -----
Contribution 1,337 1,265 2,491
----- ----- -----
Direct cost:income ratio (%) 36.7 39.6 38.9
Total assets (£bn) 186.2 170.5 176.3
Employees at period end - permanent 13,000 14,400 14,000
- temporary 700 800 600
------ ------ -------
- total 13,700 15,200 14,600
------ ------ -------
Corporate Banking and Financial Markets provides an integrated range of
products and services to its mid-sized, large corporate and institutional
customers in the UK and overseas including corporate and commercial banking,
treasury and capital markets products, structured and leveraged finance,
trade finance, leasing and factoring.
Net interest income was flat due to a decline of £96 million in NatWest
Financial Markets which benefitted from the favourable market conditions in
the first half of 1999. Adjusting for this, underlying net interest income
increased by 11%. Non-interest income was up £68 million, 5% to £1,398
million. There was a fall in NatWest Financial Markets' non-interest income
of £46 million from the high level achieved in the first half of 1999. But
for this, non-interest income would have been 9% higher.
Direct expenses were down 5%, £40 million to £837 million. Provisions for bad
and doubtful debts were up £18 million, 28% to £83 million. Amounts written
off investments were £26 million (1999: £10 million). Contribution was up 6%,
£72 million to £1,337 million. The direct cost:income ratio improved to 36.7%
from 39.6%.
THE ROYAL BANK OF SCOTLAND GROUP plc
RETAIL BANKING (pro forma basis)
6 6 12
months months months
ended ended ended
30 30 31
June June December
2000 1999 1999
£m £m £m
Net interest income 1,180 1,081 2,221
Non-interest income 546 551 1,084
------ ----- -------
Total income 1,726 1,632 3,305
Direct expenses 456 519 1,043
------ ------ -------
Contribution before provisions 1,270 1,113 2,262
Provisions for bad and 68 69 118
doubtful debts ----- ----- ------
Contribution 1,202 1,044 2,144
----- ----- ------
Direct cost:income ratio (%) 26.4 31.8 31.6
Total assets (£bn) 53.8 50.0 51.9
Employees at period end - permanent 30,300 33,900 32,300
- temporary 1,500 2,700 2,000
------ ------ ------
- total 31,800 36,600 34,300
------ ------ ------
Retail Banking provides a wide range of banking, insurance and other related
financial services to individuals and small businesses. These services are
delivered from a UK-wide network of RBS and NatWest branches and through
alternative distribution channels.
Net interest income was 9%, £99 million higher at £1,180 million reflecting
growth in loans and deposits, including current accounts. Non-interest income
was flat mainly due to the restructuring of the life assurance businesses.
Direct expenses at £456 million were down 12%, £63 million. Provisions for
bad and doubtful debts were down £1 million. Contribution before integration
costs increased by 15%, £158 million to £1,202 million. The direct
cost:income ratio improved from 31.8% to 26.4%.
THE ROYAL BANK OF SCOTLAND GROUP plc
RETAIL DIRECT (pro forma basis)
6 6 12
months months months
ended ended ended
30 30 31
June June December
2000 1999 1999
£m £m £m
Net interest income 256 234 496
Non-interest income 265 215 475
----- ----- -----
Total income 521 449 971
Direct expenses 238 226 470
----- ----- -----
Contribution before provisions 283 223 501
Provisions for bad and 106 95 199
doubtful debts
----- ----- -----
Contribution 177 128 302
----- ----- -----
Direct cost:income ratio (%) 45.7 50.3 48.4
Total assets (£bn) 13.3 9.0 10.7
Employees at period end - permanent 5,700 5,200 5,600
- temporary 700 500 600
------ ----- -------
- total 6,400 5,700 6,200
------ ----- -------
Retail Direct issues a comprehensive range of credit, charge and debit cards
to personal and corporate customers and engages in acquisition and processing
facilities for retail businesses. It also includes the Group's internet
banking platform, Tesco Personal Finance, Virgin Direct Personal Finance,
Direct Line Financial Services and Lombard Direct.
Net interest income grew by 9%, £22 million to £256 million, due to higher
lending volumes. Non-interest income increased 23%, £50 million to £265
million. Direct expenses at £238 million were 5%, £12 million higher.
Provisions for bad and doubtful debts increased by 12%, £11 million to £106
million. Contribution rose by 38%, £49 million to £177 million. The direct
cost:income ratio improved from 50.3% to 45.7%.
THE ROYAL BANK OF SCOTLAND GROUP plc
MANUFACTURING (pro forma basis)
6 6 12
months months months
ended ended ended
30 30 31
June June December
2000 1999 1999
£m £m £m
Staff costs 274 314 637
Other costs 585 613 1,229
------ ----- ------
Total manufacturing costs 859 927 1,866
------ ----- ------
Employees at period end - permanent 17,900 18,500 18,500
- temporary 2,000 2,900 2,300
------ ------ -------
- total 19,900 21,400 20,800
------ ------ -------
Manufacturing supports the customer facing businesses of Corporate Banking
and Financial Markets, Retail Banking and Retail Direct and provides
operational technology, account management, money transmission, property and
other services.
Total manufacturing costs declined by 7%, £68 million, to £859 million. The
reduction reflects the initial benefits of integrating RBS and NatWest
operations, with reduced technology related expenditure partially offset by
cost increases associated with the migration of additional work into NatWest
processing centres (87% complete by 30 June).
THE ROYAL BANK OF SCOTLAND GROUP plc
WEALTH MANAGEMENT (pro forma basis)
6 6 12
months months months
ended ended ended
30 30 31
June June December
2000 1999 1999
£m £m £m
Net interest income 204 184 380
Non-interest income 237 199 402
---- ----- -----
Total income 441 383 782
Expenses 244 235 457
---- ----- -----
Profit before provisions 197 148 325
Provisions for bad and (3) 3 (3)
doubtful debts ---- ----- -----
Profit before integration 200 145 328
costs ---- ----- -----
Cost:income ratio (%) 55.3 61.4 58.4
Total assets (£bn) 10.2 9.5 9.8
Employees at period end - permanent 6,200 6,200 6,200
- temporary 600 700 600
------ ----- -------
- total 6,800 6,900 6,800
------ ----- -------
Wealth Management, which includes Coutts, brings together the Group's
businesses that focus on longer term savings, investments and private banking
markets in the UK and internationally. It also includes the Group's offshore
banking interests which deliver a wide range of services to local customers,
expatriates, intermediaries and institutional clients.
Total income was up 15%, £58 million to £441 million. Net interest income
grew by 11%, £20 million to £204 million while non-interest income increased
19%, £38 million to £237 million. Expenses were 4%, £9 million higher at £244
million. There was a net recovery of provisions for bad and doubtful debts of
£3 million (1999: charge of £3 million). Profit before integration costs
increased by 38%, £55 million to £200 million. The cost:income ratio improved
from 61.4% to 55.3%.
THE ROYAL BANK OF SCOTLAND GROUP plc
DIRECT LINE INSURANCE GROUP (pro forma basis)
6 6 12
months months months
ended ended ended
30 30 31
June June December
2000 1999 1999
£m £m £m
Earned premiums 621 425 929
Reinsurers' share (171) (78) (197)
------ ----- ------
Insurance premium income 450 347 732
Net interest income 43 33 72
Non-interest income 37 38 92
------ ----- ------
Total income 530 418 896
Expenses 131 93 195
Gross claims 462 356 764
Reinsurers' share (139) (67) (163)
----- ----- ------
Profit before goodwill amortisation
and integration costs 76 36 100
------ ----- ------
In-force policies (000)
Motor 2,714 2,383 2,524
Home 952 882 918
Combined operating ratio 89.5 101.3 98.9
- DLI and Privilege
Total assets (£bn) 2.2 1.5 1.9
Insurance reserves - net (£m) 1,226 1,092 1,171
Employees at period end - permanent 6,300 4,800 5,700
- temporary 100 100 100
----- ----- -----
- total 6,400 4,900 5,800
----- ----- -----
Direct Line Insurance Group sells and underwrites motor and personal lines
insurance directly by telephone and over the internet to consumers. It
includes Green Flag, the UK's third largest breakdown recovery service.
Premium income grew strongly, up £103 million, 30%. Green
Flag contributed £68 million to this growth. Claims were 12%, £34 million
higher at £323 million. Profit before goodwill amortisation and integration
costs was up 111%, £40 million, at £76 million, partly due to the acquisition
of Green Flag in November 1999.
Motor in-force policies have increased by 8% in the six months to 30 June
2000. Home in-force policies show a growth of 4% in the six months ended 30
June 2000.
The Group's year-end of 30 September led to a material seasonal effect on
Direct Line Insurance's half-yearly results. As a consequence of the change
in the year end, it is expected that the seasonal effect will be largely
eliminated.
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